Britain is "at serious risk" of recession as the credit crunch continues to tighten its grip on the economy.

According to the British Chambers of Commerce (BCC), services companies, which account for three-quarters of the economy, saw "alarming" declines in the second quarter of 2008.

Firms that reported lower orders outnumbered those recording rises for the first time since 1990, a survey of almost 5,000 businesses found.

The BCC warned the Government against hitting firms with more taxes in an effort to boost public revenues as the economic gloom grows.

It comes as one of the UK's biggest housebuilders cut 1,100 jobs amid plunging house sales and prices.

Persimmon's job losses follow nearly 2,000 job cuts announced last week by rival firms Taylor Wimpey and Barratt Developments.

BCC Director-general David Frost said: "The temptation for the Government will be to raise business taxes because the exchequer is running out of money. This would be a catastrophe.

"To put more pressure on business would not only restrict growth and hit the consumer hard, it would further crush what our economy is based on - confidence."

Firms are facing soaring costs from rising electricity bills as oil approaches $150 a barrel, while banks hit by the credit crunch clamp down on lending, putting cashflow among UK firms under the most pressure since 1992, the BCC said.

The BCC said the balance of manufacturers intending to raise prices had reached an all-time high - 45 per cent - for the third quarter in a row, with raw material increases also hitting the services sector.

The report comes as a study of Treasury figures shows the slowdown in the economy will reportedly cut at least £8 billion from tax revenues.

Elsewhere, the UK's largest housebuilder, Persimmon, is the latest construction firm to be hit by the credit crunch, saying 1,100 jobs have been cut so far this year after sales fell 31 per cent in the past six months.

The losses follow announcements last week by rivals Taylor Wimpey and Barratt Developments who said nearly 2,000 posts are being axed.

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