A recession in Britain is looming, according to the European Commission (EC), which today cut its growth forecast and increased its inflation expectations for the eurozone.

The EC expects the UK to shrink by 0.2 per cent in two successive quarters, which is the technical definition of a recession.

The EC's forecast tallies with the Organisation for Economic Co-Operation and Development (OECD) which recently singled out Britain as the only G7 economy that will fall into recession duing the second half of 2008.

However, the EC expects that Germany and Spain will also enter recession, although the 15-nation eurozone will avoid two quarters of negative growth.

Spain's economy is expected to contract by 0.1 per cent and 0.2 per cent over two quarters.

Germany is predicted to recover after two quarters of shrinking output in the second and third quarters to grow by 0.2 per cent in the final three months of the year.

The European Union's executive arm said that financial market turmoil, elevated commodity prices and sliding housing markets would result in much slower European economic growth that it had previously predicted.

It has cut its forecast of 1.7 per cent in April to 1.3 per cent growth this year.

The eurozone economy contracted 0.2 per cent in the second quarter, and the EC predicted it would stall in the third quarter and expand by only 0.1 per cent in the final three months.

The OECD also cut its annual growth forecast for the eurozone from 1.7 per cent to 1.3 per cent last week.

Economists have said the downturn could continue into next year. Howard Archer, chief UK and European economist at Global Insight, said: " We expect the UK economy to contract modestly for three successive quarters from the third quarter of 2008."

The EC also said that eurozone inflation would reach 3.6 per cent this year, up from its previous forecast of 3.1 per cent, and well above the European Central Bank's inflation target of around 2 per cent.

“The main downside risks identified in the spring forecast have materialised, with the financial turmoil deepening, commodity prices soaring and the shocks to several housing markets spreading more widely," the EC said.

It said that, while there were no signs of second-round inflationary effects, there were risks that higher prices could feed into wages, further embedding inflation in the economy.

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