Britain's poorest communities have been the hardest hit by thousands of bank and building society branch closures, according to University of Nottingham research funded by the Economic and Social Research Council.

The report found that Britain's least affluent inner cities and traditional manufacturing areas have lost more local high street branches than any other area since 1995.

By contrast, areas defined by the researchers as typical 'Middle England' - including suburbs, small towns, coastal and countryside areas - have fared much better, seeing the lowest rates of closure.

And the divide between poorer and more affluent areas is set to widen still further in the coming years, cutting off more of the poorest in society from the financial services that branches provide.

The study found that overall, between 1995-2003, the average rate of bank closures was 20 per cent. The highest rate of closure - almost 24 per cent in that eight-year period alone ­was in 'multicultural metropolitan areas', which include poor inner city areas.

Higher than average rates of branch closure were also experienced in areas defined as 'traditional manufacturing', 'built-up areas' and 'student communities'.

Between 1995 and 2003, a total of 4,041 branches closed their doors and only 1,074 new ones opened. Poorer, urban areas bore the brunt of this net loss of almost 3,000 branches.

The findings suggest the emergence of a 'twin-track' pattern of branch changes, with customers in affluent suburbs, small towns, coastal areas and the countryside getting the best deal.

Professor Andrew Leyshon, Dr Paola Signoretta and Dr Shaun French wrote: "The current research confirmed that the branch networks of both banks and building societies have now been in a continuous process of decline since at least the late 1980s.

"Against a background of overall decline, we anticipate a further reduction in the share of bank and building society branches located within less affluent urban areas and a relative increase in the proportion within suburban areas and small towns.

"The closure of banks and building society branches can have significant consequences for customers, who may have to incur additional costs to travel to undertake transactions or obtain face-to-face advice, in addition to engendering a sense of loss and abandonment within local communities. The loss of counter services and cash transmission is particularly problematic for local businesses."

The researchers carried out a series of interviews with representatives of leading retail services organisations, industry bodies and pressure groups. Analysis of the findings of these interviews identified four primary causes for the closure of local branches in the UK:

• Corporate governance - pressure to deliver costs savings and increased profits for shareholders
  
• Branch closure policies - failure of a branch to meet performance targets
  
• New socio-economic geographies - changes in population patterns, and in economic activity in different regions, have meant financial institutions have decided a significant number of branches are 'in the wrong place'
  
• Use of branches and new distribution channels - increasing use of phone and internet banking; some banking services becoming available at Post Offices.

Professor Andrew Leyshon, of The University of Nottingham's School of Geography, said:

"This research provides the evidence that the geography of bank and building society branches is changing and that the branch networks are in a long-term process of decline.

"Although the days of banks announcing the closure of hundreds of branches on a single day are probably over - financial institutions are for the most part now too media-savvy to deliberately generate such negative publicity - the research reveals that there was a net closure of nearly 3,000 bank and building society branches between 1995 and 2003.

"These closures were unevenly distributed. Put simply, branch networks are increasingly located in Middle England; that is, in suburban areas and small towns. This shift is understandable as the geography of branches realigns itself with the geography of the population as a whole.

"But the closure of branches in many areas creates a severe problem for many customers, particularly for those lower-income consumers who tend to be heavier users of branches and for small businesses who rely on branches for their cash transmission services."

Professor Leyshon's co-researchers at the University were Dr Paola Signoretta and Dr Shaun French.

NOTES TO EDITORS

A PDF copy of the full report, 'The Changing Geography of British Bank and Building Society Branch networks, 1995-2003', is available from: Emma Thorne, Media Relations Manager, University of Nottingham, emma.thorne@nottingham.ac.uk. tel +44 (0)115951 5793; or Tim Utton, Media Relations Manager, tim.utton@notting-ham.ac.uk. tel +44 (0)115 846 8092.

More information is available from Professor Andrew Leyshon, School of Geography, University of Nottingham, on +44 (0)115 846 6147, andrew.leyshon@nottingham.ac.uk:
Media Relations Manager Tim Dtton in the University's Public Affairs Office on +44 (0)1158468092, tim.utton@nottingham.ac.uk; or Media Relations Manager Emma Thorne on +44 (0)115 951 5793, emma.thorne@notting-ham.ac.uk