The economy will likely avoid a deep recession but will experience a mild one, with unemployment to rise by 250,000-300,000 to 2m over the next two to three years, along with a flat or slightly negative growth in gross domestic product over the next two to three quarters, the British Chambers of Commerce will announce today in its quarterly economic forecast.

However, the economy is likely to resume expansion after that, growth will be anaemic and weaker than it has been for some time, the BCC said.

Two other surveys showed that British businesses are preparing for an economic slowdown amid widespread expectations that business prospects for the coming year are dimming. A survey by the Institute of Chartered Accountants in England and Wales says confidence is now at its weakest point in all but two of 11 UK regions since the survey began in 2003.

The Lloyds TSB Corporate Markets Business Barometer shows that just 22 percent of companies believe their business will pick up over the next 12 months rather than languish. This marks a 10 percent fall from the reading in June and well below the average of 51 percent seen over the course of the survey’s six year history.

Robin Feith, the ICAEW’s executive director of operations and finance, said: “We expect the slowdown to be at its worst towards the end of 2008 and into early 2009 … Overall performance of UK plc through 2009 is likely to be the weakest growth since 1992 - when the economy grew by just 0.3 per cent.”

Mr Feith added that economic activity was likely to pick up towards the end of 2009, providing that wage inflation remained low.

Companies in the key services sector suffered the single biggest month on month drop in confidence, with only 27 percent of those surveyed expecting an increase of activity, according to the Lloyds TSB survey. Businesses in all regions covered suffered a declining balance, with the Midlands faring the worst.

The BCC expects the UK’s dominant services sector to fall sharply in 2008 and 2009. “Our view is that the threats to growth are more serious and more immediate than the risks of higher inflation,” it said.