BRUSSELS, Belgium - January 20, 2009 - Britain's economy is about to suffer its most vicious slump since 1946, shrinking by a drastic 2.8 per cent this year, Brussels warned yesterday, as fears over the scale of the recession mounted despite the new banking bailout.

In a dire assessment that threatens to leave Chancellor Alistair Darling red-faced at a meeting of European Union finance ministers today, Brussels predicted that the UK would suffer the worst recession of any large European economy.

The European Commission's grim forecast of Britain's outlook points to a toll this year more than twice as bad as the worst-case scenario in the Chancellor's Pre-Budget projections. Mr. Darling had pinned his hopes on GDP falling by no more than 1.25 per cent, although he has admitted since then that this rosy view would have to be ditched. The warning is the most authoritative yet that the economy's plight will prove far worse than the Treasury has acknowledged. It comes as a growing number of independent economists are predicting a contraction in GDP of 2.5 per cent or more this year.

The consequences for the UK would include soaring unemployment, while the economy also teeters on the brink of full-blown deflation, Brussels added. The Commission expects unemployment to jump by more than 900,000 people over the next 12 months, driving the jobless total to 2.55 million by the end of the year. The unemployment rate would surge to 8.2 per cent of the workforce, from 5.3 per cent at present.