THE UK’s economy will slow significantly as it is buffeted by the debt storms whipping the eurozone and US, the Bank of England will warn this week.

Bank Governor Sir Mervyn King is expected to say that GDP in 2011 will rise by about 1.3% – significantly less than the 1.8% it predicted in May, while its forecasts for next year could also be slashed.

The sluggish nature of the UK’s recovery is expected to be made worse as panic sweeps global financial markets after America’s prized AAA credit rating was slashed and worries persist that Italy and Spain could need a bailout.

Meanwhile, Business Secretary Vince Cable said the UK was in danger of a double dip recession and living standards would continue to come under pressure unless the banks boost growth by lending more.

His warning follows a week of mayhem on global stock markets in which the UK’s FTSE 100 Index lost nearly 10% of its value, or £150bn, in its worst period of trading since October 2008.

World leaders are reported to be breaking off from their holidays to hold emergency calls in an attempt to resolve the crisis.