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The International Monetary Fund recently said that Britain could face a “double-dip” economic recession which will cancel out the slight recovery already reported by many financial quarters.

According to the IMF, the potential for economic growth is currently endangered because of the lack of capital available to banks in order to restore normal lending practices. This lack of investment is curbing many businesses chance for growth even as other financial factors return to positive levels.

In its annual Article Four report, the IMF reported that output will fall by 4.2 per cent this year, before we see any growth. Moreover, predictions for growth are for only 0.2 per cent in 2010.

The state of the banking system remains a key factor in the risk of the recession stagnating, and may yet mean even more public money will need to be invested into financial institutions.

There are optimistic reports from financial experts suggesting that the end of the recession is in sight; however, most predict a long and slow recovery. Debt assistance is available for those who are suffering through the recession.

The IMF’s mission chief to the UK, Ajai Chopra, said: “The financial sector was very sick and was rushed into the intensive care unit. It has been stabilised, but it’s still not healthy enough to start lending again to the economy, so what’s going to be important is to strengthen banks’ capital position.”

However, the report has praised Government action to tackle the financial crisis as “forceful and wide ranging”, although concerns were raised about the Bank of England’s programme of Quantitative Easing.

Further, the report calls the Treasury to implement “concrete” plans involving spending cuts and/or tax rises, saying that the recent Budget stopped short of the necessary measures.

A spokesman for the Treasury said: “The Budget set out the Government’s projections for the public finances, which were based on cautious assumptions. It also set out plans to halve the deficit over four years and bring down borrowing in the medium term.”