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Written by rosalind renshaw

Banks and building societies participating in the Funding for Lending Scheme shrunk their lending by £300m in the first three months of year.

The Bank of England did not give the split between lending to businesses and households wanting mortgages, but said that the former was mostly negative and the latter was “typically positive”.

However, the Bank’s own figures for mortgage lending this year have so far been below expectations.

Part-nationalised Lloyds Banking Group lent almost £1bn less during the first quarter of this year, despite having borrowed £3bn from the Funding for Lending Scheme. Santander has also cut its lending, while taxpayer-backed Royal Bank of Scotland shrunk its net lending by £1.6bn in the quarter, after borrowing £750m from the scheme.

There are 40 participating banks and building societies in the Funding for Lending Scheme, which have so far drawn £16.5bn since launch last August. Since then, however, their lending has dwindled by £1.8bn.

Paul Fisher, executive director for markets at the Bank of England, insisted the net lending fall was “broadly as expected”.

He added: “The plans of the FLS participants suggest that net lending volumes will pick up gradually through the remainder of 2013.”

Some lenders have increased their lending, notably Barclays, which has borrowed £6bn from the scheme and has increased its lending by £1.1bn during the first quarter of this year, while Nationwide increased its lending by £1.2bn after drawing down £2.5bn.

One of the businesses cited as having lost out because of banks’ reluctance to lend is online estate agent Hatched.

It was used as a case study by the BBC. Hatched, based in Hitchin, Hertfordshire, applied to borrow £60,000 but was eventually loaned £20,000.

Managing director Adam Day says: “Bank funding just isn’t filtering through to small business like our own, and it’s small business like ours which are going to help the economy grow.”

The BBC used Hatched as a case study on BBC Breakfast and also on Radio 5 Live, where it was said that Vince Cable considered it to be one of the businesses “likely to become a household name”.

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