Major banks scaled back lending to firms and homeowners in April, a Bank of England survey showed, suggesting the government still faces an uphill battle to get credit flowing through the economy.

Figures from the top six banking groups showed £9.1 billion of new corporate loan facilities were granted in April, down from £12.6 billion in March. In addition, £10 billion of loan facilities were withdrawn last month compared to £7.2 billion in March.

"Net lending to businesses has remained weak, with new facilities granted reported largely to reflect the refinancing of existing lending," the BoE report said.

Major UK lending reduced net mortgage lending to £1.6 billion in April from £2 billion in March on a seasonally-adjusted basis.

Mortgage applications slipped marginally to 65,000 in April from 66,000 in March on a non-seasonally-adjusted basis but the percentage of applications approved rose to 75.1 per cent from 74.4 per cent.

"Mortgage lending growth has slowed further, with net and gross lending flows having weakened in March," said the report. "The number of high loan to value products being offered has stabilised in recent months, though spreads on those products are particularly high."

Major UK lenders also reported that consumer credit lending continued to be subdued in April. Applications for unsecured lending fell last month, though the acceptance rate edged up marginally.

The Lending Panel was set up by the Treasury at the end of last year to monitor lending to consumers and businesses and reports to Finance Minister Alistair Darling and business minister Peter Mandelson.

Britain's government spent billions of pounds last year recapitalising the banking system and providing lending guarantees, and is under political pressure to show that its policy is paying economic dividends.

Britain's government spent billions of pounds last year recapitalising the banking system and providing lending guarantees, and is under political pressure to show that its policy is paying economic dividends.