Fears that consumer spending will slump in the coming months are set to rise today after a report showing that two thirds of Britons believe that the country is in recession.

The consumer confidence index of the British Retail Consortium (BRC) shows that 65 per cent of consumers believe that the country is in recession and 34 per cent predict a global recession in the next 12 months. This comes as consumer confidence has hit a record low.

The BRC said that the index fell to 79 this year as financial pressures spiral and house prices slide. That is down from 91 last year and is the lowest since the survey started in 2003.

The biggest worry among consumers was the outlook for the economy, with nearly one in five people saying that it was their main concern, the BRC said.

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Debt came a close second, with 16 per cent of people saying that it was their primary worry.

One in five people questioned had no spare cash and 57 per cent said that they felt bad or not so good about their personal finances. Three in five were negative about their job prospects over the next year.

An economy is classed as being in recession when it shrinks for six consecutive months. Britain's economy is still growing, according to the most recent figures, released in March. GDP, the measure of economic growth, rose by 0.4 per cent in the first three months of the year.

However, this was down from 0.6percent in the previous quarter and marked the slowest expansion since the start of 2005.

Some economists say that there is a risk that the economy will fall into recession next year.

Howard Archer, of Global Insight, an economic consultancy, said he was not surprised that people believed that the UK was in recession.

He said: “The economy has slowed down suddenly, so it may feel like a recession, even though it isn't technically the case. In addition, people are seeing their bills rise and are really feeling the effects of the credit crunch.”

However, the Bank of England, which was persuaded not to cut rates last week by increasing inflationary pressures, will take some comfort from the report, which says that more than half of consumers consider inflation to be the biggest risk when the economy is slowing.

About 55 per cent of people said that inflation was their main concern during an economic downturn, and 39 per cent considered rises in interest rates to be the biggest risk.

The gloomy outlook has boosted the popularity of savings, with more people choosing to put their spare cash in a savings account rather than spending it on holidays, clothes or entertainment.

About 37 per cent of people said that they would save their extra money rather than spend it, compared with 32 per cent in October 2006.

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