Government talks with banks to ensure they lend an extra £20 billion this year have broken down.
Sources say that the Treasury will get only half the desired increase, leaving homebuyers and small businesses scrambling for credit.
But the Treasury last night signalled that it’s prepared to play hardball after indicating that unless big banks cooperate they could be broken up.
Though officials say a deal is still possible, with banks expected to announce details of their bonus pots as a sweetener. But the lending total is still expected to fall short by billions of the rate the Government wants.
This is likely to impact most on small businesses struggling for credit, and those trying to get on the property ladder, who face huge mortgage deposits and difficult terms.