Alistair Darling, Britain's finance minister, has announced in his budget statement that the country's economy will shrink by 3.5 per cent in 2009, the biggest contraction since the second world war.
Darling also revealed the nation's budget deficit will nearly double this year to $253bn.
The revised Gross Domestic Product (GDP) forecast of -3.5 per cent was a sharp revision from the government's pre-budget prediction in November of a drop of no more than 1.25 per cent.
Darling said a series of further large deficits would boost the national debt to 79 per cent of GDP by 2013-14.
He forecast that the economy would begin to pick up by the end of 2009, with growth of 1.25 per cent next year.
"Because of our underlying strength, the measures we are taking, domestically and internationally, I expect to see growth resume towards the end of the year," Darling said.
He also announced a new top rate for taxation of 50 per cent for people with incomes of more than $217,000 from April next year.
In a bid to revive Britain's depressed motor industry, the minister also announced a scrappage policy which would pay owners of cars over 10-years old up to $2,900 towards the purchase of a new vehicle.
Responding to the budget statement, David Cameron, the leader of the opposition Conservative party, said: "The figures are staggering ... the price will be paid by families and businesses up and down the country."
Cameron said the figures revealed the "utter mess" that Gordon Brown, the British prime minister, had made of the economy.
Darling's speech came on a day of more bad economic news for the UK as the Office for National Statistics (ONS) reported that unemployment in Britain had risen to 6.7 per cent in the three months ending in February.
This was up from 6.1 per cent in the previous quarter.
The ONS said that the number of people counted as unemployed rose by 177,000 to 2.1 million between December and February.
With regard to wages, the office said annual earnings growth was just 0.1 per cent.
The number of people employed in manufacturing jobs fell to a record low of 2.75 million, while the number of people with full time jobs dropped to 21.74 million.
Official figures also revealed that public borrowing hit a record $130bn in the last financial year, much higher than the $113bn prediction by Darling in November.