The economic slowdown will reach its nadir at the end of 2008 and the start of 2009, according to the Institute of Chartered Accountants in England and Wales (ICAEW).

According to the organisation business confidence is continuing to slump and the effects of this are now spreading from banking and the housing market into other sectors such as recruitment, consultancy and marketing.

But ICAEW also found that measures companies were taking to safeguard their own position - including rising prices and wages by less than the rate of inflation - would help to reduce the rate of inflation and pave the way for interest rate cuts that could see the UK avoid a full-on recession.

"We expect inflation to start falling back from early 2009, allowing the Bank of England room to cut interest rates throughout 2009," said Robin Fieth, the ICAEW's executive director of operations and finance.

"The performance of UK plc through 2009 is likely to be the weakest growth since 1992, when the economy grew by just 0.3%. However, towards the end of 2009, providing wage inflation stays low, economic activity looks likely to pick up."