The UK economy is in a worse state than many had expected, the Confederation of British Industry (CBI) has warned.

The organisation admitted it - along with other forecasters - had been too optimistic about the economic situation, having originally predicted that the effects of the credit crunch would only last a year.

"A year ago it seemed reasonable to hope that the worst would be over by now," said CBI director general Richard Lambert in a letter to members. "That has not turned out to be the case."

The rate at which inflation had soared had taken people by surprise, he added, and businesses and consumers could expect an "uncomfortable time" over the next 12 months.

The CBI has now cut its forecast for economic growth from 1.0% to 0.4% in 2009, although this would still steer the UK clear of recession.