The British Chambers of Commerce (BCC) has slashed its forecast for economic growth this year, from 0.6% to 0.1%.
But the group, which represents more than 100,000 businesses, raised its forecast for 2013 from 1.8% to 1.9%.
The data, in the BCC's latest Quarterly Economic Forecast, follow official figures showing that the UK has returned to recession.
BCC director-general John Longworth called for more "enterprise-friendly" action from the government.
Unemployment will also increase from 2.625 million - or 8.2% of the workforce - to 2.9 million, or 9%, in the third quarter of 2013, driven primarily by continued public sector spending cuts.
Mr Longworth 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.
Without action the economy will "bump along the bottom" for longer than expected, Mr Longworth said.
"We need growth and we need it now," he said.
"If the government works together with the private sector to create the right environment over the long term, we'll be able to prove once and for all that bold businesses can propel us forward out of stagnation and firmly on the road to recovery."
The BCC's report warns that problems in the eurozone will persist for a considerable time and cause difficulties for UK businesses.
However, household spending will see modest improvement, from shrinking 1.2% in 2011 to growth of 0.7% in 2012, 1.7% in 2013 and of 2.1% in 2014.
Business investment should improve, from 1.2% in 2011 to 4.3% in 2012.
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