The pound crashed below $1.60 today for the first time in five years as Britain heads for recession.

Sterling sank 3.85 cents to $1.5845, its lowest since September 2003, putting it on course for its biggest weekly fall against the greenback since the aftermath of Black Wednesday more than 16 years ago.

The slump came as figures were set to show the economy shrank in the third quarter of the year the first decline in output since the second quarter of 1992.

Bank of England Governor Mervyn King and Prime Minister Gordon Brown this week warned that Britain was running into recession.

King said Britain's economy is probably entering its first recession in 16 years and before the Government stepped in the UK banking system was closer to collapse than at any stage since the First World War.

"We expect the currency to continue underperforming the greenback," said Geoffery Yu, a UBS currency strategist at UBS in London.

The pound has lost nearly 8% against the dollar this week. The last time it fell so sharply was after Britain was ejected from the European Exchange Rate Mechanism on Black Wednesday in September 1992.

Official figures were today expected to show that Britain is plunging headlong into recession. The economy looks to have shrunk in the third quarter, having seen no change in the second. A widely expected contraction in the fourth quarter would leave Britain in recession.

City economists today said they did not expect to see growth again until late next year or even 2010. Howard Archer of Global Insight said: "I don't see any growth at all until the fourth quarter of next year."

George Buckley of Deutsche Bank said: "We are now substantially more bearish on economic growth than we were just two weeks ago. Rather than the mild recession we had forecast we now see a more destructive decline in output. Our forecast is for a similar loss as in the 1990s recession."