Business leaders told Gordon Brown last night that he must take more radical measures to avoid a prolonged depression after a “frightening deterioration” in the economy.

After the Prime Minister told a London jobs summit that people thrown out of work would not be abandoned, the British Chambers of Commerce (BCC) said that the manufacturing and service sectors had recorded their worst figures since records began in 1989. The BCC said that it had been surprised by the severity of the downturn and was almost certain to revise downwards the predictions it made for the economy two weeks ago.

However, as Mr Brown promised that his £500 million scheme would help 500,000 people into work or training over the next two years, the pessimism of the business community appeared to contrast sharply with that of the general public: The TimesPopulus poll today shows that, while people have less confidence in the prospects for the economy as a whole, they are much less worried about the prospects for themselves and their families.

Business groups were guarded in their reaction to the job summit, which put the emphasis on helping the unemployed and creating jobs from low-carbon technology development. Jeremy Leggett, the executive chairman of Solar Century, said: “The fact that ministers and business people spent half their time talking about a green new deal will have come as a surprise to many delegates.

“But in quickly building a low-carbon economy we have huge opportunities for digging our way out of the downturn. I fully expect to see bold new leadership moves in the labour-intensive renewables industries, such as solar, and in energy efficiency.”

John Cridland, the deputy director-general of the CBI, said: “These measures to help the unemployed are welcome and important, but we also need initiatives that will stop people being made unemployed in the first place. We believe that the best way to protect jobs and the economy is to target the credit crunch. If we do not get credit flowing through the economy again, good businesses will fail, causing more job losses and lasting damage to the economy.”

Chris Hannant, head of policy at the BCC, said: “The priority should be helping businesses keep jobs. The top issue for business is protecting cash-flow. The Government can help by cutting business taxes, ensuring banks maintain credit facilities and delivering flexibility on tax payments.”

Mr Brown faced a series of questions from union and business leaders about what should be done to tackle growing unemployment.

Tony Burke, assistant general-secretary of Unite, said that levels of redundancy pay should be increased and added that it should be easier to gain access to training funds.

Dave Prentis, leader of Unison, called on the Prime Minister to halve job losses in the public sector and expand apprenticeships in areas such as local government. He said that councils were reporting big increases in the number of people seeking debt counselling and housing advice, and warned of fresh redundancies being planning by local authorities.

John Wright, chairman of the Federation of Small Businesses, said that 86 small firms were going out of business every day, highlighting the need for extra help, including reductions in regulations and cuts in payroll taxes.

David Frost, the Director-General of the BCC, described the figures in the Populus survey as “truly awful”. He said: “The last time I saw anything of this magnitude of decline was when I worked in the West Midlands in the early Eighties. The sheer scale of this comes as a surprise to many of us.”

David Kern, chief economist of the BCC, said that his forecast of a 2.2 per cent contraction in the economy this year was now likely to be revised further downwards, to about 2.3 per cent or 2.4 per cent negative growth in gross domestic product.

Mr Brown will hold talks on the European response to the economic downturn with President Sarkozy of France in Paris tomorrow, before going to Berlin to speak on Thursday to Angela Merkel, the German Chancellor. The Conservatives stepped up their attack over the recession by using the image of a baby to drive home the human cost of debt. A poster features a newborn child and the slogan: “Dad’s nose, mum’s eyes, Gordon Brown’s debt – Labour debt crisis: Every child in Britain is born owing £17,000.”

The campaign is reminiscent of an advertisement used in the US in 2004, which featured images of children doing menial jobs, followed by the question: “Guess Who’s Going to Pay Off George Bush’s $1 trillion deficit?”

David Cameron, the Tory leader, and George Osborne, the Shadow Chancellor – both criticised for failing to make more political capital from the downturn – stepped up the rhetoric at the start of the £250,000 campaign. Mr Cameron cleared the way for the launch with an admission over the weekend that he should have abandoned earlier his pledge to match Labour’s spending totals.

Unveiling the poster, Mr Cameron said that, with national debt set to exceed £1 trillion in several years, the interest payment alone amounted to more than was spent on educating the nation’s children. “I think it is an extremely powerful, important and responsible message that we are quite right to get across,” he said.

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