The Prime Minister admitted for the first time today that Britain is heading for a recession as a result of the global economic downturn.

During questions in the House of Commons, Mr Brown said he agreed with Mervyn King, the Governor of the Bank of England, who last night conceded that the UK was on the brink of a painful and prolonged recession.

Mr Brown said today: "The Governor of the Bank of England said last night that not since the First World War has the international banking system been so close to collapse, and I agree with him."

Official figures due out on Friday are expected to show that the British economy shrank for the first time since 1992 between July and September. The technical definition of a recession is two successive quarters of negative growth.

Mr Brown said that no country could insulate itself from the global downturn, and he pledged that the Government would take action.

"Having taken action on the banking system, we must now take action on the global financial recession which is likely to cause recession in America, France, Italy, Germany, Japan and - because no country can insulate itself from it - Britain too," he said.

"That is why we are giving our undivided attention to helping families and businesses."

The Prime Minister's words follow the stark warning from Mr King, which sent the pound plunging against the dollar on the currency markets today.

Sterling tumbled to a five-year low against the dollar - to $1.6331 - after Mr King who, like Mr Brown, had so far avoided using the word recession, said: "It now seems likely that the economy is entering a recession." The Governor also told the country to prepare for a prolonged period of hardship.

The euro also fell against the dollar to $1.2743, to its lowest level since November 2006, over expectations that savage interest rate cuts would be needed across Europe to prop up the economy.

While the pound and euro have weakened, the dollar has been gathering strength, after Ben Bernanke, the US Federal Reserve chairman, told Congress on Monday that he endorsed more government spending to stimulate the American economy.

Last night, it also emerged that the Fed could lend as much as $540 billion (£329 billion) in a new facility aimed at restoring liquidity for money market mutual funds.

Mr King said yesterday that a squeeze on take-home pay, soaring living costs and the decline in consumer credit had increased the risk of “a sharp and prolonged slowdown” in Britain.

He said: “Over the past month, the economic news has probably been the worst in such a short period for a very considerable time.”

Mr King said that, since the collapse of Lehman Brothers, the US investment bank, on September 15, markets had been hit by an “extraordinary, almost unimaginable sequence of events”.

He added: “It is difficult to exaggerate the severity and importance of those events. Not since the beginning of the First World War has our banking system been so close to collapse.”

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