Britain should brace itself for a devastating financial crisis, the governor of the Bank of England warned last night.

Sir Mervyn King told MPs there was no doubt the banking system was ‘less safe’ than three months ago and might not be strong enough to withstand a eurozone meltdown.

He spoke out amid fresh warnings that the UK is set to plunge into a double dip recession.

The Organisation for Economic Cooperation and Development said the economy will shrink in the final three months of this year and the first three months of next.

The bleak warnings were a blow for George Osborne on the eve of today’s crucial autumn statement.

The Chancellor will be hit by another dire growth warning today when the independent Office of Budget Responsibility issues its prediction for economic performance.

The OBR will reveal that borrowing has to rise and that Mr Osborne’s plans to eradicate the deficit by 2015 will be blown off course. The Chancellor plans to recast his goal as something to be achieved after five years – giving him until 2016-17 instead.

The one glimmer of light is that the record low interest payments the government is making on its debt mean Mr Osborne will have to find £22billion less over the next three years.

The Paris-based OECD think-tank warned of a ‘deep depression’ in Europe and beyond if the single currency debt crisis spirals out of control.

It said the break-up of the euro was a ‘devastating outcome’ that would trigger ‘massive wealth destruction, bankruptcies and a collapse in confidence’.Sir Mervyn predicted economic growth will be flat or close to zero over the next six months.

But he warned Britain could be sucked into a banking disaster if the single currency goes under, as many in the Treasury now expect.

‘None of us can really know the scale of shocks that could come from the euro area and no banking system can withstand shocks that are sufficiently large so there is certainly no room for complacency,’ he told MPs on the Treasury Select Committee.

‘Over the past quarter I think all banks have become less safe because our banking system is exposed to the euro area. There is no question about it.’Treasury officials have spent the past few months drawing up contingency plans to protect British banks, which have hundreds of billions of pounds in exposure to eurozone countries.

The OECD forecasts that UK GDP to fall by 0.025 per cent in the current fourth quarter of 2011 and 0.15 per cent in the first quarter of 2012.

It also predicted a sharp rise in unemployment, from a current rate of 8.3 per cent to 9.1 per cent by 2013, sparking fresh social problems and increased homelessness.

But the Institute of Economic Affairs yesterday warned the outlook is so dire the Chancellor is likely to miss his target to eradicate the structural deficit by 2015.

Mark Littlewood, director general of the Institute, said: ‘Owing to the growth in the economy being considerably lower than previous forecasts, the government may actually come closer to the Shadow Chancellor’s preferred fiscal policy to have the structural deficit by the end of the Parliament than its own declared policy.

‘Things are probably even worse than we fear. If over recent years you had taken any economic forecast and about halved its level of optimism you would have been somewhere near to the truth.’