UK economic output fell by 0.5% in Q3, according to the Office for National Statistics, a bigger-than-expected drop, knocking UK shares and weakening the pound.
The UK will be classed as being in recession if the economy slows in the fourth quarter as well.
'Once-in-a-lifetime crisis'
Gordon Brown says the government is 'fighting' the recession".
He said the government was putting more money into people's pockets - including an increase of the winter allowance for pensioners and a £120 tax cut for basic taxpayers.
The fall in UK output has been blamed on the credit crunch, falling house prices and rising energy prices, which have forced consumers to tighten their belts.
Charlie Bean, deputy governor of the Bank of England's rate-setting committee, the MPC, described it as a "once in a lifetime crisis and possibly the largest financial crisis of its kind in human history".
UK shares tumbled further on the news, closing down 5%.
The pound was also affected, falling to $1.52 before recovering to $1.5889 - the first time it has fallen below $1.60 in the past five years.
Shock fall
The 0.5% fall in economic output is far greater than predicted and increases expectations of further interest rate cuts from the current level of 4.5% to ignite growth.
