The British Chambers of Commerce (BCC) revised down its growth forecast from 0.6 percent to 0.1 percent, but said confidence about its economic prospects would gradually improve.
The BCC issued its quarterly economic forecast report on Friday, saying that weak growth in 2012 will be followed by stronger growth in 2013, which has been revised up from 1.8 percent to 1.9 percent.
John Longworth, director-general of the BCC, said, "Though growth will return, it will be over a longer period than expected. GDP and consumer spending will only return to pre-recession levels in the second half of 2014 or early in 2015."
"Though growth might be low, the economy will expand in spite of the difficulties continuing to face the eurozone," he said, adding that growth is likely to be lower if there was a disorderly euro breakdown.
Britain, the seventh largest economy in the world, slipped back into recession after the country's GDP shrunk 0.2 percent in the first quarter this year.
BCC forecast that unemployment will increase from 8.2 percent of the workforce to 9 percent in the third quarter of 2013, driven primarily by continued public sector spending cuts. Youth unemployment is expected to affect 1.07 million people by the same period.
However, household spending will see modest improvement, from shrinking 1.2 percent in 2011 to growing 0.7 percent in 2012 and 1.7 percent in 2013. Business investment too should improve from 1.2 percent in 2011 to 4.3 percent in 2012.
BCC said weak growth prospects, both globally and in Britain, would make it necessary to keep official interest rates at very low levels for at least another year.
It expected rates to start increasing late in 2013, to reach 0.75 percent at the end of 2013 and 1.25 percent in the second quarter of 2014.
Longworth also called for the creation of a business bank to provide capital for small business, more infrastructure spending, long-term strategies for aviation and energy, and more deregulation./.