Hundreds of towns and villages are now bankless as a result of the mass closure of branches by the big banks. But some financial institutions are refusing to give up on the high street.
They realise that the withdrawal of the big banks gives them an ideal opportunity to demonstrate support for the communities they are dependent upon for their very own survival.
In this special three-page report, Personal Finance Editor Jeff Prestridge looks at the work being done by some to keep financial services on the high street. He begins his report in the Lake District.
Keen fell runner Chris Hodgson says it is reassuring to have a contact at his branch
Ambleside is a thriving Cumbrian town. As the gateway to the southern fells of the Lake District, it is a bolthole for walkers, overseas tourists in search of a bit of William Wordsworth, and students at the University of Cumbria’s campus in the town.
Yet despite the constant stream of visitors, as well as an independently owned cinema (Zeffirellis), a number of fine dining restaurants (The Old Stamp House and Lake Road Kitchen) and a host of bed and breakfasts and guest houses, Ambleside is now deemed a no-go zone as far as the big banks are concerned.
Barclays, HSBC and, most recently, NatWest have all pulled out of the town, claiming that a high street presence no longer works for them. When NatWest pulled down the shutters for the last time on its rather ugly branch in October 2017, it said counter transactions at the branch had declined by 43 per cent since 2010.
Ambleside’s plight is not unique. Far from it. All the big banks – Barclays, HSBC, Lloyds and NatWest – have pushed through draconian branch-axing programmes in recent years. Closures perpetuated by the growth of internet banking – and a steely determination to cut costs and staff numbers.
The closures show no sign of slowing up. Royal Bank of Scotland, the owner of NatWest, recently announced plans to shut another 162 outlets in the coming months. This is on top of the 259 it earmarked for the axe late last year.
Once these branches close, the part State-owned bank will have shed a third of its network since the end of last year. A dramatic rate of shrinkage.
Although Royal Bank of Scotland is not alone in felling branches –Lloyds has just earmarked another 49 for the chop – the speed of closures has raised widespread concerns about the impact on communities.
Local support: Cumberland Building Society’s branch in Silloth
Mike Cherry, chairman of the Federation of Small Businesses, says they will ‘hurt’ high streets at a time when thousands of small firms and independent retailers are already struggling against a difficult economic backdrop. He adds: ‘When a bank branch goes, it means less footfall, less cash in the local economy and less revenue for local firms.’
Even MPs across the political divide have become alarmed about the banks’ withdrawal from the high street. Earlier this month Nicky Morgan, chairwoman of the influential Treasury Select Committee, said that if branch closures led to increased levels of financial exclusion among the elderly, disabled and small businesses, the Government ‘may be required’ to intervene.
‘Cumberland strives to help firms like ours’
Safe haven: Chris and Allie Hodgson
As owners of the deluxe Haven Cottage guest house in Ambleside, where most visitors book and pay via the internet, Allie and Chris Hodgson are comfortable doing most of their banking electronically.
But when guests pay by cash, they need somewhere convenient to deposit their takings, which is one of the reasons why they have a business account with Cumberland Building Society.
The local branch is a brisk five-minute walk away – or in Chris’s case, a keen fell runner, a quick sprint.
Chris, 52, says: ‘Cumberland was an obvious banking choice for us given its presence in the town and the regrettable withdrawal of all the big banks. It is reassuring to have a point of local contact in the branch and to be able to bank cash without having to get in a car and drive – often in horrific holiday traffic – to a bank in Windermere four-anda-half miles away.’
Allie, 51, and Chris also used Cumberland early last year to help finance the purchase of Haven Cottage, in part by allowing them to take out a holiday let mortgage on their property in Windermere. Although the opening month – April last year – was ‘tough’, the guest house’s five bedrooms are proving popular.
Allie, as keen on walking as her husband is on running up nearby Todd Crag, says: ‘From next month through to September, occupancy rates are hovering at around the 98 per cent level.
‘Cumberland’s faith in us as a business is being vindicated. It is a local financial institution striving to help small businesses like us that make up the fabric of Ambleside.’
Currently, when a branch is put on notice of closure, the bank must let customers know and inform them of alternatives – such as online banking, the use of local Post Office facilities and other nearby branches. It is also required to disclose usage data, supporting the decision to close.
But unless there is an almighty backlash from customers – as happened earlier this year, forcing Royal Bank of Scotland to give ten Scottish branches a stay of execution – a bank can shut an outlet without being required to defend its actions to anyone.
At a stroke, it can leave a village or town bankless irrespective of the damage it leaves in its wake – with personal and business customers forced to travel further afield to do their banking with the knock-on effect on local trade.
Indeed, executives at Royal Bank of Scotland were ridiculed last week by Morgan’s fellow committee members for allowing staff to escort customers to their local post office so they could learn of the banking facilities available ahead of their branch closing.
John Mann, Labour MP for Bassetlaw, accused RBS of Monty Python-style banking, adding: ‘This is one of many stories which prove that the bank’s line that customers no longer use branches is fiction.’
Chief executive David Marlow has doubled Nottingham Building Society’s network
Although the big banks are withdrawing from the high street, some rival financial institutions – most notably challenger banks and building societies – are taking an altogether different tack. They are investing in bricks and mortar, even if it means revolutionising the way their retail outlets operate to attract new customers.
Of the challengers, Metro Bank has shown the greatest commitment to the high street. When its newest ‘store’ opens in Watford later this month, it will bring its network to 56. At present it is heavily concentrated in the south of the country, but another 11 branches are due to open between now and the end of the year, with the network expanding west into both Bristol and Southampton in the autumn.
