Britain's government is going full steam ahead in its attempts to pull the economy down the track towards recovery and away from recession.

From rail infrastructure investment to increased stimulus by the Bank of England, chancellor George Osborne is desperately trying to bring the country back to growth in the second half of the year to save not only the economy, but his own ravaged reputation.

"Whilst we inherited a deficit greater than any in our nation's peacetime history, we knew that we had to give the country the boost it needs, to build great railways and make journeys better for the millions of hard-working people who use the train every day," Prime Minister David Cameron said of the rail investment.

UK economy: recession and low growth

Britain is in its second recession in four years - the first time it has double-dipped since the 1970s.

The economy contracted by 0.3 percent in the final quarter of 2011, then again by the same amount in the first three months of the new year, largely driven by a collapse in construction sector output.

Austerity is the order of the day, not only in the UK but across the world, and the government has torn the public sector to shreds to try to cut down the Treasury's budget deficit.

There can be no return to state spending levels of the past, argues the Conservative and Liberal Democrat coalition, because the public debt required is unsustainable.

Worrying private industry data from the construction sector shows that output plunged further at the end of the second quarter.

This is on top of related private industry data that showed slowing growth in the service sector - the UK's biggest, representing around three quarters of GDP - and continued contraction in manufacturing sector output.

Business and consumer confidence has crumpled under the weight of slowing emerging markets and continued crisis in the eurozone, Britain's biggest trading partner.

With consumer and business spending restrained for fear of the situation getting worse, and banks unwilling to take on additional lending risks, several forecasters have slashed their GDP predictions for the UK.

International Monetary Fund (IMF) economists cut their UK growth forecasts for the year to a dismal 0.2 percent.

Business lobbyist the Confederation of British Industry (CBI) revised down its UK growth forecast to 0.6 percent across the year, from 0.9 percent.

The Bank of England knocked a third off of its 2012 growth forecasts, to just a 0.8 percent expansion.

£9.4bn rail infrastructure investment

A major rail infrastructure investment project has been hastily announced by the government, in the midst of a barrage of grim economic news.

Britain has an ageing, dated infrastructure, with much of the country relying on a creaking network of Victorian railway lines.

Around £9.4bn will be ploughed into improving the rail network, including station upgrades and electrification of some lines, to create jobs and a better service for rail users across Britain.

"This government is making more funds available to invest in rail projects than at any time since the Victorian era, and shows that the government is committed to delivering on its promises to support investment in public infrastructure that will support economic growth," Osborne said.

The investment will be funded by fare rises from 2010 and "substantial efficiency savings which projects like electrification will have on the long term operating costs of the railways," said the Department for Transport.

In effect this means the government is directly funding a significant part of the investment.

Osborne appears to be sounding the fiscal siren, a signal that the government's economic policy - which the chancellor specifically said could not rely on state spending - has failed.

His concoction of austerity, limited supply side reform, small tax cuts, and Bank of England monetary policy efforts is not the economic elixir he had hoped.

Proponents of rail infrastructure improvement say it will create faster links between key regions and London, which should encourage business investment in areas that desperately need jobs and development, particularly in the north of England.

John Cridland, CBI Director-General, said some of the investment "will bring our cities closer together and provide a spur to businesses up and down the country".

He highlighted the "Northern Hub" cluster of rail investment that sees upgrades and electrification across cities such as Manchester and Liverpool as a significant improvement, as well as the "electric spine", a high capacity line running from Yorkshire through the Midlands to southern ports.

"The government's main priority should be phasing out taxpayer subsidies to the railways rather than investing in additional loss-making projects," Dr Richard Wellings, head of transport at the Institute of Economic Affairs, said.

"Indeed, claims that the schemes can be funded through higher fare revenues and efficiency gains should be treated with scepticism.

"In reality taxpayers are likely to end up paying a significant share of the costs. This is particularly objectionable given that rail travellers are on average wealthier than the general population.

