Lending drops despite BoE scheme The government's flagship initiative to kick-start credit creation failed to prevent a slump in lending during the final three months of last year, with just one of the UK's big retail banks providing more loans over the period. The latest figures for banks participating in Funding for Lending, a scheme unveiled by the Treasury and the Bank of England last summer, showed credit to households and businesses in the UK fell by £2.4bn in the fourth quarter of 2012. Of the four big retail banks participating in the scheme, Barclays was the only one that saw growth in its loan book to UK businesses and households, while Nationwide, the largest building society, also expanded its lending to British borrowers. The Royal Bank of Scotland, Santander and Lloyds made less funding available, though all three have accessed the FLS for cheap funding. HSBC does not use the scheme. The BoE cautioned that the final three months of the year were typically a weak quarter for lending and pointed to a £3.1bn expansion in net lending in January. Thirty-nine banks, which together account for 80 per cent of UK lending, are members of the scheme. Eleven of those using the FLS drew £9.5bn from the facility, more than double the amount drawn in the third quarter. The total amount drawn from the scheme so far is £13.8bn, of which Barclays accounts for £6bn. Banks could have borrowed a maximum of £68bn through the facility, whereby the BoE makes cheap loans available for up to four years. The BoE said funding costs had fallen "significantly" since the introduction of the scheme and pointed to "indications" of an improvement in credit conditions, reporting a fall in the cost of borrowing. Separately, figures from the British Bankers" Association showed the amount of new lending to small and medium sized businesses was lower in the fourth quarter of last year than in the final three months of 2011. New loans to small businesses fell to £1.5bn, compared with £1.6bn. New loans to medium-sized companies fell to £3.6bn, from £4.1bn.