Yet for all the gloom, there has been a subtle shift in perception: the unrelieved pessimism at the start of the year has now given way to cautious optimism and the HSBC view is that the recession will technically end (ie GDP will stop shrinking) in the second half of this year. Recovery, however, will be fragile and the return to trend growth (0.6-0.7% a quarter) is likely to be slow, taking most of 2010.

So, in the game of alphabet soup that economists have been playing for the past year, it is looking more like a ‘U- shaped' recession than the ‘V' that the optimists were predicting, and a long way from the ‘L' shape predicted by the pessimists. But there is another letter that should not be discounted, the ‘W' shape, implying a double-dip recession.

This could be caused by one of two factors. Given the huge injection of liquidity into the banking system via quantitative easing (£125bn, around 9% of GDP), there are now more concerns about inflation than deflation. It has been suggested that at the first sign of price pressures building, the committee will raise interest rates, perhaps stifling a nascent recovery before it gains any momentum. A short burst of positive growth could be followed by another downturn.

Assuming that the authorities are more pragmatic and recognise the risks of being too obsessed with inflation, the other risk of a double dip comes from the banking system.

Doing everything possible
In terms of conventional economic policy, there is little more that the policymakers could have done to counter the recession. Interest rates are the lowest since the Bank of England was formed in 1694, the budget deficit of £175bn is the biggest fiscal easing in history and sterling has weakened. And if this is not enough, the programme of quantitative easing is meant to ensure that households and businesses are not starved of funds once activity picks up.

All the levers that can be pulled have been pulled, very decisively and much earlier in the downswing of the cycle than in previous recessions.

All these initiatives taken by the Treasury and the Bank of England will fail to work as intended unless credit for businesses and consumers is readily available. If businesses with new orders cannot get the working capital they need, or households cannot get mortgages they can afford, the current malaise will last a lot longer.

Although there are no reliable data on the effectiveness of quantitative easing, the Bank has been publishing regular reports on lending and credit conditions. The June 2009 lending report does not make for very comfortable reading. The April figures showed the weakest flow of net lending to businesses since June 2000 and all the major UK lenders reported that net lending remained very weak in May.

Much of the gross lending reflected the refinancing of existing loans and lenders reported that demand for new credit continues to be constrained by weak investment intentions and businesses' desire to reduce debts. Gross mortgage lending has continued to weaken, largely because of weaker re-mortgaging activity. There is optimism that quantitative easing will have a positive effect, largely because the UK economy is dependent on the banking system.

The Bank of England's quantitative easing programme has been skewed towards large and fast injections, via gilt buybacks, but the long and variable lags in the transmission mechanism make it difficult to assess how well it is working. It is now largely a matter of waiting rather than more policy initiatives, but the media and the policymakers, faced with the ultimate imperative of a general election in less than 12 months, do not have the luxury of time or patience.