THE FTSE 100 Index shed more than two per cent yesterday as cautious forecasts from the Bank of England dealt a blow.

The index lost 94.2 points to 4331.4 after the Bank said a slower than expected resumption of bank lending could hamper recovery.

Shares also came under pressure as worse than expected retail sales figures in the US sent Wall Street’s Dow Jones Industrial Average down by more than two per cent in early trading.

The decline in the City was led by part-nationalised Royal Bank of Scotland, which slid nearly 13 per cent, or 5.5p to 38p.

Barclays lost nearly ten per cent, or 25.75p to 242.75p, HSBC slid 29p to 530.5p, while Lloyds Banking Group – another firm part-owned by the taxpayer – fell 4.5p to 84.6p. The gloom overshadowed good results from catering group Compass, which saw shares surge six per cent, or 20.25p to 353p – on the back of a higher-than-expected 41 per cent increase in profits. Sainsbury’s 11.3 per cent increase in underlying full-year profits had little impact on its shares, which fell 5.25p to 335p.

Property firm Land Securities was the leading faller after it said it expected conditions “to remain challenging”. Shares fell more than 13 per cent or 71p to 468p. Hammerson and British Land were off 37.75p at 285.25p and 35.75p at 386.25p, respectively.

Outside the top, some of the biggest falls came from pub groups after a group of MPs called for the pub landlord groups to be investigated by the Competition Commission. Enterprise Inns fell 42.25p to 117.25p in the FTSE 250 – a fall of more than 26 per cent.

Punch Taverns, which lets its landlords buy from a single firm, was down 13 per cent, or 18p to 120p.

Shares in Johnston Press lost value after it said it was in talks with lenders after dropping plans to sell Irish titles.

Shares fell 38 per cent to 19.25p.