In next month’s pre-Budget report, Chancellor Alistair Darling is expected to sharply revise his forecast downwards for the UK economy, according to Treasury sources.
The Chancellor is expected to say that the UK economy contracted by 4.75% in 2009 - far more than the 3.5% he predicted in March’s Budget.
However, while he is expected to admit that the recession was worse than feared, he is believed to stick to his original forecast of growth between 1%-1.5% for 2010.
He is expected to say: “At the time of the Budget, my forecast for growth in 2009 was in line with the average of external forecasters. Since then, new data has shown that most economies, ours included, suffered a severe shock in the first quarter of this year.”
The Chancellor’s revised predictions comes as the UK economy failed to emerge from recession in the third quarter as expected after contracting by 0.3%.
The figures meant that the UK has endured six consecutive quarters without growth - the first time since records began in 1955.
The UK has been lagging behind other economies and is now the last major economy that is still in recession.
However, on a positive note, there has been a run of good news for the economy of late.
The Office for National Statistics said retail sales in October were up 0.4% compared with September, while the most recent Purchasing Managers Index showed manufacturing output increased at its fastest rate for almost two years in October.
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