Brown admits 'recession now likely'

The Prime Minister's first use of the "r-word" came as share prices also fell dramatically again and the date for a US-hosted world summit to discuss the crisis was set for November 15.

"Having taken action on the banking system, we must now take action on the global financial recession which is likely to cause recession in America, France, Italy, Germany, Japan and - because no country can insulate itself from it - Britain too," Mr Brown said at Prime Minister's questions.

Official statistics due this Friday are expected to show Britain suffering the first of the two consecutive quarters of negative growth which technically constitute a recession.

But, following Bank of England Governor Mervyn King's recession warning on Tuesday night, the Prime Minister was forced to concede myriad expert predictions were almost certainly correct.

The grim official analyses - the first official confirmation of what has been widely predicted by experts for weeks - sparked an immediate drop in the value of the pound.

It fell as low as 1.616 US dollars - the lowest since September 2003.

London's blue chip FTSE share index fell 4.5% to close at 4040.9, with the Cac 40 in France and Germany's Dax both finishing more than 5% lower and the Dow Jones Industrial Average on Wall Street plunging nearly 300 points in the first few hours of trading.

Commodities were worst hit in London with concerns that demand would plummet amid a recession sending mining companies lower. Banks were also sharply down in the sell-off. There were also predictions that interest rates would be slashed again as soon as next month as the Bank of England attempts to stave off a deep recession.

Pressure for deep cuts is likely to mount further on Friday when official figures are expected to confirm a shrinking UK economy for the first time since 1992.