Despite the dramatic early-morning announcement, coupled with a surprise half-point cut in interest rates, the FTSE 100 Index plunged by more than 5 per cent yesterday to its lowest level since 2004 amid growing fear of recession.

The influential International Monetary Fund added to the gloom after warning of a deep downturn for the global economy, and there were deep losses on Wall Street, in France and in Germany.

Last night, US Treasury Secretary Hank Paulson warned: "The turmoil will not end quickly and significant challenges remain ahead."

There are worries in both Westminster and the City that the Government's gamble may not be enough to stop the markets sliding and get banks lending to one another again, and questions over whether Mr Brown and Mr Darling have a Plan B if it fails.

The Prime Minister and Chancellor will spend the coming days pushing for co-ordinated international action to restore stability to the financial sector.

Mr Darling flies to Washington this afternoon ahead of crucial meetings of the finance ministers of the G7 group of rich countries on Friday and the IMF on Saturday.

And Mr Brown will be in close contact with his European counterparts ahead of next week's EU summit in Brussels, following criticisms that last weekend's pledge to co-ordinate their response to the credit crunch has fallen apart within days.

Downing Street said last night: "We have taken our action in the UK and called for international action and a co-ordinated response.
"The Chancellor will want to discuss with his finance minister colleagues what more we can do at an international level to deal with the current uncertainty."

Treasury officials are today talking with UK banks over the level of individual take-up of the Government's £50bn recapitalisation scheme and the precise terms of the deals.

Eight UK financial institutions - Abbey, Barclays, HBOS, HSBC, Lloyds TSB, RBS, Standard Chartered and Nationwide Building Society - have pledged to increase their capital by £25 billion, but Government will pump in the funds if called upon.

The Treasury also stands ready to make at least another £25 billion available if necessary, effectively part-nationalising the banks.
HSBC has already said that, while it is eligible for the scheme, it has no plans to take up the deal, as funding could be covered by "internal resources".

There was a call last night from Virgin tycoon Sir Richard Branson for Britain to follow Germany and Ireland in guaranteeing 100 per cent of savers' deposits. Sir Richard also called for further sharp cuts of as much as 1.25 per cent in the base interest rate, reduced from 5 per cent to 4.5 per cent yesterday.