Vicky Redwood, economist at Capital Economics, suggested that GDP growth would remain 'sluggish' following the recession, if credit flows do not improve from their current level.

The comments follow the release of M4 data for the year to June from the Bank of England last week.

This report showed that the household's sectors holdings of M4 - a key measure of the amount of cash flowing around the economy - rose by £3.5 billion over June.

While this still represents a net rise, the rate of increase is significantly lower than in previous months - and brings the annual rate of growth down to £3 billion.

A separate report from the Bank also showed that total net lending to individuals fell from £500 million in May to £400 million in June.

Ms Redwood said: '[The figures are] worrying in terms of how quickly we can expect the economic recovery.

'Unless lending growth starts to pick up I think recovery in the wider economy will certainly be very sluggish and drawn out.'

Annual growth in a key component of money supply slowed to its weakest since 1999 in the second quarter, Bank of England data showed today, just two days before the central bank decides whether to expand its quantitative easing programme.

M4 broad money supply growth, excluding holdings of intermediate other financial corporations, slowed to an annual rate of 3.1% in the second quarter of 2009 from a downwardly revised 3.8% in the first quarter.

The Bank has identified this subcomponent of M4 growth as a key gauge of whether its quantitative easing policy is boosting the money supply, because it strips out the volatile and sometimes inflated money holdings of firms such as clearing houses included in the overall M4 measure.

"It still shows that money growth is weak up to and including the second quarter," said Philip Shaw, economist at Investec.

"If I was a policymaker, I wouldn't take too much comfort from the quarterly trend, and look at the overall slowdown. The conclusion is that QE isn't boosting money growth, though it's early to be making a judgement," he said.

When the Bank started buying billions of pounds of gilts and corporate debt with newly-created money in March, it said the aim was to boost the money supply to sustain spending and borrowing during Britain's worst recession in decades.

Before the credit crunch, M4 excluding intermediate OFCs was growing at a year-on-year rate of around 10%, and during the downturn it has fallen much faster than standard M4.

On a quarter-on-quarter basis, M4 holdings of intermediate OFCs grew at an annualised rate of 3.7% in the second quarter of 2009 - an improvement from 3.1% in the first three months of the year, but below the 4.1% achieved in the last three months of 2009.

M4 lending to firms other than intermediate OFCs was also very weak, dropping to a year-on-year rate of 1.0%, its lowest in over a decade, from 2.8% in the first quarter.

But there was an improvement in quarter-on-quarter M4 lending growth excluding intermediate OFCs, with the annualised rate rising to 2.7% from 1.9%.