The UK Government may resort to printing more money as desperate measures if interest rates keep falling, it has been revealed.

As base rates are expected to fall further this week, Chancellor Alistair Darling and Governor Mervyn King of the Bank of England are considering expanding the supply of money.

Vince Cable, the Liberal Democrat shadow chancellor, said: "It would be a very dangerous course of action and if it went wrong there could be high inflation afterwards.

But if we get into the dire straits of deflation then governments have no choice but to take drastic measures. These are policies for truly knife-edge situations."

The UK government is also searching for ways to pick up the pieces from the broken economy by encouraging banks to increase lending.

Earlier this week, Prime Minister Gordon Brown and Chancellor Alistair Darling considered further cash injections into the economy to urge banks to start lending again.

Although the move was not their first choice, the idea was considered and as an alternative, the Treasury is said to be looking into an insurance scheme which may aid banks by reducing potential losses on bad loans.

Meanwhile, loans firm Cattles has announced that it may axe 1,000 jobs as a bid to beat the credit crisis.

Lender, Barclays has also announced that it is to axe 400 jobs after “a review of its operations.”