The CBI has cut its prediction for the growth of the UK economy in 2008 from 2% to 1.8%.

Ian McCafferty, the CBI's chief economic adviser, says: "The UK economy is being buffeted by some strong headwinds, with the prolonged troubles in the financial markets making for a bumpier ride both this year and next.

"High commodity prices are adding to inflationary pressures and significantly squeezing household incomes. And some households are feeling a chill from the credit freeze, with lending conditions becoming tighter."

Richard Lambert, the CBI's director general, adds: "Having enjoyed two years of strong growth, we are now living in uncertain times. We are facing a financial shock on a scale not experienced in recent times, which is coming on top of already slower growth."

In his recent Budget speech, Chancellor Alastair Darling predicted GDP growth of between 2.25% and 2.75%.