Chancellor Alistair Darling will say in his pre-Budget report that the economy performed worse in 2009 than he first predicted, Treasury sources have said.

Mr Darling is expected to say that the UK economy shrank by 4.75% this year – more than the 3.5% originally forecast in the Budget in March.

The adjustment follows the economy’s unexpectedly poor performance in the first three months of the year.

But he is likely to stick to 2010 forecasts of growth between 1-1.5%.

Return to growth

On Thursday, Mr Darling said that since the Budget forecasts were made, “new data has shown that most economies, ours included, suffered a severe shock in the first quarter of this year”.

He added that he still expected a return to growth around the turn of the year.

The UK economy has contracted for the past six quarters, but the economies of the US, Japan, France and Germany have all started growing again.

Recent UK economic figures, such as retail sales and manufacturing output, have indicated signs of recovery.

October’s retail sales were up 0.4% from September, according to the Office for National Statistics.

And the latest Purchasing Managers Index showed manufacturing output increased at its fastest rate for almost two years in October.