Unemployment in the UK could reach 3.2m by the second half of next year as public borrowing reaches £158bn, according to a report by the British Chamber of Commerce (BCC).

If the BCC's figures were accurate then it would mean that GDP would decline 3.7% across the next five quarters and public borrowing would account for over 10% of GDP.

Director general of the BCC, David Frost, has called on chancellor Alistair Darling to do more to help small and medium-sized firms in the forthcoming budget.

"It will be business that leads the UK out of recession. For this reason it is vital that companies are given the freedom to create jobs and wealth."