Up to 300,000 workers will lose their jobs by 2011 as recession hits Britain

The number of people out of work could rise to almost two million over the next three years, according to the British Chamber of Commerce.

In what is the first prediction of recession by a major business group, they warned that unemployment will soar by between 250,000 and 300,000 by 2011.

Grim prediction: The British Chamber of Commerce predicts the number of people out of work could rise to almost two million over the next three years

The rise would put the total unemployment rate to the same level as when Labour came to power.

The BCC, which represents Britain's small and medium-sized businesses, believes that there is a strong possibility that the economy will shrink during two quarters before next March which would mean Britain would be in a 'technical' recession.

It said that the UK economy needed to 'act urgently' and to reduce the threat of economic slump.

Last month the number of people claiming unemployment benefits increased by its fastest rate for 16 years, rising by 20,100.

The total number of people out of work now stands at 1.67 million, according to official figures.

Fear of job losses will place a further strain on homeowners who are already facing soaring food and energy bills.

It believes recession is now a more serious threat than inflation and that the Bank of England should start cutting interest rates as soon as inflation peaks.

Speaking of the possibility of recession, David Kern, the BCC's economic adviser said: 'Our view is that the threats to growth are more serious and more immediate than the risks of higher inflation.

The UK economy urgently needs an interest rate cut to counter threats of recession.'

The Bank of England's Monetary Policy Committee (MPC) held rates at five per cent  in July, the third month in a row they were left unchanged.

The BCC said it was predicting GDP growth to fall to 1.3 per cent this year and 1.1 per cent in 2009.

The economy grew three per cent during 2007.

Its May survey forecast a less abrupt slowdown, with growth of 1.7 per cent in 2008, and to 1.6 per cent in 2009.

Inflation reached a 16-year high of 4.4 per cent last month, more than double the Bank’s two per cent target.