The Bank of England is set to offer UK lenders an extra £10bn in funds as it tries to limit the impact of the global credit crunch and high borrowing costs. It is one of five central banks that have pledged to inject $100bn (£49bn) of emergency cash into money markets.

On Monday, the US Federal Reserve made $20bn available through auction, though it did not say how many banks took advantage of the extra money.

Analysts said the extra cash was needed because the inter-bank lending rate had remained stubbornly high despite recent interest rate cuts in the UK and US. In London, the Libor, which stands for the London Inter-bank Offered Rate, dipped earlier this week to 6.431%, compared with 6.627% on Wednesday last week when the central banks unveiled their rescue plan.

As well as the Bank of England and the Fed, the European Central Bank and the national banks of Canada and Switzerland are also involved in the plan.