Exactly.
If you failed and resit, the maximum mark you can be awarded is 40%. It was like this when I was at Manchester Uni... seems like standard practise for me. The only time when this doesn't happen is if you have a valid reason for not doing well (illness, for example).
If this wasn't the case, why wouldn't people only study for half their exams and fail the other half on purpose to get more study time for them when they resit?