The bank's governor, Sir Mervyn King, warned it could be years before a sustained recovery was under way as the Government came under increasing pressure over the impact of its austerity programme on the economy.
A year after the bank predicted 2% growth this year, Sir Mervyn yesterday announced it had revised that figure to close to zero and was cutting next year's forecast as well.
There was some good news, however, for borrowers amid predictions of another three years of record low interest rates, with some analysts suggesting there will be a further cut from the current record low of 0.5%.
John Longworth from the British Chambers of Commerce said ministers were not doing enough to boost growth and should increase spending on areas like infrastructure and housing.
Asked if Chancellor George Osborne should adopt a Plan B, Mr Longworth said: "We need two plans, we need a plan for deficit reduction but we also need a parallel plan on growth – and it can be done without affecting the first plan."
Sir Richard Lambert, former director-general of the Confederation of British Industry, said the Coalition should change tack if there was no improvement soon.
With low interest rates the Chancellor should be creating jobs "through the construction sector, [through] some bold scheme for housing", he said.
Sir Mervyn, who said the UK economy was "navigating rough waters and storm clouds continue to roll in", blamed the gloomy outlook in part on the continuing eurozone crisis.
He also admitted the Coalition's austerity drive had been a drag on growth.
Sir Mervyn said the public should look to Team GB's Olympians for inspiration on how to cope with a long and slow recovery, adding that full fitness could lie "some years ahead".
The revised forecasts increase the chances the bank will use more Quantitative Easing (QE), a form of printing cash, to help aid the economy.
Sir Mervyn appeared to rule out early interest rate cuts, despite inflation predictions, saying such a move could be "more counterproductive than beneficial".
The bank still believes the UK will emerge from its second recession in five years, but that growth will be much slower and shallower than previously predicted.
Growth forecasts for 2013 were also cut from 2.4% just three months ago to 1.9% yesterday.
Although the bank believes the London Olympics, which end on Sunday, could provide a mini-boost from ticket sales and TV rights, extra spending from tourism is expected to be offset by Britons leaving the UK.
Footfall figures have shown that many businesses in the capital city are struggling to attract business as Londoners stay away during the Games.
Meanwhile, The Federation of Small Businesses reiterated its call for a National Insurance holiday for companies who create new jobs. A spokesman said: "We need a real push to get more private sector jobs into the economy."
Others suggested the bank would take more action, including cutting interest rates further to stimulate growth.
Vicky Redwood, chief UK economist at Capital Economics, said: "The door is clearly open to more stimulus and we still expect both more QE and a further interest rate cut in November."
Labour claimed the Coalition's policies were damaging the economy.
Rachel Reeves, Labour's Shadow Chief Secretary to the Treasury, said: "We urgently need a change of course on fiscal policy from David Cameron and George Osborne to boost the jobs and growth we need to get the deficit down."
Scottish Finance Secretary John Swinney said the revised forecast starkly demonstrated the UK Government's economic plans were failing and reiterated his call for a Plan B. The SNP treasury spokesman Stewart Hosie added that action was "more urgent than ever".
"We need the houses, we need the jobs – so it's time for a bold scheme to invest in construction," he said.
Mr Osborne defended his administration's handling of the economy saying Sir Mervyn was "right on the big picture" that recovery would be slow but the Coalition would now focus "110%" on boosting growth.
l The Office for National Statistics yesterday said the Queen's Diamond Jubilee had not depressed manufacturing figures as much as previously feared. It reported a 2.9% decline compared to the previous month following the celebrations at the start of June, which included an extra bank holiday.
There had been expectations the figure could be as much as 4.5%.