Metro boss Craig Donaldson says the bank is ultimately looking to build a network of between 200 and 250 branches. The bank’s approach is centred on delivering customer service par excellence with branches open 12 hours a day during the working week and also at the weekend, albeit with reduced opening times.
In most instances, bank accounts – both personal and business – can be opened on the spot and new customers can walk out of the branch with a debit card ready to use.
Coin-counting machines and in some cases safe deposit boxes for hire complete Metro’s offering – as well as dog bowls for its four-legged visitors.
Nottingham Building Society’s approach is slightly different. Like Metro, it is bucking the trend by expanding its branch network. It now has 67 outlets, compared to 32 six years ago, with the expansion done not by building new branches (as Metro has) but through acquiring outlets abandoned by rivals. It has a presence in 11 counties and hopes to add more premises. Its preference is for a presence in bustling towns where there is money – the likes of Ashbourne in the Peak District, Melton Mowbray in Leicestershire and Stamford in Lincolnshire.
David Marlow, chief executive of the society, says its focus on the high street works because it ‘sweats’ all the branches. Rather than purely use them in the traditional way – as hubs for customers to top up or withdraw savings – Marlow has transformed them into financial centres where people can get advice on mortgages and key financial planning issues. Some outlets double as estate agents.
He says: ‘Our view is that over the next 30 years, it is going to be a great challenge for many millennials to fund an adequate financial future.
‘We want to position ourselves as a business that through sound advice available on the high street can help the younger generation buy their first home and plan ahead.’ Marlow says the society has a strong sense of community and supports local initiatives aimed at tackling homelessness and helping people become more employable.
He adds: ‘I think that if your reason as a bank or building society for a high street presence is to transact, the future is a dim one. Ours is a different raison d’etre and it is working.’
LAST BANK STANDING
For other financial organisations, a priority is supporting communities that otherwise would have limited access to high street banking other than a free-to-use cash machine or a post office.
In Ambleside, Cumberland Building Society is the only institution where someone can walk in and do business banking – or operate a current account. Furness, also a building society, has an agency in the town, but customers can only conduct savings transactions.
Cumberland, whose catchment area extends from Lancaster in the south to Dumfries in the north, is keen to do all it can to support local communities. Of its 34 branches, 11 are the ‘last’ bank standing.
Vicky Hope banks takings from her Fairydust Emporium tearoom in Silloth at her local branch
Peter Temple is deputy chief executive of the building society. He says: ‘We have an economic commitment to our region. As a business we can only succeed if it thrives. That means offering as wide a range of services as we possibly can – everything from personal and business bank accounts through to internet and mobile app banking and financial advice.
‘It is also about being prepared to do things for our customers that other institutions would not contemplate. That comes from being more intimate – for example writing mortgages underwritten on an individual basis rather than on a tick box approach. We can do that because we understand the region we operate in.’
Vicky Hope is delighted that Cumberland is prepared to back the coastal town of Silloth from where she runs the Fairydust Emporium – a vintage tea and coffee room renowned for its ‘big’ hot chocolates.
Although a popular summer holiday spot, resulting in the population swelling from 3,500 to 15,000, both NatWest and HSBC shut up shop in Silloth long ago. While NatWest now offers an irregular banking service via a visiting mobile van, only Cumberland among the banks and building societies has a high street presence.
Vicky, 49, says: ‘I run a successful business and employ 15 people. Yes, I do internet banking and accept payments via Apple Pay but I generate a lot of cash and want to bank it promptly.
‘Cumberland’s branch in the town allows me to do that safely and it goes into my business account. I also have a cash Isa with it, my kids have savings accounts and I encourage all my friends to turn to the building society.
‘My view is simple. It supports us as a community and so we should return the favour and back it.’
Why franchises in village halls could solve the branch crisis
The Bendigo Bank franchise in Cummins, near Adelaide
Community-style banks have long been seen by some campaigners as a solution to the disappearance of big banks from towns and villages.
It was an idea promoted by the Campaign for Banking Community Services. But persistent resistance by banks – on competitive grounds – meant the campaign, led by former banker Derek French, was abandoned in 2016.
Yet a group of individuals, led by a retired chartered accountant and two academics, are determined to take over from where French left off creating The Comoola Tree Project – a play on ‘community’ and ‘money tree’. Their idea is to launch ‘local community interest companies’ in villages and towns where there is no longer a banking presence.
Set up in a sports club, village hall or disused building – even a former bank – the businesses would offer a range of community services. Not just banking facilities (primarily transactional through state-of-the-art cash machines) but groceries, post and parcel services – as well as a ‘virtual’ department store where people can come and order goods online.
The branches would open seven days a week with all profits ploughed back into the community.
The businesses would be offered as franchises to individual communities. The people behind The Comoola Tree Project believe each branch could break even within four years.
Alan Braithwaite, a visiting professor at Bedford’s Cranfield University and a business consultant, is part of the project. He says if it gets off the ground it would address all the key issues identified in a recent Government White Paper on industrial challenges – living in a digital economy, enabling greater employment mobility, planning for an ageing population and backing ‘clean’ economic growth.
Although the project is still seeking funding, Braithwaite is confident that ‘pilot’ branches will be up and running by early next year. Contis, a payment technology firm based in Skipton, North Yorkshire, has agreed to provide the banking facilities. The Comoola Tree Project could help arrest the decline of communities, Braithwaite says. He points to similar projects in Australia which have gone on to be a success.
For example, a Bendigo Bank franchise set up 18 years ago in the tiny community of Cummins, near Adelaide, made an annual profit in 2016 of £150,000 – £140,000 of which was used to fund local projects.
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