Branch closures 'a major issue' for UK small firms

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Branch closures 'a major issue' for UK small firms (image credit: iStock/BrianAJackson)

The closure of many local branches by UK banks is having a detrimental impact on the ability of many small businesses to effectively manage their finances.

According to a new report from the Federation of Small Businesses (FSB) entitled 'Locked out: The impact of bank branch closures on small businesses', the total size of the UK branch network has more than halved during the last 25 years.

This therefore represents a significant difficulty for many smaller companies, as their access to banking services has been severely reduced as a result.

FSB national chairman Mike Cherry argued that the rapid rate of branch closures constitutes a risk to many smaller firms up and down the country, as the services that they provide are essential for the smooth running of businesses.

Indeed, over the counter services like cash and cheque banking form a large part of many firm's banking needs, but this is an area where it is becoming increasingly difficult to find an open branch to make deposits.

Many company leaders also appreciate the face-to-face nature of branch banking and this is something that cannot be achieved through the ongoing shift to online services.

"Small businesses are keen to embrace the opportunities of the digital economy - 94 per cent of small businesses already use internet banking," Mr Cherry stated.

"However, barriers towards digital inclusion, such as unreliable broadband connectivity and a lack of confidence in using digital services, creates serious challenges.

"These are some of the reasons which explain why the protection of in-branch banking is so important for financial inclusion."

Mr Cherry claimed that the rate of closures means there will be half again of the existing number of branches open within the next ten years. It is an issue that the government must now look to address.

The FSB has called for an increase in awareness surrounding the Access to Banking Protocol, which was launched in March 2015. It is designed to showcase to businesses across the UK alternative options for banking in their local area.

However, an independent review into the protocol is now underway and it remains to be seen how successful the initiative has been to date.

"The only way to fully assess which areas across the UK are most severely affected by local bank branch closures is through effective monitoring. But this cannot happen while banks continue to publish limited data on both branch closures and small business' access to banking services," the FSB chief concluded.

"We believe there needs to be a much higher level of transparency."