Towns ‘running out of money’ due to bank closures
IN THE first report into the effect of bank branch closures on small and medium-sized businesses, seen exclusively by The Mail on Sunday, the Federation of Small Businesses has demanded greater communication from banks over reductions in services and protection for the ATM network.
Its report, Locked Out: The Impact Of Bank Branch Closures On Small Businesses, authored by policy adviser Ben Baruch, is to be revealed tomorrow following focus group meetings across the UK between July and September.
FSB policy director Martin McTague said in the study: ‘Our report shows the disproportionate impact branch closures are having in some parts of the UK and particularly in rural areas. This is concerning as evidence strongly suggests that closure programmes are both expanding and accelerating.’
The report said small businesses affected by closures received limited communication from their bank with regard to support and signposting towards alternative services. It also said awareness of consultation or engagement exercises on behalf of banks is ‘effectively zero amongst the small business community’.
In spite of the increasing range of payment methods used by small firms, cash is ‘still vital to the operation of many local economies’, the report found.
And the FSB said there were instances of villages and towns ‘literally running out of money’. It complained that business banking services at some Post Office branches and franchises were ‘too limited’ and that the high cost of small electronic transactions was putting some small firms off investing in new payment technology.
Gwyn Evans, chairman of FSB North Wales, said in the report: ‘Unlike in urban areas, if a branch closes in rural Wales, the business owner may face a 20-mile or more round trip to bank cash. Also, when you run a business dealing in cash, you cannot pay in a bag of change over the internet or through a smartphone app – there are limitations to even the most advanced technologies. In addition, online banking is not always easily available in rural areas.’
Malcolm Harrison, who runs Crazy Horse Coffee Shop in Invergordon in the Highlands, took part in a focus group and accused Royal Bank of Scotland of leaving the town ‘high and dry’ after it closed the last bank branch there.
He said: ‘I have not been too badly affected, but I have been here 12odd years and am part of the furniture. Two or three businesses have closed since RBS went – a jeweller and another coffee shop, and a gift shop moved to another location.’
He said a lot of business custom moved to the next town when the branch closed, but added: ‘The biggest problem is where to get change from. Even if I put £100 to one side, it affects cash flow and I can get through that in a couple of hours. I then have to drive to the next town, leaving the shop a person down.
‘What was particularly upsetting was that the bank put a lot of effort into marketing online banking, and that affected footfall in the Invergordon branch.
‘We had an idea there was something afoot but the bank denied it was closing it. It has really been underhand in the way it has gone about this.
‘It changed its policy about not closing the last bank branch in town very quietly and left a town already suffering economically high and dry.’