London  - The British economy is set to shrink by 2.7 per cent this year, its most serious contraction in 60 years, a think-tank said Wednesday.

The prediction by the National Institute of Economic and Social Research (NIESR) matches a recent forecast by the International Monetary Fund (IMF) which said Britain's economy would contract by 2.8 per cent in 2009.

As recently as October, the NIESR was only predicting a 0.9 per cent decline in economic growth.

The think-tank predicted the recovery would begin in the third quarter of 2009, but said it would be "feeble," with growth of just 0.6 per cent in 2010.

The government has said it expects the economy to pick up in the second half of this year - a view challenged by many economists.

NIESR said the economy would be hit by a 3.8-per-cent fall in consumer spending and 8.8-per-cent drop in business investment this year.

Its assessment was published ahead of a possible further interest rate cut by the Bank of England, which is widely expected to cut the key lending rate to 1 per cent Thursday. (dpa)