Almost every major bank in the City of London has dramatically reduced its forecast for growth in the UK in 2017 in the wake of Britain’s decision to leave the European Union, with many effectively now forecasting recession.

Barclays Capital now predicts that UK GDP will shrink by 0.5 per cent in 2017. In June, before the referendum took place, it forecast growth of 1.9 per cent.

In June, Nomura forecast 1.9 per cent growth. This month it revised its prediction to a contraction of 1.3 per cent.

Citigroup, JP Morgan, Goldman Sachs, Royal Bank of Scotland and Bank of America Merrill Lynch have also all drastically revised down their predictions.

According to the index published monthly by HM Treasury, Bank of America Merrill Lynch had forecast 2.3 per cent growth, and now predicts much smaller growth of 0.2 per cent.

Technically, a recession is defined as two consecutive quarters of negative growth. It is possible for growth to shrink overall over the course of a full year without a recession having occurred, but highly unlikely.

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Other non-City based forecasters such as the International Monetary Fund, have taken a less pessimistic outlook, forecasting 1.3 per cent growth, but this is still down from its most recent forecast in April of 2.2 per cent.

On average, the more than 30 institutions included in the Treasury’s figures forecast a reduction in growth from 2.1 per cent to 0.7 per cent.

The same institutions have also revised up their inflation forecasts from 1.9 per cent to 2.5 per cent. Unemployment forecasts have increased from 4.9 per cent to 5.7 per cent, and public sector net borrowing in the financial year 2017 to 2018 is forecast to rise from £45.5 billion to an average of £63 billion.

The Labour Party’s Shadow Chief Secretary to the Treasury Rebecca Long-Bailey said the figures "confirm the real impact of Brexit on the UK economy".

She added: “We need an emergency programme of investment to create jobs and lay the foundations for the high-skill, high-wage economy we deserve.