Shares in British banks took a nose dive in morning trading today as the FTSE 100 continued its plunge to new depths as investors jettison shares out of fear of a double-dip recession.

On Tuesday the FTSE 100 dipped below the 5,000 mark for the second time this year and have continued falling since then.

Yesterday banks were hit further after analysts cut their earnings estimates for Barclays after the bank said conditions for investment banking were worsening. Barclays, and other banks, were previously expected to generate significant profits, despite the downturn, thanks to its investment banking business.

In addition there are fears that growth in the Chinese economy is less promising than previously thought, with manufacturing growth weaker in June. The weaker Chinese figures helped fuel fears that the global economic recovery is not as strong as hoped.

By 10:59 shares in Lloyds Banking Group were down 3.04 per cent to 52.95 pence per share, RBS shares declined 2.49 per cent to 40.40 pence per share, Barclays shares dropped 2.77 per cent to 263.05 pence per share, while HSBC shares fell 1.95 per cent to 603.20 pence per share.

Overall the FTSE 100 was down 1.21 per cent to 4,857.49.