Why are bank branches vanishing from the high street?

The much-predicted death of the High Street continues, but one high-profile casualty has stoked the ire of the British public uniquely – the closure of High Street banks.

And with good reason – access to local banking services is a key need of small businesses and individuals alike.

In a new report from the House of Commons library, Bank branches: why are they closing and what is the impact?, looks to shed some light on the issue.

Between 1986 and 2014 the number of bank branches on UK high streets roughly halved. The regional effect was unbalanced, too. Nationally between 2012 and 2018, the number of branches declined by 17%, but in the South West, the decline was more severe at 21%.

The reasons as to why banks have shut down branches across the country are a double-edged sword. On the one hand, technological change has reduced many customers’ needs for physical banking, with the introduction of digital and mobile banking. The days of cashing checks are nearly over.

At their peak, 4 billion check payments were made in 1990. This fell to just 558 million in 2015.

But the other key aspect of branch closures comes down to the bottom line. Major banks have looked to cut costs and buff up balance sheets as branch usage has declined. Staffing and infrastructure are an expensive component of a physical branch network – by reducing the number many banks can save significant sums.

But many are still highly reliant on physical banking services despite the onset of more sophisticated digital technology. The poor, vulnerable and elderly are all disproportionately affected by branch closures.

Those who live in rural areas too – as much as 10% of the rural population now lives at least 10 miles away from nearest branch of their bank, according to the report. The report also found that over 60s were disproportionately more affected by bank branch closures.

It found that not everyone automatically adopts digital technology provided by banks after the closure of their local branch. This was especially the case amongst over 60s.

Small businesses are also likely to be heavily affected by branch closures. The report found around one in five (20%) of small businesses with a turnover of less than £2 million used branches as their primary banking method.

While in many cases a customer can switch to another bank that still has a branch in their community, or defer to using Post Office services instead, neither are guaranteed, as many have found the last branch in town closing for good.

Find out more and read the full report on why banks are closing branches closing here.