The new independent watchdog for the UK's public finances has slashed official growth forecasts for next year.
The Office for Budget Responsibility (OBR) is forecasting growth of 2.6 per cent in 2011, below the 3.25 per cent predicted by Labour in March's Budget.
The OBR's figures, which do not include the impact of measures introduced by the coalition Government, set the scene for Chancellor George Osborne's emergency Budget next week.
The OBR predicts borrowing of £155 billion in the current financial year - below the £163 billion forecast in the Budget - with total net borrowing over the next five years £23 billion lower than expected in March.
On a slightly brighter note the OBR also forecast the public borrowing would be lower than previously predicted. Immediate market reaction to the news appeared positive too as the pound climbed against the dollar.
Despite the drop financial expert Philip Shaw sees the economic situation as having changed very little: "The structural deficit is worse than that implied by the March budget but we're starting from a better position, so overall there is not much change to the fiscal position."