The UK economy shrank by 1% between September and November, according to data released by the National Institute of Economic and Social Research (NIESR).

The fall comes on top of a 0.8% drop in the three months to the end of October, this would indicate the rate of output decline is continuing to accelerate, NIESR now expects a fall of more than 1% in the last three months of the year.

Official data showed that the economy shrank 0.5% from July to September.

If it reports a decline for the three months to December, then the UK will be in officially in recession under the generally accepted definition of two consecutive quarters of decline, although it cannot be denied the UK is in recession, only the depth of the downturn is in question, NIESR say the recession could be deeper than first thought.

"The Government faces the real risk that, despite the measures it took in last month's Budget, output will fall more sharply than it expected to the end of next year," it said.

"The main problem that it needs to address very urgently is the availability of bank credit, and further interest reductions are unlikely to have much effect."

In addition to the recent cuts in interest rates, the Bank of England and the government have given the UK's banking sector billions of pounds in loans to try to restore lending levels to normal.

In response, banks such as Royal Bank of Scotland, Lloyds TSB and HBOS have all announced measures to increase lending to small firms.

The Organisation for Economic Co-operation and Development (OECD) also warned last week that the UK faces a "severe" economic downturn in 2009.

The Paris-based body predicted that economic output in the UK will fall by 1.1% next year, more than any other major G7 country adding unemployment in the UK will likely rise significantly to over 8% by end of 2009 from 5.5% in 2008.