The UK economy will shrink at almost twice the pace previously forecast this year as the credit famine plunges the nation deeper into the worst recession in almost 30 years, according to the Confederation of British Industry (CBI).

Gross domestic product (GDP) will contract -3.3%, instead of the -1.7% predicted in November, according to the CBI. It added that by the end of 2009, the economy will have contracted for six consecutive quarters.

Richard Lambert, the CBI’s director general, said: “The world has changed dramatically. Faced with a global confidence crisis, a rapid fall in demand and credit constraints, UK firms have been forced to scale back investments and cut jobs.”

Gordon Brown, Prime Minister, has pledged billions of pounds to revive lending as a housing slump deepens and job losses mount. The CBI expects the economy to shrink -4.5% from the start of the recession in the third quarter of last year, only slightly less than in the early 1980s slump during Margaret Thatcher’s first term. Output will stagnate in 2010, according to the CBI.