"If economic objectives were the priority, the government would be investing the money in road schemes, which generally produce far greater economic returns."

Bank of England credit easing

Much of the country's economic woe is down to a severe lack of financing for small and medium sized businesses, argues the government, leaving many to go bust or stalling those who want to invest in expansion.

Banks are not lending because of the dismal global economic picture and so the Bank of England, backed by the Treasury, announced two new credit easing efforts in a frantic attempt to free up credit for businesses and consumers.

The first, called the Extended Collateral Term Repo (ECTR) facility, offers secured six-month loans each month worth £5bn against whatever assets - good or bad - the borrowing bank holds.

It means banks will be able to access cheaper funds than they would normally get against certain assets.

Funding for Lending is the second scheme and sees cheap loans offered to banks, at a rate of 0.25 percent with a maturity of up to four years, worth up to 5 percent of the value of their existing loan liabilities to the so-called "real economy" - businesses and consumers.

Banks will then be able to increase their borrowing of cheap funds in direct correlation with an increase in their real economy lending.

Mervyn King, the Bank of England governor, said it should offer a significant financial incentive to banks to free up affordable lending to the wider economy.

In turn this newly available credit should boost business spending and create new jobs, while the housing market should pick up with the increase in affordable residential mortgages.

More QE from the Bank

The Bank of England has already been trying to boost business spending with its quantitative easing programme.

In July the monetary policy committee (MPC) voted to put an additional £50bn of monetary stimulus into its programme, which takes it to a total value of £375bn.

The programme is called the asset purchase facility and sees the Bank buy up high quality assets, such as gilts, in order to improve market liquidity.

This new found cash on business balance sheets is then meant to make its way into the economy through investment in jobs and expansion.

Sticky inflation and high unemployment, which some say will hit 3m out of work in 2013, led to fears that any more stimulus would push prices higher and risk making more Britons jobless.

However inflation has fallen sharply in recent months, from its peak to 5.2 percent in September to June's figure of 2.8 percent, and the unemployment rate has remained steady, though still around its 17-year high.

These factors gave the Bank of England room to move in quantitative easing.

Will it all work?

A double-dip recession and near-zero growth suggest that quantitative easing, at least in its current form of asset purchasing, has failed.

This raises doubts about the impact that another £50bn will have on the economy and some question if it is worth risking the progress made on bringing inflation down.

Ernst & Young recently released a report showing that businesses were in fact hoarding the cash gifted to them in the quantitative easing programme, rather than spending as was intended by policymakers.

"The corporate sector is accumulating cash at an astonishing and accelerating pace and acting as a major drag on the rest of the economy, keeping it close to stall speed," the report said.

"It is hard to see any strong revival in the economy until companies start to release this cash by spending more on acquisitions, investment or dividends."

Looming potential bank losses from exposure to the eurozone, which continues to wallow in economic crisis, cast a dark shadow over confidence in the financial sector.

Any catastrophe, such as a disorderly exit of an ailing state from the single currency area, threatens to throw the banking world back into turmoil.

This uncertainty is weighing heavily on banks and they are unwilling to take on extra lending risk in case of a future crisis.

It remains to be seen whether the credit easing schemes from the Bank of England offer enough of an incentive to banks for them to increase lending.

Mervyn King has admitted there are "no guarantees" his credit easing plans will work.

The government's infrastructure investment, the first proper sign that Osborne's defence is weakening to the Keynesian argument of increased fiscal stimulus in times of recession, may prove too little, too late.

A £9.4bn investment is a drop in the ocean of a £1tn budget and there is no certainty that the improvements will provide enough of a boost in job creation and business activity to pull the country down the road to recovery.

Some say more should be done elsewhere in Britain's infrastructure, such as improving the roads and building new social housing to accommodate the country's growing population.

With the coalition insisting austerity is the only answer to controlling the public finances, it seems unlikely that this sort of expenditure will come while it retains power.