According to the Oxford English Dictionary:
billion, purposely formed in 16th c. to denote the second power of a million (by substituting BI- prefix for the initial letters), trillion and quadrillion being similarly formed to denote its 3rd and 4th powers. The name appears not to have been adopted in Eng. before the end of the 17th … Subsequently the application of the word was changed by French arithmeticians, figures being divided in numeration into groups of threes, instead of sixes, so that F. billion, trillion, denoted not the second and third powers of a million, but a thousand millions and a thousand thousand millions. In the 19th century, the U.S. adopted the French convention, but Britain retained the original and etymological use (to which France reverted in 1948).
Since 1951 the U.S. value, a thousand millions, has been increasingly used in Britain, especially in technical writing and, more recently, in journalism; but the older sense ‘a million millions’ is still common.
The confusion resulted in a question being put to the Prime Minister, Harold Wilson in 1974
Mr Maxwell-Hyslop asked the Prime Minister whether he will make it the practice of his administration that when Ministers employ the word “billion” in any official speeches, documents, or answers to Parliamentaty Questions, they will, to avoid confusion, only do so in its British meaning of 1 million million and not in the sense used in the United States of America, which uses the term “billion” to mean 1,000 million.
The Prime Minister: No. The word “billion” is now used internationally to mean 1,000 million and it would be confusing if British Ministers were to use it in any other sense. I accept that it could still be interpreted in this country as 1 million million and I shall ask my colleagues to ensure that, if they do use it, there should be no ambiguity as to its meaning.