...Campaign for Community Banking...

STATEMENT

8 October 2004

1800 Bank Branch Closures in Prospect 2005-2010

In its 2004 annual statement on branch network reduction, the Campaign for Community Banking Services (CCBS) warned of an early return to branch closures.

CCBS is now able to quantify the prediction at a minimum of 1800 branches within the 5 years commencing 2005, leaving another 500 communities with the damaging effects of having no bank branch at all. This should be seen in the context of 11274 retail bank branches (including 2824 ex building societies) at the end of 2003; a branch density between a half and a third of most of our European partners.

The emphasis this time is expected to be more suburban and small town than remote rural sites but, since last year’s unilateral alteration to the Banking Code, only 45 branches in England and Wales plus 69 in Scotland have a vestige of protection against closure as a last bank in town. CCBS expects a reduction by half in the 1087 identified sole bank communities but communities where there are currently 2 banks will enter the category for the first time as the race to get out first resumes.

These estimates take no account of any branch closures resulting directly from the current take-over interest in Abbey nor any Barclays/Woolwich or RBS/NatWest branch mergers.

Factors influencing the predictions include:

Continuing reduction in footfall and cheque usage in favour of alternative delivery channels
Growth in new retail entrants to the financial products marketplace e.g. post offices and supermarkets
Increasing competition from within the sector, from those with a lower branch cost base
Observations of commentators and experts on closure patterns and target network sizes
Pressure to reduce cost/income ratios in UK retail banking
HSBC’s network is disproportionately large in relation to market share
Banks’ need to invest heavily in branch technology and improving the retail experience in the branches with higher footfall and higher sales potential
Costs of so equipping small units cannot be cost justified
Modest further rationalisation of merged banks’ branches ( excepting the above )

It is unlikely that banks will attract media and public attention by announcing in advance a branch closure programme but there are signals that the restraint that has existed since the Barclays’ PR debacle in April 2000 is coming to an end as the pressures referred to above build up:

“Last bank” keep open pledges given in 2000 “for the foreseeable future” are nearly 5 years old and have not been renewed
The new Banking Code definition of “last bank in town” as no other bank within a 5 mile radius opens up the scope for “no fault” closures to virtually the whole network. CCBS is challenging in the current Code review process.
The banks’ determined efforts to prevent the shared banking option becoming available, despite it being academically validated as operationally feasible and financially viable, leaves the way clear for swift implementation of closure plans by individual banks
Barclays, LloydsTSB and HSBC all have new bosses at key levels in relation to the UK branch network after some sudden, not always voluntary, departures.
LloydsTSB in particular has been cutting days/hours of opening in its marginal sites; usually a precursor to closure
HSBC closed more branches in 2002/3 than the previous 5 years in total and recently added to the usual “no immediate plans” statement in respect of a vulnerable branch “but we cannot guarantee that it will be there in 12 months time”; the bank has also withdrawn all but one of its rural mobile banks.
Foreign owned Yorkshire/Clydesdale banks are under exceptional pressures to reduce costs and recent closures are unlikely to be the last.
The choice of a 2011 lease expiry on branch freeholds sold and leasebacked by Lloyds TSB.

Against this background CCBS has examined the networks of each of the major banks and concluded that a further reduction of 1800 branches can be expected in the 5 years to 2010 of which around 800 will result in the communities concerned losing their remaining banking presence altogether or coming down to a vulnerable choice of one!

That this is being allowed to happen, with the attendant damage to the communities concerned, without a proper appraisal and trial of the neutral outsourced option for replacing branches cost-effectively is unforgivable, as are the delaying tactics this very profitable industry has employed since 2000 to prevent the development of the shared banking option. Government too is culpable for condoning the banks’ tactics whilst claiming to be committed to the agendas of financial inclusion and community sustainability.