Banks have been urged to provide loans to businesses and customers, to deter the effects of a recession. The Governor of the Bank of England, Mervyn King stated that this was the "most important" issue that is affecting the UK economy.

King also stated that the recession would be “steeper” and the effects of banks not lending to the businesses and customers, would be deflation – this is a fall in the price of goods.

Deflation can increase the length of a recession as with falling prices, consumers will wait before they purchase goods, such as food, electronic products and properties; in the hopes of prices falling even more, thus lowering the level of products being sold and produced. This can also ripple out and cause job losses, as fewer goods will be made, stemming from the lower sales figures.

Mr King added that, improving the conditions would be "more important than anything else" at present.

This comes soon after the Government noted that a sharp drop in inflation had taken place, from September to October, with the Consumer Price Index dropping 0.7 per cent.

Mr King added: "Domestically, the most pressing challenge is to ensure normal bank lending is resumed. Without that, the downturn in activity could become protracted and extremely damaging and would see deflation come to pass."