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This dire prediction, the worst since 1991, is a revision of that made about two months ago, which was far less gloomy.

It is a reflection of the speed with which the economy is slowing, but mores other lost of confidence by the service and manufacturing sectors.

So, more than a year after the rescue of Northern Rock, a 150 basic point cut in the base rate and a month after saving Bradford & Bingley and injecting liquidity in to the banking sector, confidence in the sector is still a as dispiriting as it was before.

The one consistency throughout all these events are the predictions of gloom by the mass-circulation media and politicians seeking an advantage as the nation does a balancing act on a precipice.

The reality is that times are tough and we are entering an economic dark hole in which are likely to encounter a number of threatening forces.

But that same reality should also caution that we take the usual precautions, abandon recklessness and proceed step by step.

Steering the nation away from Armageddon is not just the responsibility of government, although it is the biggest player, banks too have a role to play by providing liquidity to businesses of every size with cashflow problems, but otherwise good business models.

Otherwise, there is a powerful case for government by-passing the banks and going direct to these business to fund them – not in a 1960s and 1970s nationalisation way, but one which reflects the reality of the new globalised economy.

Already British car manufacturers are approaching the government for direct funding, suggesting what is good for the banks is also good for manufacturing.

But there is another side to this. The reason why a crisis in retail banking terrifies governments is because of banks' special place in the economy – funding small businesses.

However, if banks abandon this of their own choosing then the whole concept of systemic risk is undermined, if not fatally weakened. Banks have no special place in the wider picture if when businesses go to them for funding they shut up shop.