Total bank lending in Britain is set to shrink for the first time since 2009 this year, and the lack of credit from mainstream banks will help payday loan firms grow further, a survey by the Ernst & Young ITEM club said on Monday.

The E&Y ITEM club forecast that total UK bank loans would shrink by 2.2 percent in 2012, having risen by an estimated 4.3 percent in 2011.

We have been warning about the impact bank deleveraging could have on the economy for some time, but this is the first time there will be an annual contraction in total loans since 2009, when the UK economy was still suffering from the immediate effects of the global financial crisis, said Neil Blake, senior economic adviser to the Ernst & Young ITEM Club.

Last year, Britain's top banks, including the Big Four of Barclays, HSBC and part-nationalised lenders Lloyds and Royal Bank of Scotland, stuck a deal with the government in which they pledged to lend more to businesses in return for legislative restraint.

However, many small firms have said they are still not getting enough credit following the deal, known as Project Merlin.

As a result, both small businesses and consumers are turning increasingly to alternative lenders, such as firms that typically lend a few hundred pounds to clients for a week or two to tide them over until their next pay cheque.

Last month, payday loan companies Ferratum and Cash Converters both told Reuters they expected more growth this year, and the E&Y ITEM club said this sector was set to expand in 2012.

Households that fall outside of the credit terms of traditional lenders are increasingly looking toward other credit providers, regardless of the cost. With banks expected to further tighten lending conditions, we expect the shift towards alternative lenders to continue unabated, said Blake.

(Reporting by Sudip Kar-Gupta; Editing by Will Waterman)