As Yorkshire reels from another 600 job losses, the deal will aim to restore confidence in the markets after banks saw billions wiped off their values yesterday, with HBOS and Royal Bank of Scotland the worst hit.

Facing accusations of dithering in the wake of recent turmoil, the Government is expected to offer to inject billions of pounds into banks in a package to provide them with much-needed liquidity and stabilise the system.

The deal emerged as 300,000 UK savers with internet bank Icesave became victims of turmoil in Iceland as they were blocked from making transactions on their account after parent bank Landsbanki was nationalised.

Yorkshire economic experts also called for a half per cent cut in interest rates this week to give ailing businesses a boost, echoing calls from the British Chambers of Commerce which has warned the UK is already in a recession.

The deal to support banks comes after talks in Downing Street between Prime Minister Gordon Brown, Chancellor Alistair Darling, Bank of England Governor Mervyn King and chairman of the Financial Services Authority Lord Turner last night. Downing Street denied it was an "emergency meeting", and insisted it had been in the diary for some time.

Mr Darling – who also met EU finance ministers yesterday – spoke briefly after the meeting and will unveil full details of the Government's plans this morning in a statement before markets open.

It is thought the Government could take a stake in the ownership of the banks through preference shares as part of the deal, effectively a part-nationalisation.

"The Bank of England has been putting substantial sums into the market today and it is ready to do more when that is needed," he said last night.

"We have been working closely with the Governor of the Bank of England, the Financial Services Authority and financial institutions to put banks on a longer term sound footing."

Earlier Downing Street had refused to disclose what options were being discussed, but talked of the need to stabilise the system and for long-term reform. The Tories have called for decisive Government action, while the Liberal Democrats have backed a recapitalisation scheme.

Although the FTSE 100 finished slightly up at the end of yesterday, shares in HBOS plunged 42 per cent and Royal Bank of Scotland dropped 39 per cent as confidence ebbed away. Fury erupted in the City after reports that bank bosses had asked the Chancellor for a £50billion bail-out, prompting fierce denials from RBS and Barclays, but it was too late to stop share prices plunging.

In Iceland, the government nationalised its second-largest bank under new emergency legislation as it moved to get a grip on the escalating economic crisis.

The bail-out of Landsbanki came a day after trading in shares of major banks was suspended, the Icelandic krona lost a quarter of its value against the euro, and the government rushed through emergency legislation giving it sweeping powers to deal with the financial meltdown.

There were further blows closer to home as well. Just a day after the loss of 600 jobs at car parts supplier LSUK in Sheffield, 300 of the 318 staff were made redundant at Rotherham-based Speed Frame PVCu Windows, one of Britain's biggest makers of double glazing and conservatories.

Joint administrator Toby Underwood of BDO Stoy Hayward said: "Despite being one of the largest manufacturers and suppliers of PVCu windows and doors to the UK's house builders, the appointment of administrators has been brought about by an unprecedented collapse in this sector.

"Management in conjunction with key stakeholders and funders had been working on a solvent rescue of the business, but unfortunately this downturn in the market has proved too sudden and severe."

Endless, a Leeds-based fund which provides turnaround investment for companies, had acquired a majority stake in Speed Frame in December 2005.

Garry Wilson, a partner in Endless, said: "We turned the business around and it reported a profit of £1m last year. It was a business that depended completely on new build housing and that market has collapsed. No business can cope with a 70 per cent decline in sales."

And more than 300 workers are facing redundancy after Hull's beleaguered caravan industry took a further hit, with 280 jobs under threat at east Hull firm Cosalt Holiday Homes, while around 80 jobs have gone at Atlas Holiday Homes.

Cosalt's parent company, Grimsby-based Cosalt Plc, announced it was selling the Hull caravan and lodge business in June. Union officials were called to a meeting at the company last week where they were told they had no orders beyond October 31, although there is still understood to still be the prospect of a buyer interested in the business.

A three-month consultation period has now started, which runs out on December 31.

Ken Vincent, of the GMB, said the union had failed to get answers from Cosalt about the identity of the interested buyer.

Louise Wood, of the National Caravan Council, which represents more than 70 caravan-related companies in Yorkshire and the Humber, said: "Some manufacturers have taken the decision of short term pain, hopefully for longer term gain and making sure they are stable and in business by going for redundancies or a short working week or temporary shut downs."

About 600 people are believed to have been made redundant this year in the industry, which is one of Hull's biggest employers. The city produced about 32,000 caravans at its peak and this is expected to shrink to between 18,000 and 19,000 this year.

Meanwhile, members of the Yorkshire Shadow Monetary Policy Committee, a group of the region's leading economists which meets in advance of the Bank of England committee to help influence its decision, yesterday recommended it make a 0.5 per cent cut in interest rates.

They said that should be followed next month by a further 0.5 per cent cut, and also warned that the MPC needs to take "a hard look" at what it does to prevent it from becoming irrelevant in the fast-changing economic conditions when it meets on Thursday.