The Confederation of British Industry (CBI) is predicting a tough couple of years for firms in the UK.
Its latest economic forecast published on Tuesday predicted that continued troubles in the credit markets, rising commodity prices and weak domestic and global demand will lead to a slowing in economic growth.
Richard Lambert, director general of the CBI, said: "Having enjoyed two years of strong growth, we are now living in uncertain times. We are facing a financial shock on a scale not experienced in recent times, which is coming on top of already slower growth."
However, he did add that some non-financial firms in the UK are still reporting "quite positive conditions".
The report also found that household spending will fall as food and energy prices rise.
Meanwhile, the Forum of Private Business has warned that the increased cost of borrowing means that SMEs are finding it increasingly difficult to raise capital for investment.
