UK stands on 'brink of recession'

Business Secretary Lord Mandelson has warned a "contraction" in the economy was inevitable and that it was impossible to tell how long it would last.

His comments come ahead of official figures this week that are set to show the first quarter of "negative growth" since 1992 between June and September.

If that contraction continues for a second month, the economy would officially be in recession.

But the Ernst & Young ITEM club claimed that the economy was already in recession and would shrink by 1% next year. Using the Treasury's own model for its predictions, it also said house prices would continue to fall until 2010.

And unemployment could hit 2.2 million by the end of 2009 as the impact of the slowdown and cost-cutting by employers leads to lengthening dole queues, it said.

At the same time, a new study showed confidence among British firms plunging to a new low in the wake of the economic downturn.

A survey of more than 200 firms last month by Lloyds TSB showed almost one in four feared their business activity would fall over the next year, with fewer than one in three confident that things would improve.

Meanwhile, new home sellers appear to be failing to price their properties realistically, with asking prices rising 1% in the past month. The average property for sale in England and Wales now costs £229,691, following the first increase in asking prices for five months in the four weeks to October 11.

But property website Rightmove warned that despite the recent "financial mayhem", many people were failing to price realistically and were tempted to think that their home was more desirable than others on the market.