Chancellor George Osborne appears to be fast losing the support and confidence of British business as the body representing 100,000 UK firms accuses ministers of a mixture of indecision, equivocation and political short-termism that is choking off economic recovery.

The outspoken attack from the director general of the British Chambers of Commerce, John Longworth, is a severe blow to the chancellor, who faces fresh pressure on Wednesday when official figures are expected to show that the UK's GDP contracted for a third successive quarter between April and June.

Writing in today's Observer, Longworth is savage in his criticism, accusing ministers of making announcements that lack substance and of using "political calculation", rather than economic need, as the driver of policy-making.

His comments, just two weeks after the head of the CBI, John Cridland, tore into ministers for failing to do more to boost infrastructure, show that the traditional close relations between the Tory party and the business community are under intense strain as the economy remains in recession.

Longworth argues that ministers often lecture businesses about taking more risks. But he says it is ministers who must do more to create the climate for investment.

He calls for a new business bank to be established, like those that exist in Germany and the US, to support "bona fide growth companies". "Politicians seem to believe that businesses must be willing and ready to 'strain every sinew', without doing the same themselves," he writes. They should also show greater "statesmanship" and courage to take controversial decisions, such as on the need to expand airport capacity in the south-east. Earlier this month the coalition delayed a consultation on the issue.

"As we noted when the aviation policy paper was announced, businesses are tired of indecision and equivocation. They are tired of political short-termism, electoral calculation, and the privileging of presentation over substance," Longworth writes. "Without sustained, long-term action from government to create a stable business environment here at home, the risk appetite among many businesspeople will remain muted."

Before Wednesday's GDP figures are announced, Howard Archer, of consultancy IHS Global Insight, said he expected a 0.3% fall, and warned that the economy would remain weak for the rest of the year. "We expect UK GDP to be essentially flat overall in 2012, and there is a very real and increasing danger that the economy will contract marginally," he said.

This week Labour leader Ed Miliband will seek to put himself at the head of new efforts in the EU to boost youth employment when he will be the first senior British politician to meet French president François Hollande at the Elysée Palace on Tuesday. A Labour source said: "We now need to work together to have a coordinated plan for jobs and growth. We cannot allow the future of the European continent to sit idle because of the failure to deliver the jobs young people need."

In the UK, weak growth has undermined the coalition's attempt to bring the deficit under control. The latest official public finance data, released on Friday, showed that the shortfall from April to June was almost £7bn larger than in the same period last year, excluding one-off quirks such as the transfer of assets from the Royal Mail pension fund. Analysts said that made it increasingly likely Osborne would miss his deficit target for the current financial year.

Pierre Williams, spokesman for the Federation of Small Businesses, echoed Longworth's frustration. "It's the number one concern of small businesses that they're not getting the loans that they need," he said. "We're encouraged by the fact that the government has recognised the problem; but we have not been so encouraged by the schemes they've introduced to rectify it, because they simply haven't worked."

The latest Bank of England data shows that lending to businesses has continued to decline, despite a blizzard of initiatives from the Treasury.

Many analysts believe this is as much because of a collapse of business confidence against the background of the continuing crisis in the eurozone, rather than the banks' unwillingness to lend. Joe Cox, of the Compass campaign group, said: "Businesses are sitting on billions of pounds of savings because they don't trust that the demand is there to make it worth them investing – there can be no bigger indictment of Osborne's economic management than that."

On Saturday a spokesman for the business secretary, Vince Cable, who said in a Financial Times interview that he had not ruled out leading his party again, insisted he was fully in agreement with the coalition's broad economic policy and was working well with Osborne.

Cable, while a strong supporter of the coalition's deficit-cutting policy, has long argued that more should be done to boost infrastructure spending, particularly on housing. In February he wrote to David Cameron and his Lib Dem deputy Nick Clegg, saying the government lacked "a compelling vision of where the country is heading beyond sorting out the fiscal mess". He is now said to believe the government is moving in the right direction, with announcements such as last week's plan for a £9bn boost to rail investment. In his FT interview, Cable said he thought Clegg was "doing a good job".

However he refused to deny a lingering ambition to lead his party. "I don't exclude it – who knows what might happen in the future," he said. He also told the paper that the "worship of youth" was subsiding, in an apparent dig at those leading the two coalition parties. A friend of Cable said: "Dr Cable is on call in case of an emergency."