Bank of England Deputy Governor Charles Bean warned on Monday that Britain could be heading for an even deeper recession than previously thought.
The bank said last week in a report that the economy -- which entered recession in the second half of 2008 -- risked shrinking 4.0-6.0 percent later this year on a 12-month basis, before possibly returning to growth in 2010.
Bean, speaking at the National Farmers' Union annual conference in Birmingham, central England, said that there was "roughly a three in four" chance that growth could be weaker than the central projection.
He added that credit-crunch woes in the global banking sector and growing protectionism could hinder a recovery.
"Efforts to restore the banking system may take longer to bear fruit, and that the adoption of protectionist measures abroad as the downturn deepens may slow the recovery," said Bean, who is BoE deputy governor for monetary policy.
"Consequently the risks are heavily weighted to the downside, with roughly a three-in-four chance of growth turning out weaker than in the central case."
Bean's comments were in a statement on the Bank of England's website.
Earlier this month, the BoE cut its key lending rate by half a percentage point, taking rates to 1.0 percent -- the lowest level in the bank's 315-year history -- in a bid to breathe life into the economy.
"Since interest rates cannot fall below zero, we are running out of room for further cuts," Bean said Monday.
He added that policymakers were working on the "missing bit of the toolbox" to help protect the economy.
"This could be, for instance, by making banks build up extra capital buffers or reserves in the good times, which can then be drawn on when times turn bad so obviating the need to cut back sharply on their lending," he said.
"In this way, the real economy can be protected from the financial excesses that seem prone to recur."
Analysts said the speech left the door open for more rate cuts -- and the possible use of quantitative easing, whereby it would effectively print money to pump it into the system in a bid to stimulate lending.
"Bean's speech today reinforces the message... that the BoE is poised to take further action to boost the economy through trimming interest rates further and through quantitative easing," said IHS Global Insight economist Howard Archer.