The British government has revealed a gloomier outlook about the economy, but says the pain will be much worse if eurozone countries do not solve their sovereign debt crisis.
Treasury chief George Osborne said Tuesday that the Office for Budget Responsibility expects Britain's GDP to grow by 0.9 percent this year, down from its March forecast of 1.7 percent.
For next year, the OBR predicts growth of 0.7 percent, sharply down from the 2.5 percent prediction in March.
Osborne told Britain's House of Commons that the forecast assumes there will be a solution of the eurozone turmoil.
"A more disorderly outcome is clearly possible," the budget office said.
"Even though we believe there is an equal chance that growth will come in above or below our central forecast, the probability of a much worse outcome than the central forecast is greater than the probability of a much better one," the OBR added.
The Treasury chief said he still expects to meet his deficit-reduction target by 2015.
The British forecast was more optimistic than Monday's update from the Organization of Economic Cooperation and Development, which predicted that Britain was sliding into a mild recession which would continue through the first three months of next year.
Osborne appealed to unions representing 2 million public sector workers to cancel a one-day strike set for Wednesday.
"Call off the strikes tomorrow. Come back to the table," Osborne appealed to the unions, which are angry about proposed changes to pensions.
Osborne stressed that Britain is, to a great extent, at the mercy of developments on the continent.
"Much of Europe now appears to be heading into a recession caused by a chronic lack of confidence in the ability of countries to deal with their debts," Osborne said. "We will do whatever it takes to protect Britain from this debt storm while doing all we can to build the foundations of future growth."
Osborne announced he was raising the bank levy - charged against the balance sheets of major banks - from 0.075 percent to 0.088 percent - but he repeated his opposition to a tax on financial transactions, calling that "a tax on pensions."
As previously announced, he committed 20 billion pounds ($31 billion) to a program to guarantee bank loans to small- and medium-sized businesses. The guarantee applies to banks' wholesale borrowing to fund business loans; banks would still have to absorb any losses from bad loans.
Osborne announced that the government has authorized 35 job-creating rail and road infrastructure projects, and there were modest increases in state pensions and some benefits.
A pay freeze for public sector workers will be replaced by a 1 percent cap, half as generous as government departments had assumed, a 3 pence per liter tax on petrol due in January was canceled, and Osborne limited how much rail fares can increase.
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