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Increasing numbers of local bank branch closures are having a negative effect on the productivity of small firms in the UK. A new report from the Federation of Small Businesses (FSB) warns that companies, particularly those that rely on cash transactions or the local knowledge of bank staff, are being let down by the pace of branch closures.
According to a study published recently by academics at the University of Nottingham, the size of the bank branch network in Britain has halved since 1990, with just 8,000 outlets currently in operation. This figure is expected to halve again to around 4,000 within the next decade.
The FSB’s national chairman Mike Cherry said, “The rapid pace of bank branch closures across the UK presents some very real and tough challenges for small businesses. Our members highly value the face-to-face interaction they receive in-branch, particularly when making complex financial transactions, with staff who often have a greater understanding of their business and the local economy.
“In addition, many deal heavily in cash and cheques and need access to over-the-counter banking facilities on a regular basis.”
Campaigners say that more needs to be done to ensure that the Access to Banking Protocol, an agreement signed in 2015 between government and the banking industry to limit the impact of branch closures, is properly implemented.
The protocol stipulates that banks should consult local communities before making any closures, and that they should also ensure that there is adequate alternative provision of banking services in the area. Earlier this year, the British Bankers’ Association announced an independent review of the protocol, which is being carried out by Professor Russel Griggs. He is due to publish his findings in March next year.
The review is part of a deal with ministers to ensure that customers such as consumers and small firms are not being shortchanged by branch closures. Professor Griggs said, “It’s vital that the protocol meets its aim of minimising the impact of bank branch closures on customers and local communities. This review will not only be looking at how the processes behind the protocol are working in practice, but also crucially the outcomes that they are delivering.”
Small business groups have also called on the UK’s major banking groups to be more transparent about the closures they have planned and the reasons for making them. While the protocol cannot influence banks’ commercial decisions to close branches, it is designed to ensure that alternatives are readily available, for example access to Post Office branches, which provide many banking services.
Research carried out by the BBC earlier this year found that rural areas were bearing the brunt of local bank closures, with regions such as the Scottish Highlands, Wales and the South-west of England seeing the highest rate of closures per head of population.
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