Unemployment 'to hit 3.2 million'

Around 1.97 million people in the UK are currently unemployed

Unemployment across the UK will reach 3.2 million - or just over 10% of the workforce - by the second half of next year, a business group has predicted.

The warning comes from the British Chambers of Commerce (BCC), which said the economy had worsened "significantly" so far in 2009.

The BCC added that next month's Budget was the government's "last real chance" to help lift the economy.

Official UK unemployment hit 1.97 million between October and December.

The most recent figure, this is the highest level since 1997.

'Reduce regulation'

BCC director general David Frost said the government had to do more to help firms of all sizes.

See how unemployment has risen

"It will be business that leads the UK out of recession," he said.

"For this reason it is vital that companies are given the freedom to create jobs and wealth."

Ministers must do everything they can to help nurture industry while creating the conditions required to make growth a reality

BCC director general David Frost

See where jobs have been lost

The BCC said the government now had to reduce the "regulatory burden on business", scrap the planned increase in national insurance contributions, and freeze the national minimum wage.

Since the start of the year, the government has announced a number of measures to help companies, including a plan to guarantee up to £20bn of loans to small and medium-sized firms to help them survive the recession.

It has also part-nationalised Lloyds Banking Group and RBS, and introduced a scheme to guarantee the banks' bad debts, moves it hopes will encourage more lending to both firms and individuals.

However, opposition parties say it still has not done enough to help businesses.

"Ministers must do everything they can to help nurture industry while creating the conditions required to make growth a reality," added Mr Frost.