Small firms locked out and let down by local bank branch closures

In the last 25 years, the total size of the branch network has halved to just over 8,000 branches and is set to halve again in the next ten years [2].

FSB's new report, “Locked out: The impact of bank branch closures on small businesses” sets out the serious implications of this trend and finds that small business access to banking and productivity is already being damaged.

Mike Cherry, FSB National Chairman, said:

“The rapid pace of bank branch closures across the UK presents some very real and tough challenges for small businesses. FSB 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 of our members deal heavily in cash and cheques and need access to over-the-counter banking facilities on a regular basis.

“Small businesses are keen to embrace the opportunities of the digital economy - 94 per cent of small businesses [3] already use internet banking. However, barriers towards digital inclusion, such as unreliable broadband connectivity, and a lack of confidence in using digital services creates serious challenges. These are some of the reasons which explain why the protection of in-branch banking is so important for financial inclusion.

“We believe there is a sensible middle way. Our research highlights as good practice, those banks incorporating new technology in-branch, in order to both develop their digital offerings and better meet customer needs.”

FSB is calling on Government and the banking sector to improve small business awareness and confidence in the Access to Banking Protocol. The Protocol, put in place in March 2015, was designed to ensure that customers were offered alternative ways of banking in their local area, should a branch close down. A series of UK-wide small business focus groups organised by FSB revealed extremely limited awareness of the Protocol. We look forward to the outcome of the independent review into the Protocol announced in March by Professor Russell Griggs OBE and due out before the end of the year.

We now urgently need a strengthening of the Protocol, to ensure banks undertake a proper consultation process, engage with small businesses affected by branch closures and provide appropriate banking service alternatives.

Banks are increasingly referring customers to the Post Office as an alternative provider. Whilst FSB supports the post office network providing these services, our members have revealed a number of cases where banks have provided inaccurate details of Post Office branches which have either closed or moved and have not properly investigated the range of services available. In addition, Post Office in-branch services vary greatly, and in many communities this means they do not cater for the needs of small businesses in their area. FSB calls for the creation of a standardised, high-quality service across the Post Office network. This would help to smooth the process for banks to refer more customers on to their local Post Office when a bank branch closes.

Mike Cherry continued:

“The only way to fully assess which areas across the UK are most severely affected by local bank branch closures is through effective monitoring. But this cannot happen while banks continue to publish limited data on both branch closures and small business’ access to banking services. We believe there needs to be a much higher level of transparency whereby banks would provide details of branch closures to a government run register on a continuous basis”

FSB is calling on Government to conduct an economic impact assessment of bank branch closures in the most severely affected areas as well as ensuring that the new Universal Service Obligation for broadband explicitly covers small business premises. It is only in this way that we can deliver on the ambition of an economy for everyone.