Chancellor George Osborne was issued a pre-Budget warning by an influential credit rating agency as it issued a "negative" outlook on the prospects of the UK economy retaining its AAA rating.
Fitch moved the country's rating from stable after deciding its exposure to a fresh eurozone crisis made it more likely than not that it would be stripped of its cherished top-rating by 2014.
Treasury Chief Secretary Danny Alexander said the move - which follows a similar downgrade by another of the top agencies last month - was a "salutary reminder" of the need to maintain austerity measures.
"There will be no unfunded giveaways in next week's Budget," Mr Alexander said - insisting the news should act as a "wake-up call" for those urging the Government to ease up on stringent deficit-reduction plans.
"This is a salutary reminder as to why Britain needs to deal with the enormous debts and deficits we inherited, why we have got to stick to those plans. It should be a wake-up call to anyone who thinks we can afford, as a country, to loosen the purse strings. We can't afford to do that."
Fitch said it considered the Government's deficit-reduction plans to be "credible" and on track and that it expected them to be sustained in the Budget.
But it said that current projected levels of future debt were "at the limit of the level consistent with the UK retaining its AAA status".
Although eurozone markets had calmed over recent weeks, there was still a risk that the crisis could re-emerge, the analysis concluded, spelling potential problems for the UK.
"The revision of the rating outlook to negative from stable reflects the very limited fiscal space to absorb further adverse economic shocks in light of such elevated debt levels and a potentially weaker than currently forecast economic recovery,
"In light of the considerable uncertainty around the economic and fiscal outlook, including the risks posed to economic recovery by ongoing financial tensions in the eurozone and against the backdrop of a still large structural budget deficit and high and rising government debt, the Negative Outlook indicates a slightly greater than 50% chance of a downgrade over a two-year horizon," Fitch said.
If there are no major financial shocks and the economy remains on track, the rating will be returned to stable in 2014.
Shadow chancellor Ed Balls said the change was symptomatic of a "growing worry" about the UK's prospects.
"It shows that there's a growing worry that our economy's not growing, that unemployment's rising, that our borrowing's not coming down as George Osborne had planned," he told BBC2's Newsnight.
"Now I've said to George Osborne always, don't set your policies by the credit rating agencies, but they are a weather vane and they say the wind is blowing in a difficult direction for the British economy."
With less than a week until Mr Osborne delivers his Budget, the fine details are still being thrashed out by the Conservative and Liberal Democrat sides of the coalition.
After making good progress at a meeting on Monday, the "Quad" of Mr Osborne, Prime Minister David Cameron, Deputy Prime Minister Nick Clegg and Treasury Chief Secretary Mr Alexander, are expected to gather again to finalise plans after the Prime Minister returns from the USA on Friday.
The Chancellor is flying home early from the States tomorrow to continue work on the Budget.
It is understood that there is still movement on some key elements of the Budget, though it is not clear whether this includes totemic issues like the 50p income tax rate, the Lib Dem proposals for a mansion tax or tycoon tax and the possibility of preserving child benefit for some upper-rate taxpayers.
Under Treasury rules, any proposals with cost implications must be sent to the OBR by the end of Friday so they can prepare independent forecasts of their impact, to be released after Mr Osborne's statement.
Ahead of the Budget, the Chancellor will announce operational details of his credit easing scheme to help businesses obtain loans at affordable interest rates which was given the green light by European regulators today.
The credit-easing programme will initially see £20 billion made available to small businesses over the next two years under a National Loan Guarantee Scheme (NLGS) and an additional £1 billion to mid-sized firms under a Business Finance Partnership.
The European Commission (EC) gave state aid approval to the scheme as the Treasury also announced plans to take advantage of Britain's historically low interest rates by taking out loans which will not be repaid for 100 years or more.
But the plans for "super-long" bonds were met with instant criticism from the National Association of Pension Funds (NAPF), which said most funds would not buy them.
The move would mean that children not yet born will continue to pay interest throughout their lives on debts racked up during the financial crisis of 2008/09.
But the Chancellor believes it will benefit future generations by "locking in" low interest rates on a proportion of the UK's national debt, reducing refinancing costs and insulating Britain from some of the risk of future market instability.