British lenders taking part in a Bank of England scheme to boost firms' and households' access to credit cut lending sharply in the last three months, dampening hopes that the project could help revive economic growth.
The central bank announced the Funding for Lending Scheme jointly with the government in June 2012, as a way to unblock a credit log-jam which some economists say is a big factor behind Britain's weak economic recovery.
Banks and building societies cut lending by a net 2.425 billion pounds between October and December, in contrast to an increase of around 1 billion pounds in the first months of the Funding for Lending Scheme's operation, the bank said on Monday.
Total net lending by banks and building societies taking part in the scheme - which includes all major British lenders apart from HSBC - is now down by 1.502 billion pounds since June 30.
The central bank said that the scheme's benefits will not be fully clear until later in 2013.
"I would not expect to see a return to rising aggregate quantities until we start getting data for 2013 at the earliest," said Paul Fisher, the central bank official in charge of the scheme.
(Reporting by David Milliken; editing by William Schomberg)