Recovery of the British banking sector could be thwarted by the increasing number of commercial property loan failures.

As per the UK commercial property lending survey from De Montford University, the value of debts breaching covenants climbed to around 18.6 billion pounds in the first six months of the current year.

Fresh figures also showed an additional loan of 11.8 billion pounds had fallen into default during the same period. Thus total value of commercial real estate distressed debt to over 30 billion pounds.

Distressed loans accounts for 8.6 per cent of the total loan book of the 56 lenders surveyed.

Lloyds Banking Group suffered a loss of four billion pounds due to bad debts of 13.4 billion pounds.

New lending remained scant as well as costly. New loans of just 7.4 billion pounds were sanctioned during the first six months of the year as compared with loans of 83 billion pounds in 2007.