RES000220686 – The changing geography of British bank and building society branches, 1995-2003

Funded by the Economic and Social Research Council

Award/Grant Name: The changing geography of British bank and building society branches, 1995-2003.

Award/Grant Holders: Andrew Leyshon, Shaun French and Paola Signoretta.

Duration: June 2004 – May 2005.

For the full End of Award Report, click here.

Non-technical Summary

When banks and building societies close their branches, it can have significant consequences for customers, who may have to incur extra travel costs to make transactions or get face-to-face advice. Closures also engender a sense of loss and abandonment within local communities. This project, by the University of Nottingham, mapped the changing provision of bank and building society branches between 1995 and 2003 – updating research into changes between 1989 and 1995.

Key Findings

Continuous decline

  • The branch networks of both banks and building societies have now been in a continuous process of decline over this period.
  • Between 1989 and 2003, banks closed 32 per cent of their branches, converted building societies 22 per cent, and building societies 20 per cent. Between 1995 and 2003, banks closed 21 per cent of their branches, converted building societies 19 per cent and building societies seven per cent.

Poor inner cities hit hardest

  • Distribution of closures was uneven. The average closure rate for all areas between 1995 and 2003 was 25 per cent. However, the highest rate – more than 30 per cent – was experienced in ‘multicultural metropolitan’ areas, which include poor inner city areas.
  • Meanwhile, areas that experienced fewer than average branch closures tended to be more affluent, areas which could safely be described as typically ‘Middle England’.

Market forces

  • This long run process of branch closure is a product of a more competitive market for retail financial services, which forces firms seriously to appraise costs against revenues.
  • It is also a result of new distribution channels for financial services, such as use of the telephone, developed in the 1980s, and the Internet, from the late 1990s.
  • However, perhaps the most significant new channel arose from government moves with the 16 largest banks and biggest building society to ensure basic bank accounts for low-income customers. To facilitate provision to poorer communities, they were made available through post offices. This widens the scope of the retail financial services industry, but was cited as a potential factor in driving further bank closures.
  • Closures vary between institutions, with banks in particular being anxious to drive down costs in the face of investor pressure.

Regional distribution

  • Lng-run disparities in economic and population growth have contributed to an uneven regional distribution of branches. There is a marked concentration of networks in the South East of England, in contrast to the situation in, say, Wales.
  • However, based on branches per population, Wales, the South West and parts of Scotland come out best, while the lowest number per capita are in the East and West Midlands, Yorkshire and Humberside.

About the Study

The project was led by Professor Andrew Leyshon, of the School of Geography, University of Nottingham. It included developing a database of bank and building society branches for the period 1995-2003 for analysis, building on one produced for previous research. Findings were discussed in 15 interviews with leading decision and policy makers, consumer organizations and representatives of mainstream financial services.

Key words

Banking, building societies, financial services, exclusion, communities, inner cities