The Federation of Small Businesses (FSB), representing the sector most disadvantaged by the wholesale closure of local bank branches, has sponsored an independent study of the proposal for a network of community banks to take their place.

The Banking Centre at Loughborough University has confirmed that the idea of community banks to provide counter services on behalf of all major banks is "both operationally feasible and financially viable".

The validation exercise, carried out by Professor Barry Howcroft, examined the detailed proposals of the Campaign for Community Banking Services and found in its favour. It highlighted that the banks, as well as banking customers, need a solution to the problem of how to service the significant number of small businesses and individuals who, for a variety of reasons, cannot or will not use the technology based alternatives to the local branch when it is closed.

Professor Howcroft's research indicates that the community bank proposal will succeed or fail on the strength of co-operation from the banks.

The report also highlights that the suggestion of the post office network in its present form taking on a universal role as substitute bank is not a popular choice. As far as small business customers are concerned there would be many difficulties if that course is chosen and it could lead to small businesses becoming the new "financially excluded" when it comes to local access to banking services.

As a direct result of the protest against Barclays closing ten per cent of its branches last year, the British Bankers Association is conducting a feasibility study of shared branches and community banks shortly expected in a report.

Small businesses are some of the largest users of bank branches.

Many retail and catering establishments operate largely in the cash economy, security considerations and financial pressures dictate frequent deposits and there are loose change requirements. Other types of small businesses have regular need for cash withdrawals or to pay in cheques received. According to independent research, 70 per cent of small businesses visit a bank branch at least weekly and 8 per cent do so every day.

The closure of many local bank branches, with more closures to come, imposes particular problems on small businesses. Some shops have to close temporarily to allow banking to take place in a neighbouring town; others are put at risk by carrying cash from multi-storey car parks to city centre branches. More cash is left overnight, or for several nights, on business premises, increasing the possibility of robbery and the cost of insurance.

When customers bank elsewhere, they also shop elsewhere - sometimes with devastating results for a community's other shops and services that cannot afford to lose that valuable custom and still survive.

The Campaign for Community Banking Services is a coalition of 26 national charities, small businesses and community bodies speaking for those most affected by bank branch closures.

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