The construction industry has been among the worst hit by a credit squeeze on business with lending down by 3.5 per cent between April and June, figures show.
Lending to the construction sector was down by £2.1 billion as total lending tumbled by a record £14.7bn during the period.
The second quarter slump in lending to “non-financial corporations” is the biggest since the Bank of England started recording data in 1997.
The figures are likely to fuel anger over the reluctance of banks to offer loans to struggling companies despite many of them being propped up by the taxpayer.
They will also call into question the effectiveness of the Bank’s £125 billion quantitative easing programme aimed at boosting the money supply and dragging the economy out of recession.
Vicky Redwood, from Capital Economics, said: “With the recent bank results highlighting how bad debts are rising sharply, banks are likely just to sit on their cash. So the money is unlikely to make it past the banking system in the near-term.”