Ernst&Young's ITEM Club Autumn forecast shows the economy has deteriorated dramatically in the last quarter and is now in recession.
ITEM is forecasting that the economy will contract for three further quarters before bottoming out in the second half of next year and expects a weak recovery in 2010.
GDP will fall by 1% next year, the first year of negative growth since 1992 and will grow by only 1% in 2010.
Peter Spencer, Chief Economist to the Ernst & Young ITEM Club says, "Gordon Brown may have won plaudits for stopping the systemic meltdown of the banking system over the last few days.
"But, we now have to face up to the reality of an economy that has been seriously weakened by recent dramatic events. The effects of the credit crisis are spreading out from the financial and housing sectors and impacting every part of our domestic economy."
The report says that employment and investment will fall and household incomes will remain flat for the next 12 months, but inflation will continue to fall, allowing interest rates to be aggressively cut.
"Even if the equity markets stabilise and we begin to see capital flowing around the international banking system again we are still looking at a domestic and global economy that will be in recession for the next 12 months," said Spencer.
"But with plunging interest rates, falling inflation, a fundamentally strong economy and some sort of stability in the banking system it should be a relatively short and shallow downturn."