As MPs debate banking closures

Lending to firms falls sharply where bank branches close

Clydesdale Bank Bridge of WeirLending to businesses falls dramatically in those areas where bank branches close, according to new research.

It has found that postcodes that lose a bank branch suffer an average 63% drop in business lending growth.

Postcodes that lose their last bank suffer even more, seeing their business lending drop by 104% on average – meaning that banks are actually withdrawing money from those areas.

The research is launched on the day that MPs are scheduled to debate the crisis of bank branch closures in Parliament.

Postcodes that lose their “last bank in town” receive an average of £1.6 million less lending only a year later.

Often these are already some of the poorest areas with higher rates of business failure than the UK average.

The research authors say these branch closures drive cycles of local economic depression and stagnation, the report finds. 

Launching the research, Fionn Travers-Smith, Campaign Manager for Move Your Money, said: “The UK’s biggest banks are abandoning communities across the country, and today for the first time we can see the incredible damage that this is happening – predominantly to those communities that need bank branches the most.

“Free-market competition has abjectly failed to provide a banking and financial system that works in the interests of people and society, and the crisis in bank branch closures is just the latest proof of that.

“Given the economic and financial chaos caused by the Brexit vote, it’s now more important than ever that banks keep lending to small businesses and keep local bank branches in rural and poorer areas open to achieve this.

“The Government must now intervene to ensure adequate access is provided for all, not just the rich, by strengthening the Access to Banking Protocol, and by recognising the case for public provision of critical banking services.”

Since 1989, the UK has lost more than 53% of its bank branches, with UBS predicting the closure of a further 50% in the next ten years.

There are 1,500 communities with no bank, and a further 840 with only one branch.

The banks argue that closures are a response to falling demand, but the authors of the research claim that usage figures are “widely misrepresented and manipulated” by the bank and accuse the banks of “intentionally targeting poorer and rural areas for closures.”

The authors make a series of recommendations on how to improve banking provision and access to the financial system in the UK – first, by strengthening the Access to Banking Protocol which is currently under review, and secondly by recognising and investigating the case for public provision of key banking infrastructure, including branches. 

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