Some of Britain's biggest companies will take the axe to shareholder dividends this week amid escalating fears that the global economic slowdown could be the most severe since the Opec oil crisis of the 1970s.

Investors in Bovis Homes and Taylor Wimpey, the housebuilders, Pendragon, the car dealer, and Johnston Press, the regional newspaper publisher, are all expected to see their payouts fall significantly. More pain is expected in the coming weeks as scores of companies strive to trim costs and survive the toughest economic climate for decades.

It emerged yesterday that the International Monetary Fund (IMF) had cut its forecasts for world economic growth this year and next, only weeks after publishing its latest predictions.

An unnamed G20 finance official told Reuters that the IMF had downgraded its world growth forecast for this year to 3.9 per cent from 4.1 per cent in a briefing note prepared for a summit of deputy finance ministers in Rio de Janeiro this week.

The IMF's bleakest projection was reserved for the eurozone, where it asserts that growth will be 1.4 per cent this year, compared with the 1.7 per cent it predicted last month. No figures were given for Britain. The official said: “Commodity prices will remain high and volatile ... [and] market turbulence will go on through 2009.”

Although the IMF is believed to have kept growth estimates for the US economy unchanged at 1.3percent for 2008, fears that the growing economic malaise will hit American exporters triggered heavy falls in shares on Wall Street. By lunchtime the Dow Jones industrial average had fallen by nearly 2 per cent, or 217.90 points, to 11,410.20. Housing data in the United States also indicated that the glut of unsold homes had reached record levels.

The gloom extended to the currency markets, where sterling briefly touched a two-year low against the dollar, of $1.8407, as traders bet that the Bank of England would cut interest rates this year.

Charlie Bean, the Deputy Governor of the Bank, refused to be drawn on interest rates but acknowledged that he believed that Britain and the rest of the world were gripped by the worst economic difficulties for more than 30 years. Speaking at a conference of leading central bank chiefs and economists in Jackson Hole, Wyoming, he conceded that there was little sign of any respite as fuel and food prices stoked inflationary pressure.

He said: “Last year this was a financial crisis that we thought, with a bit of luck, would be over by the time of Christmas, but it has dragged on for a year and looks like it will drag on for some considerable time further yet. It's fair to say that if you look at the shocks impinging on us, this is at least as challenging a time as back in the 1970s.”

Grim figures before the Bank Holiday revealed that the British economy had stalled in the second quarter of the year, breaking a 16-year streak of rising living standards and igniting fears that Britain would enter a recession - two consecutive quarters of shrinking output.

Last month the IMF predicted that the British economy would grow by 1.8 per cent this year and by 1.7 per cent next year. An IMF spokesman declined to comment yesterday on the figures reported by Reuters or be drawn on the prospects for Britain. He said that the IMF's next formal set of growth forecasts would be published at the beginning of October.

David Kern, economic adviser to the British Chambers of Commerce, said: “We certainly believe that the impact of the credit crunch is going to take some time to sort out, and it may be prolonged. But if the right measures can be taken by the Government and the Monetary Policy Committee, they can avoid a major recession.”

Explore Economics

• Pre-Budget Report 2008

• Budget 2008

• World Economic Forum

• The Times MPC

Times Recommends

• Lloyds TSB wins vote for HBOS merger
• Bank of England discussed 2% rate cut
• Woolworths dives as it confirms takeover talks