Since 1989, 53% of bank branches in the UK have closed. 681 local bank branches closed in 2015 alone, and the pace of closures looks set to rapidly increase in 2016. Branch closures and reduced services are taking place across the UK but small firms in rural areas are particularly vulnerable to both financial and digital exclusion – a lack of broadband connectivity and digital skills prevent many from accessing alternative banking services online.
Branch closures present challenges that can only be addressed if small businesses are better understood and supported. Small businesses continue to rely on branches for services where face-to-face interaction is not easily replicated by alternative communication channels. There is also a continuing reliance on cash and cheques that remain rooted in the operations of both many small businesses and local economies across the UK.
Action FSB have taken
- In March 2015, FSB along with a number of different stakeholder groups agreed an “Access to Banking” Protocol to support customers affected by closures and allow them to continue using alternative banking services at a local level.
- In September 2016, the Competition and Markets Authority, an independent regulator, recommended more support for small firms affected by branch closures as part of its SME Banking Review.
- In October 2016, FSB published a major new report, “Locked out: The impact of bank branch closures on small businesses,” which found that financial inclusion and small business productivity is being damaged by branch closures.
- Improve small business awareness in the Access to Banking Protocol - The 12 week minimum period in which banks must notify customers before a branch is moved or closed should be extended to 24 weeks. In addition, limitations to alternative banking services should be clearly detailed by banks, who should also do more to communicate with the Post Office to ensure information signposting is accurate and up to date.
- Improve banking providers’ data disclosure - FSB believes the limited level of data published by all banking providers on small businesses’ access to services, including levels of lending and branch usage, makes targeted interventions across the financial inclusion space extremely challenging.
- Post Office needs to create a standardised service that matches the specific needs of businesses - All small businesses should be able to quickly transfer basic banking facilities to their nearest Post Office branch, including depositing both cash and cheques as well as accessing change.