Britain’s economy has entered a mild recession and will shrink in 2012, according to a leading think tank, which urged its government to boost near-term spending to prevent long-term damage from higher unemployment.

The National Institute of Economic and Social Research predicted a drop in GDP of 0.1 per cent in Britain this year as the euro crisis weighs on export prospects and confidence. The institute sees the unemployment rate rising to 9.1 per cent, and warned of “long-term economic and social damage”.