Sport England, the government-backed development agency, said in a statement on Tuesday that Britain's tennis body had agreed to accept a reduction of 530,000 pounds in the light of disappointing participation figures.
A survey showed the average number of English adults playing tennis at least once a week has declined from 487,500 in 2007/08 to 375,800 in the latest update.
"No decision to reduce funding is taken lightly, but Sport England has been clear that failure to achieve the agreed growth in a sport would lead to a governing body's overall funding levels being reviewed," Sport England chief executive Jennie Price said.
British tennis fans have long bemoaned their lack of impact in a sport which largely began in Britain.
World number four Murray, from Scotland, has been a rare success story but is still to win a grand slam title which also eluded previous British beacon Tim Henman.
The women's game in the UK has struggled even more with Virginia Wade's 1977 Wimbledon win now a long time ago.
"We continue to work closely with Sport England in order to grow tennis," LTA Chief Executive Roger Draper said.
"Like other sports we face a huge challenge to increase the numbers playing tennis regularly in challenging economic times but participation is our top priority."
Every year Britain is gripped by tennis fever for the two weeks of Wimbledon when public courts are deluged with excited youngsters wielding brand new rackets but the interest soon fades once football season begins and the dark nights roll in.
That happens despite Novak Djokovic, Rafa Nadal, Roger Federer and, to a lesser degree Murray, serving up some of the best tennis the world has ever seen in recent Wimbledons.
Spain does not boast a grand slam tournament but has five men in the top 20 compared to Britain's one.
London does not just host Wimbledon: Queen's takes place just before the main grasscourt event and pulls in the crowds while the ATP World Tour Finals, dubbed the fifth grand slam as it groups together the best eight players in an end-of-year showpiece, is also held in the city.
American Andy Roddick confirmed on Tuesday that he would be at Queen's this June while it was announced that the ATP Finals, contracted to London until at least 2013, will take place on Nov. 5-12 this year.