London - The British economy could be heading for its biggest slump since the end of World War II, with the impending recession lasting for five years, a leading think tank has predicted.

The Centre for Economics and Business Research (CEBR) said Friday that the British economy could shrink by more than 2.5 per cent in 2009 as bank lending continues to stagnate.

The forecast echoes a growing number of analysts who have said that Britain's gross domestic product (GDP) could fall by 2.5 per cent next year.

Such a decline would be the biggest slump since 1946-7 when Britain was wrestling with the aftermath of war and a freezing winter.

"It is easy to see that things could be even worse," the CEBR's leading economist Ben Read told the Daily Telegraph Friday.

"Despite public declarations by the government that the banks ought to be lending more, it is clear the primary concern of many of our largest banks is to shore up their balance sheets and, for those on the end of government bail-outs, to pay back their Treasury masters," he said.

A cutback in investments and increased savings activity by consumers could mean an economic contraction of between 5 and 10 per cent, setting the British economy back for five years, Read told the paper.

Britain's Chancellor of the Exchequer Alistair Darling earned a storm of protest with his assessment earlier in the credit crunch that the British economy was facing its worst crisis in 60 years. (dpa)