As the latest quarterly figures from the Bank of England confirm that lending to UK businesses fell by £4 billion, the Business Minister has admitted that there is little evidence that the Government’s Funding for Lending Scheme (FLS) is actually working.

Over the last three months to November 2012 lending to SMEs and larger businesses fell by £4 billion, and, according to Paul Aitken, CEO of borro, the Minister’s “grim” admission means that SMEs will “…remain caught in a credit drought for the time being.”

Business Minister Michael Fallon said he is putting pressure on banks to ensure Government schemes, such as FLS, are “properly taken up” as the “taxpayer is putting a lot of money on the table now.”

He continued: “I do find the banks tell you an individual story that they’re not the problem and so on. We need to make sure that taxpayer-funded schemes are getting through to the SMEs that need it.”

According to a Telegraph report, Mr Fallon said he is working on a plan to publish bank lending by region and business size in order to increase transparency and “get to the bottom of” where the money is being lent.

The plans follow complaints that SMEs have been unfairly rejected for loans by mainstream banks.

Despite this, the Bank of England’s Credit Conditions Survey claimed that in recent discussions, some major UK lenders reported that a lack of confidence among firms was still weighing down on demand for credit.

Paul Aitken added: “Of course it is encouraging to see SME lending is on the radar for policymakers, with the Business Bank on the horizon, but there is still far to go. Millions of small businesses have no confidence in the banks and have already turned to alternative forms of financing. If we are going to encourage small and medium sized businesses to grow, the Government needs to pull out all the stops.”