Move to stimulate growth with a £50bn injection of electronic money into the UK and interest rate cuts in the eurozone and China

Central banks around the world signalled their determination to stimulate the flagging global economy on Thursday yesterday, with the injection of £50bn of electronic money into the UK and interest rate cuts in the eurozone and China.

The Bank of England warned that recovery was at risk without a boost to its programme of quantitative easing after a flurry of economic surveys showed the double-dip recession could stretch into the autumn.

Not since the financial crash of 2008 has the world economy appeared to be going into reverse, but a downturn in the US and key Asian economies following the euro crisis has sapped the life out of global trade.

The Bank of England's monetary policy committee, which sets interest rate policy, said that the total amount of QE would rise to £375bn, while the base interest rate would remain at 0.5%.

It said the eurozone crisis was continuing to batter business confidence, despite a deal struck last weekend that calmed market fears of a euro collapse.

The Bank said: "In spite of the progress made at the latest European council, concerns remain about the indebtedness and competitiveness of several euro-area economies, and that is weighing on confidence here.

"The correspondingly weaker outlook for UK output growth means that the margin of economic slack is likely to be greater and more persistent."

Graeme Leach, chief economist at the Institute of Directors, summed up the view of many analysts. "Double-dip recession, weak money supply and anaemic earnings growth suggests inflation will tumble into 2013," he said. "Moreover in the current risk-averse economic environment, with consumers and companies reluctant to spend, QE has got to work harder and harder. The end result is that we could see another £50bn on top of this, within a few months."

In the eurozone, Mario Draghi, president of the European Central Bank, reacted to this week's unemployment figures, which revealed the highest number of jobless people in the eurozone's history, with a cut of 0.25% in its base rate to 0.75%. But he hinted that, despite the low level of interest rates, the Frankfurt institution had more steps it could take to prop up the 17-nation bloc. "We still have all our artillery ready," he said. His downbeat assessment of the eurozone's prospects sent Spanish bond yields back to dangerous levels. The cost of Spanish government borrowing rose to near 7% – almost back to the level that prompted the German chancellor, Angela Merkel, to make concessions at last weekend's euro summit. Italian borrowing costs also climbed higher.

In Beijing, the government cut interest rates as it stepped up efforts to reverse its deepest economic slump since the 2008 global crisis. China cut its key lending rate for a second time in a month to prevent a further slump in manufacturing and a collapse in property values following a decade-long house price bubble. Interest on a one-year loan will be reduced by 0.31 percentage points to 6% from Friday, the central bank announced.

Last month four of the Bank of England's nine-member rate-setting committee, including Sir Mervyn King, voted for more QE, but the majority voiced scepticism over economic data that showed Britain falling further into recession.

The committee noted George Osborne's new Funding for Lending scheme, which it is hoped would boost lending to small businesses, but the Bank's rate-setters said this would not be enough to pull the economy around.

They expressed concern about tight credit conditions, the continuing impact of austerity and the drag on the economy coming from the eurozone crisis, and said that without the extra QE stimulus there was a risk of deflation – a worrying downward spiral of prices and incomes.

Some MPC members said they were concerned whether QE would have any further impact on levels of lending. They wanted new tactics to increase the amount of lending in the economy.

However, a succession of negative business surveys appears to have persuaded the committee to pull the QE lever again. A report this week showed the services sector, which accounts for more than 70% of the economy, experienced one of its worst months since the recovery began three years ago. In the construction sector, much of the industry outside central London remains in recession, while manufacturing has slumped.

Difficult trading conditions following the euro crisis have added to the headwinds facing British business. Exports have declined and imports grown, adding to a decline in the balance of payments.

Neil Bentley, CBI deputy director general, said recent falls in inflation and slowing growth had forced the MPC to pump further funds into the economy.

He said: "This extension of QE should provide a fillip to confidence, but with gilt yields already at low levels, the direct impact may only be modest, and consideration should also be given to investing in a broader set of assets, for example bank bonds and high-grade corporate paper.

"However, when combined with the measures announced at the Mansion House, this additional QE will provide some support to business at a difficult time."