Small businesses believe the UK is already in recession and expect unemployment to rise by 350,000 by the end of the year, according to a British Chambers of Commerce (BCC) survey.

The group is calling on the government to cut business taxes and the Bank of England to reduce interest rates in a bid to prevent widespread failures.

"Many parts of the business community continue to perform well," said BCC director general David Frost. "The government needs to say that business taxes will be cut.

"The Bank of England needs to cut interest rates immediately and politicians need to get behind our businesses in these challenging times."

The BCC poll revealed that confidence had plummeted in both the manufacturing and service sectors.

The UK is not yet technically in recession - classed as two consecutive quarters of negative economic growth - but is expected to be so by the end of the year.