Britain will be the ONLY major economy to fall into recession this year, experts claim

Britain is forecast to be the only major economy that falls into recession this year as a crumbling housing market takes its toll, heaping further embarrassment on Chancellor Alistair Darling.

Marking out the UK as the sick man of the G7 group of leading economies, the respected Organisation for Economic Co-operation and Development has downgraded the UK to bottom of the pile behind the U.S., Germany, France and Japan.

While Mr Darling backtracked on his comments that this country faces the worst downturn in 60 years, the OECD painted a grim picture in the short term, with forecasts that the economy will shrink for the rest of the year.

It expects UK economic growth to fall by 0.3 per cent this quarter and 0.4 per cent for the last quarter of the year.

This would officially plunge the economy into recession, which happens after two consecutive periods of falling growth.

The OECD said the housing market plays such a key role in the UK's economic prosperity that any downturn in property will have a major knock-on effect for the economy. Last month the Nationwide building society recorded a 10.5 per cent fall in house prices for the year.

Howard Archer, an economist at Global Insight, said: 'The housing market is crucial to the UK as we have such a high percentage of homeowners. When house prices are rising consumer confidence is high and people go out and spend.

'But when they're falling, the opposite is true and causes a sharp downturn in the economy, which is what we are now starting to see.' Shadow Chancellor George Osborne said:

'This is more gloomy news coming on the back of the Chancellor's warning that the economy is facing the worst crisis for 60 years.

'The depressing thing is that at the very moment when Britain needs a strong and united leadership, we have a weak and dysfunctional Government.'

Earlier this year, the U.S. was facing a recession but now looks as if it will avoid one thanks to a combination of interest rate cuts and the pumping of hundreds of billions of dollars back into the

economy. But the Bank of England has made no such moves. While the economy is crying out for a cut in interest rates the Bank has its hands tied as it struggles to keep a lid on inflation.

Economists predict it will not reduce interest rates until at least November when inflation is expected to brought back down.

But this could be too little, too late, as the economy is already starting its freefall.

Jonathan Loynes, UK economist at Capital Economics, said: 'It's much harder for the UK to revive the economy in the same way as the U.S.

'The Bank of England is fighting to control inflation while the public finances are in such a state that the Government has no money to pump back into the economy.'

Yesterday the pound failed to recover from its sharp falls on Monday as Mr Darling's gloomy comments continued to spook currency traders.

Sterling dropped to a twoanda-half year low against the dollar of $1.78.

Nor could it recover from its record low against the euro, continuing to languish at 1.23 euros for most of the day.

With the eurozone unlikely to fall into a recession, the euro should strengthen even further against the pound.