The International Monetar y Fund has slashed its growth forecast for the UK by more than any other major country in the world, as it warned that the UK is heading into recession.

The Washington-based Fund used its World Economic Outlook to warn that the UK will contract next year by 0.1%. Although other institutions, including the Organisation for Economic Co -operation and Development, have also warned that the UK is facing a recession, none has predicted a full year of contraction.

The IMF’s chief economist, Olivier Blanchard, indicated both central banks and governments may have to do significantly more to bring the crisis to an end.

Despite the emergency half percentage point coordinated interest rate cuts from the Bank of England and others, he said: 'more may be needed. If so, we hope that it is done'.

He added: 'At this stage, I think there is still scepticism in the markets as to whether the measures taken will be sufficient. I think, again, here, as more measures are taken and people just understand that they will eventually work, then they will realise that these were the first set of policies of a larger set which is coming.'

Daily Telegraph