Lending to UK companies by the main high street banks contracted sharply last month as large corporations sought alternatives to funding from banks and demand for loans fell, but medium-sized businesses were still struggling to access finance.

Outstanding loans to private non-financial companies fell by £4.1bn last month – the largest monthly drop so far in this downturn – after a decline of £259m in June, according to seasonally adjusted data from the British Bankers’ Association.