A survey by the British Chambers of Commerce (BCC) has painted a depressing picture of the health of the UK economy.

The organisation's survey of 6,000 companies employing 680,000 people revealed economic demand and consumer confidence had fallen to the lowest level since the research was first undertaken in 1989.

Sales, employment prospects, manufacturing, cashflow and investment were now all at record lows, the data revealed.

"It is clear that the UK economy is facing a very serious recession, and the downturn is deepening at an alarming pace," said the BCC report. "The results highlight a frightening deterioration in the UK economic situation."

The group's chief economist David Kern revised his economic forecast from a 2.2% decline in 2009 to 2.4% in the wake of the data and suggested the government would have to resort to printing more money to get the economy moving again, as well as cutting interest rates still further.

Meanwhile, a report by the British Retail Consortium (BRC) revealed that total sales for December fell by 1.4% on the same month a year ago, with like-for-like sales - which do not include new stores or websites - down by 3.3%.

"Non-food retailers had a torrid December despite a blizzard of promotions and deals, which would have hit margins," said the BRC's director general Stephen Robertson. "Many hard-pressed customers couldn't be seduced into spending."

The latest batch of economic data means small business owners are likely to be in for a very tough year, with little sign that the banks any more willing to extend credit lines even to fundamentally sound companies.

Most analysts believe the economy will continue to shrink in 2009 before flattening out in 2010.

Despite the difficult start to the year small business owners are tackling the economic crisis by freezing staff pay, renegotiating businesses contracts, making redundancies and re-focusing their advertising and marketing strategies.