When the taxpayer stepped in to save some of the biggest banks from their own folly, it wasn’t an act of altruism. The banks were bailed out to save the UK economy from imploding.
However, it seemed reasonable to assume that the banking sector would feel chastened and work harder to serve the public interest.
If you’re a pensioner living in a remote Yorkshire hamlet with terrible internet access, or a small rural business relying on cash and cheques, you may be forgiven for thinking that the banks have simply deserted you.
The systematic destruction of the UK banking system’s branch network is ripping the heart out of communities around Britain.
In 1989, there were around 17,831 branches operating in the UK, according to the Federation of Small Businesses, (FSB). The FSB estimates the size of this network was just below 8,000 at the end of 2016.
There are now around 1,500 towns that have been left without a single bank branch, according to the FSB’s study Locked Out: the Impact of Bank Branch Closures.
You don’t have to look far to find cautionary tales about branch closures. Keith Tordoff, the chairman of Nidderdale Chamber of Trade, witnessed the impact of a single branch closure, and the loss of a cash machine, on Pateley Bridge high street in North Yorkshire. Many local firms didn’t have card processing facilities, so consumers stopped spending in local shops. Farmers found it harder to bank cheques, which was the only way they were being paid. Many elderly customers, who lacked internet access, still relied on cash and cheques. It’s hardly surprising that footfall plummeted.
“A number of businesses closed, and as the local pastor commented, Pateley Bridge looked like it was in its death throes,’’ Mr Tordoff recalled.
Two years ago, Mr Tordoff bought a former bank building in Pateley Bridge and, through a private company, had a cash machine installed. Local firms immediately started to see sales rise.
“The impact of losing a bank and the ability to withdraw cash is enormous and does affect businesses in the immediate area,’’ Mr Tordoff said. “Banks have a long history, and an association with communities, especially in rural areas, where generations of families have supported a particular bank.”
These loyal customers were left high and dry when their local branch closed. Pateley Bridge is, thankfully, now thriving, but Mr Tordoff believes the big banks should consider their moral obligations when they consider the future of their branch network.
The banks will argue that most customers want the ease and immediacy of internet banking and shareholders’ interests won’t be served by pumping investment into a branch system that seems to date from the 1950s. Instead, many banks are focusing their investment in larger branches, which are usually based in city centres and attract the largest footfall.
There’s a commercial logic supporting this decision, but what about Mr Tordoff’s appeal to the banks’ moral purpose? In a small town, when a branch dies, the community can perish around it.
It’s no surprise that many small firms are crying out for a friendly face at their local bank.
As Mike Cherry, Federation of Small Businesses National Chairman, observed: “At a time of unprecedented uncertainty, the last thing small businesses need is loss of in-person bank branch support. When times are tough, there’s no replacement for help from a known and trusted bank branch contact.”
The FSB’s report provides compelling evidence of the disproportionate economic damage branch closures are having on rural areas, where small firms have been exasperated by the loss of face-to-face service.
As one respondent to the FSB service reported: “Gone are the days of anything related to personal service, relationships with businesses, and such niceties.
“The entire world of banking is based around the concept of ‘the computer says no’.”
Bank customers based in the countryside have just as much right to financial services as their counterparts in the towns and cities. Many are being denied basic human rights.
The FSB believes a UK-wide strategy should be developed to create a standardised business banking service, so those living in rural areas are not left behind.
Perhaps more importantly, the Government should commission an analysis of the economic impact of branch closures; with particular focus on how productivity and the quality of life are being undermined outside the major cities.
The onus should be placed on the banks to justify each branch closure. If a town is facing a catastrophe as a result of the closure, the bank must devise a plan to support its customers.
If a branch cannot be saved, then the Government must ensure that internet connectivity is improved to ensure more people have access to online banking. There should also be the prospect of tax incentives to encourage more firms to set up standalone cash machines.
If the Government can intervene to save the banks, there’s no reason why it can’t force the banks to honour their historic debt to our rural communities.
Greg Wright is the deputy business editor of The Yorkshire Post.