UK 'will enter recession this year'

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The Paris-based Organisation for Economic Co-operation and Development (OECD) predicted that the UK economy will shrink 0.3% in the third quarter, and by 0.4% in the fourth. The definition of a recession is two successive quarters of negative growth.

According to official UK data released last month, the economy came to a standstill during the second quarter of 2008.

The OECD figures emerged in an "interim economic assessment" for the G7 group of seven leading industrialised nations, which comprise the UK, US, Japan, Germany, France, Italy and Canada.

Britain will fare the worst among the group of countries, the organisation said, with the other economies all slowing to a standstill at worst during the rest of this year.

The US will see growth slow to 0.9% in the third quarter and 0.7% in the fourth. Europe's biggest economy, Germany, will come to a standstill in the third quarter, the OECD said, and edge ahead just 0.1% in the fourth.

Jorgen Elmeskov, the OECD's acting head of economics, said financial market turmoil, housing market downturns and high commodity prices were continuing to bear down on global growth.

"The eventual depth and extent of financial disruption are still uncertain, however, with potential further losses on housing and construction finance being one source of concern," he said.

The OECD is forecasting the UK economy to grow by just 1.2% for the whole of 2008, well down on its earlier forecast of 1.8%.

Last month the International Monetary Fund predicted the UK economy would grow 1.4% this year.