Every taxpayer in the country has lost almost £40,000 since the onset of the credit crunch, as plunging house prices and the savage sell-off in stock markets have obliterated £1.2 trillion of Britain's national wealth.

The combined impact of the property downturn and the slide in share prices has wiped out the equivalent of a full year's economic output, according to research by analyst Dharval Joshi at City bank RAB Capital, £38,700 for every one of Britain's 31 million taxpayers.

"We're only halfway through; there's more destruction to come before we stabilise," said Joshi, predicting that as much as £2 trillion could be knocked off the value of assets.

Even by the end of 2008, just six months into what many analysts believe will be a prolonged recession, he calculates that £700bn has been lost in the housing market since the downturn began, plus £500bn from Britons' pension pots and share portfolios.

With public anger at senior bankers, regulators and politicians growing as the scale of the damage becomes clear, Gordon Brown will use a speech tomorrow to demand tighter international regulation of banks. He will argue that the crisis was exacerbated because no regulators, no ministers and startlingly few banking executives knew what assets had been sold to whom.

The prime minister will try to build a consensus around curbs on irresponsible banking practices later this week at the World Economic Forum in Davos, the annual gathering of tycoons and politicians. The Commons Treasury select committee will also seek to hold the industry to account over short-selling bank shares when it cross-examines five leading hedge fund managers

on Tuesday.

The Conservatives seized on Joshi's research yesterday to accuse the government of failing to protect consumers. Philip Hammond, shadow chief secretary, said: "Gordon Brown said he'd ended boom and bust, but he's presided over the biggest asset bubble in living memory and now we are all paying the price. Confidence in Brown's economic management has evaporated at home and the relentless decline of the pound shows that the rest of the world thinks the same."

Sterling declined sharply on the foreign exchanges last week, amid fears that the government's insurance scheme to protect banks against losses on 'toxic' assets - details of which are still being finalised this weekend - could expose the taxpayer to billions of pounds of additional liabilities.

Official figures revealed on Friday that the economy contracted by 1.5% in the final three months of 2008, underlining the severity of the downturn. Lord Myners, the City minister, said the economy was undergoing a "correction". "We know that there were elements of a bubble, not just in credit markets and share prices, but also in things like art and jewellery. There's a correction back towards an equilibrium. That's why we're taking the action that we are to support those who are most exposed."

But Liberal Democrat treasury spokesman Vince Cable said the government should have warned the public earlier that the housing market in particular was in the grip of an out-of-control boom. "They failed in their responsibility by failing to recognise the seriousness of the problem. We were rushing towards the edge of the cliff."

Rapid declines in wealth alarm economists, because consumers tend to respond by cutting spending, exacerbating recession. Danny Gabay of City consultancy Fathom said consumers had previously boosted their spending power by borrowing against their houses, but by the last quarter of 2008 mortgage borrowers were actually paying down equity, with a potentially devastating impact on spending.

"If you bought your house for £100,000 and some bloke in a pinstripe suit tells you it's worth £200,000, then you feel like you're being conservative if you only borrow an extra £25,000," said Gabay, who is concerned that the knock-on impact of the housing crash on families' spending habits has only just begun.

Joshi said Britain's housing boom and resulting bust meant the economy was likely to take longer to recover than America's, where consumers have more of their savings tied up in shares, which tend to see recovery faster.