A recession is brewing with consumers under pressure from rising prices and falling wages, a leading forecaster has warned.

Respected consultancy Fathom Macro-economics said it is now more likely than not that there will be a recession - defined as a fall in economic output for two successive quarters.

Economic growth has been weakening because the collapse in the pound has been stoking inflation, which experts believe is still on an upward trend despite a slight fall last month. Real wages – earnings once inflation is taken into account – are now falling.

A recession is brewing with consumers under pressure from rising prices and falling wages, a leading forecaster has warned

Joanna Davies, an economist at Fathom, said the brief period of wage growth is over and household finances are stretched.

‘The key driver of UK GDP growth – the consumer – is under assault,’ she said. ‘We believe that there is now a greater-than-evens chance of a recession over the next year.’

The Treasury argued before last year’s Brexit referendum that a vote to leave the EU would provoke a shallow year-long recession. However, its forecast proved incorrect as consumers carried on spending.

Davies said: ‘Not only are finances stretched, meaning households have limited savings into which they can dip, but real incomes are falling. The crackdown on unsecured lending [credit cards] is likely to make the usual buffer of consumer credit both less enticing and less readily accessible.’

Official figures are likely to say this week that the economy grew by just 0.3 per cent in the second quarter of the year, following a 0.2 per cent increase in the first three months.

Howard Archer, chief economic adviser to the EY Item Club, said: ‘We have pencilled in marginally improved GDP growth of 0.3 per cent, but would not be at all surprised if it came in at 0.2 per cent again.’

Analysts expect Lloyds Banking Group to reveal sharply higher impairments – a measure of assets that the bank is having to write down because it is unable to recover them – when it announces half-year figures on Thursday

Bank results out this week will be closely scrutinised for any sign that consumers are starting to default on their debts in greater numbers.

Analysts expect Lloyds Banking Group to reveal sharply higher impairments – a measure of assets that the bank is having to write down because it is unable to recover them – when it announces half-year figures on Thursday.

The bank said earlier this year that while impairments are rising compared with last year, the figures for 2016 were flattered by write-backs, where older write-offs were recouped.

Investment bank UBS said there were signs of rising debt problems for consumers. The bank said in a note to clients: ‘Our leading indicator shows an increase in new troubled credit production. For now though the increase is modest.’

Lloyds is expected to reveal impairments of £261 million for the second quarter of the year, up from £127 million in the first three months. It will disclose half-year profits of £2.8 billion, up from £2.4 billion for the same period a year before.

On Tuesday, Virgin Money is expected to reveal rising profits, thought to be up 23 per cent to £123 million for the first half of the year.

UBS said the challenger bank will be under pressure to provide reassurance on its credit card borrowers.

Virgin Money has issued more zero rate balance transfer cards as a proportion of its total credit card lending than its rivals.

The Bank of England has said it is concerned by zero rate balance transfer cards, especially as banks book the income from the cards straight away even if the zero rate period lasts for 43 months – the longest currently available.