New figures show that net lending has fallen by £300m during Q1 2013, despite the launch of the Funding for Lending Scheme (FLS).
Data from the Bank of England show banks made FLS drawdowns of £2.6bn between January and March 2013, taking the total amount drawn under the scheme to £16.5bn.
Paul Fisher, executive director for markets at the Bank of England, says that flat lending growth is “broadly as expected at this stage reflecting reductions in some legacy portfolios being roughly offset in aggregate by expanding new lending.
“The plans of the FLS participants suggest that net lending volumes will pick up gradually through the remainder of 2013.”
Despite a drop in lending by participants, Q1 2013’s figure is an improvement on a lending drop of £2.4bn in the previous quarter.
Since the scheme was introduced in August 2012, net lending has dropped a total of £1.8bn. 40 groups are participating in the scheme, covering over 80% of the stock of lending to the real economy.
Three banks that have noticeably cut back on lending are Santander, Lloyds Banking Group, and RBS, with decreases in lending of £8.6bn, £6.6bn, and £3.9bn respectively.
John Longworth, director general of the British Chambers of Commerce expressed concern at the containing contraction of lending.
He explained: “It is worrying that usage of scheme seems to have dropped significantly since the end of 2012.”
“The real test for Funding for Lending is whether it is able to get credit flowing to young and fast-growing businesses.”
In April 2013 the FLS was extended until January 2015.