Treasury Orders Bank Revised Bank Branch Closures As 6,700 Sites Disappear
Ministers have put highway banks on notice. The Treasury has commissioned an independent review into the impact of the closure of more than 6,700 bank branches across the UK, and has indicated it is ready to force lenders to provide face-to-face services when evidence shows communities and small businesses are being left out.
The Access to Banking Review, announced on Thursday by Lucy Rigby, economic secretary to the Treasury, will be led by Richard Lloyd OBE, former chief executive of consumer group Which? and interim chairman of the Financial Conduct Authority. Lloyd has been asked to report back in October, gathering evidence on where branch withdrawals have hurt the most, who has suffered the most and where new interventions are needed.
This review is in line with the government’s Financial Services Improvement Bill, which followed the King’s Speech, which the Treasury said would equip ministers with the power to “take swift action if evidence supports intervention in access to banking services”. In Whitehall language, that’s unusually straightforward language – and a clear picture across the bows of an industry that has spent a decade shrinking its territory.
A decade of decline
The scale of the regression is staggering. According to consumer champion Which?, 6,719 branches have closed since 2015 – an average of two a day. Lloyds Banking Group, NatWest, Barclays, HSBC and Santander have all taken the ax to their networks, with more than 130 new closures planned in May and June alone.
Economics from a banking perspective is not contradictory. Customers have moved to mobile apps in droves, footfall has fallen and the cost of operating a Victorian-era branch office has become difficult to justify to shareholders. But the fall in population and commerce was uneven, with rural towns, old customers and small cash-strapped retailers equally affected – a pattern Business Matters has tracked for several years and documented in its report on the closure of more than 6,000 branches in the UK.
Hubs: useful, but not enough
The industry’s response was a shared banking environment: The Post Office counter for daily cash and check needs, major lenders taking turns sending their staff to a private room to get complex questions, usually one bank during the week. Around 234 hubs have been opened since April 2021, and Labor promised in its manifesto to increase the number to 350 by 2029.
However, hubs come with structural weaknesses. Although the Financial Conduct Authority ensures access to funds, there are no official rules governing which banking services should be provided within the institution, those decisions remain at the discretion of the banks. The Post Office’s role as a de facto banking partner has been a boon to many high streets, but small business owners say the model still falls short of loan negotiations, complex account searches and the type of relationship banking used to take for granted.
That gap is important. For owner-managers who operate a cafe, a construction company or a one-man van operation, the disappearance of a local branch is not an inconvenience, it is a tax on productivity. Cash withdrawals must be banked remotely. Loan applications are increasingly powered by opaque, centralized credit scoring systems. And the local manager who once knew the business, and could vouch for it, has disappeared.
A turning of the tide?
There are unexpected signs that the industry is reading the room. Barclays last year began reopening high street branches and restored the role of the bank manager, an obvious bet that physical presence, and human judgement, is also a competitive advantage. Whether that becomes a trend or remains a commercial boom will largely depend on what Lloyd’s review concludes.
Rigby was careful to structure the work as evidence-based rather than punitive. “We support the launch of the banking industry, but we also need a clear picture of where the communities are still losing,” he said. “This independent review will show us where the problems are and what other steps may be needed, and we will move quickly to enact legislation where the evidence shows it is needed.”
Lloyd indicated that the door was open. “It is important to look at the impact the big change in digital services has already had, and to understand the need for access to personal banking in the future,” he said. “I hope to hear from as wide a range of views as possible.”
What it means for SMEs
For Britain’s 5.5 million small businesses, the review is little more than a consumer issue dressed up in policy language. Access to a banking institution that understands the commercial rhythms of the local economy has historically been a quiet but important ingredient in SME growth. If Lloyd’s report concludes – as campaigners expect – that domains alone cannot close the gap, the Financial Services Improvement Bill gives ministers the legal teeth to approve minimum standards for services.
That would represent a significant change in philosophy: from leaving the branch strategy to deciding the trade, to treating face-to-face banking as something close to a controlled service. Banks will try hard against any such restructuring. But after a decade when the lights went out on more than 6,700 highway branches, the political situation in Westminster, and the patience of small businessmen, looks very thin.
