Chancellor George Osborne has insisted the Government was doing everything possible to "weather the storm" as economic forecasters warned the UK is likely to be already in recession.
The Ernst & Young ITEM Club and the Centre for Economics and Business Research both believe that gross domestic product (GDP) shrank in the final quarter of last year and will fall again in the first three months of 2012. A recession is defined as two consecutive quarters of contracting output.
Mr Osborne said the most recent predictions by the Office for Budget Responsibility, which issues official forecasts, showed that Britain would have a negative quarter of growth but not go into recession.
He told BBC Radio 4's Today programme: "That's their forecast, but they were the first to say that it is very uncertain and one of the biggest risks to the British economy is the further deterioration of the eurozone crisis.
"I said openly at the end of November to the House of Commons when I made my autumn statement that if the eurozone were to go into a deep recession, that would have a real impact on the British economy.
"I'm confident the British Government is doing everything it can with a very difficult inheritance, facing a very difficult international situation to get Britain through this, to weather the storm."
The warnings come shortly after France, the second biggest economy in the eurozone, saw its AAA credit rating downgraded by Standard & Poor's in a move which signals more troubles for the single currency bloc.
Professor Peter Spencer, chief economic adviser to the Ernst & Young ITEM Club, said: "Figures for the last quarter of 2011 and the first quarter of this year are likely to show that we are back in recession and we are going to have to wait until this summer before there are any signs of improvement. But it's not going to be a repeat of 2009 - we are not going to see a serious double dip."
The ITEM Club report forecasts GDP growth of just 0.2% this year before increasing to 1.8% in 2013 and 2.8% in 2014. It said deteriorating levels of confidence will see business investment stagnate in 2012, while export prospects have already slowed.
But the group said UK companies have stronger balance sheets than in 2009 and have built up large cash stockpiles, which will provide a useful insurance policy if the situation deteriorates further.