Soaring world oil prices risk prolonging the world economic slowdown, the US Treasury Secretary Hank Paulson has warned.

Following talks in London with Chancellor Alistair Darling, Mr Paulson said that the rise in energy prices presented a "strong head wind" to growth in the world economy.

However he insisted that the "fundamentals" of the US economy were strong and predicted that growth would pick up in the US by the end of the year.

"I think that the oil prices are a strong head wind and at this level ... they have got a high risk that they are going to prolong the slowdown," he said.

Mr Paulson said that the "turmoil" in the financial markets and the "correction" in the US housing market would continue for some time.

However he said that he believed the outlook would improve towards the end of the year.

Mr Darling said that he did not expect the UK economy to go into recession.

"I believe that our economy will continue to grow. The rate of growth will be slower," the Chancellor said.

He made clear that he sees the current financial turbulence as an international problem and believes Britain is better placed than in the past to weather the storm.

Mr Darling said: "The UK's economy is fundamentally far, far better than it ever was in the past.

"We are going through a very difficult time at the moment, along with every other country in the world.

"The effects of the financial instability, the credit crunch, the effects of very high oil prices - which are much higher than I think anyone would have forecast even at the beginning of this year - are having an effect on every economy in the world."

"But I believe that we are better placed, although we can't be complacent about inflation. The last figure of 3.3 per cent is higher than we wanted, but if you compare it with the figure of 8 per cent at the beginning of the 1990s, we are better placed."

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