The UK economy is set to experience its weakest period of growth in 15 years and there is a risk of a recession in the next two years, a report warns.
Many jobs could be lost in financial services
The Deloitte Economic Review said that the housing market would be at the heart of the downturn, with prices falling by about 5% this year.
The global credit squeeze would make borrowing more difficult, it added.
A Bank of England policymaker echoed the report's concerns and called for further rate cuts to avoid a slump.
David Blanchflower, who was the only member of the central bank's Monetary Policy Committee (MCP) to vote for a cut in interest rates this month, said the state of the housing market was "worrying".
"Consumer confidence is low in the UK. Interest rates are restrictive at their current levels and that is why I have been voting for cuts," he told The Guardian newspaper.
Mr Blanchflower's colleagues all voted for rates to be kept on hold at 5.5%.
Jobs to go?
Deloitte said a prolonged economic downturn may also force employers to "wield the axe more sharply".
Experian, a financial data firm, said that between 10,000 to 20,000 of London's 400,000 financial services jobs could be lost over the next 18 months.
"The global financial crisis and the associated credit crunch have brought an end to the period of easy credit that in recent years has been the bedrock of rapid rises in house prices," said Roger Bootle, Deloitte's economic adviser.
He expects house prices to fall by 8% in 2009.
Unlike in 2005, Deloitte said the UK economy would not be bailed out by a strong world economy.
It expects US growth to slow to zero in the first half of this year.
And while the European economy, the UK's biggest export market, will remain relatively strong, it will not be enough to offset a US slowdown, the report says.
Nor will the rapidly growing economies of India and China come to the UK's rescue, as the two countries buy less than 5% of UK exports.
Relatively benign inflation should help to prevent a recession as it will give policymakers enough scope to cut interest rates, the report says.
Deloitte forecasts that the UK base rate will fall to 4% in 2009.
"Worrying about inflation at this time seems like fiddling while Rome burns," Mr Blanchflower said.
A technical definition of a recession is two successive quarters when the economy shrinks.
Deloitte expects the UK economy to grow by 2% this year and by a slightly smaller margin in 2009.
The UK economy grew by 3.1% in 2007, its fastest rate in three years, but growth slowed in the last three months as the credit squeeze took hold.