UK business's fragile recovery at the end of 2002 has evaporated as home sales, export deliveries and employment all worsened for the manufacturing and service sectors.

Figures from the British Chambers of Commerce's (BCC) quarterly economic survey showed significant decline across most areas of the British economy.

Export order growth was one of the most worrying indicators.

For manufacturers, export order growth fell from 11 per cent to just two per cent in the first quarter of this year.

Director general David Frost said: "The sharp deterioration is alarming."

While the results may have been partly linked to the war in Iraq, the BCC said it was clear they signalled a genuine worsening in the circumstances within which all UK businesses had to operate.

The BCC also criticised Chancellor Gordon Brown for doing little to mitigate the additional burden on business imposed by higher national insurance contributions.

The BCC said: "It is vital for the Government to cut the tax and regulatory burden on business.

"This would help hard-pressed firms to avoid recession and make it possible for at least mediocre growth to continue."

The survey showed UK manufacturing sales declined in the first quarter of this year to two per cent from a 19 per cent growth in the previous quarter.