Nearly half of bank branches have closed since 2015

Research by consumer watchdog Which? has revealed that 4,685 bank branches have closed over the last seven years with a further 226 set to disappear by the end of year – accounting for almost half of the country’s network.

According to the study, the elderly and those in rural areas who most relied on cash were also the most likely to be affected by bank and ATM closures. Seven parliamentary constituencies have been left with no banks at all.

The research shows that almost a quarter of free-to-use ATMs have vanished since 2018 and has seen significant reductions in recent years, leaving many customers who rely on face-to-face banking services and cash to pay for everyday essentials at risk of being cut adrift.

Which? is calling for the government to finally deliver on its long overdue promise from 2020 by including legislation to protect cash in next month’s Queen’s Speech. Another year of inaction could risk an irretrievable collapse of the country’s cash system.

Compounding the problem for the millions of consumers who still rely on cash is the deterioration of the UK’s ATM network – and in particular free-to-use (FTU) ATMs. Since 2018, Which? analysis found that 12,178 free-to-use ATMs have been cut, which is equivalent to almost a quarter of FTU ATMs.

Which? has identified 17 parliamentary constituencies, accounting for more than 1.5 million people, that have particularly poor access to cash (three or fewer bank branches and 30 or fewer free-to-use ATMs). These range from rural areas where the patchy public transport system makes the problem of dwindling cash access worse for an older than average population, to relatively deprived urban areas where residents struggling during the cost of living crisis might need to use cash for day to day budgeting. But more affluent student areas and villages in the home counties are also affected.

Sheffield Hallam in South Yorkshire is one of seven constituencies to see every one of its bank branches closed.

A relatively large urban constituency, Sheffield Hallam has just 25 ATMs in total, seven of which charge a fee. With a population of almost 92,000, this equates to only 1.85 ATMs available per 10,000 residents. This is far lower than the average 8.4 ATMs per 10,000 people across all urban constituencies.

Harrow East in London has seen the greatest reduction to its ATM network, losing almost 60 per cent of its free-to-use cash machines since 2018. It now has just 17 free-to-use ATMs left, the joint lowest (with Orkney and Shetland) number of any constituency in the country.

Carmarthen East and Dinefwr in Wales has had the highest number of branch closures, losing 13 of its 15 branches since 2015. This constituency is also notable for its high proportion of elderly residents, with individuals aged 65 and over making up more than 25 per cent of its population. Across the UK as a whole, this figure is 18.6 per cent.

Elderly consumers – those aged 65 and over – made up a quarter (23%) on average of the population across the 17 constituencies with poor access to cash, yet are among those most likely to rely on cash as a payment method.

Those living in rural communities, where residents often have to travel for miles to reach their nearest alternative source of cash, are also among the most reliant on it. However, digital infrastructure can be poor in these areas, making it harder for residents to embrace online banking and payments.

Which? analysis found that the rate of branch closures in rural areas has outstripped those in urban areas. Since 2015, the banking network in rural constituencies has been cut by half (50.7%), compared with 47.3 per cent in urban areas. On average, rural constituencies have just 0.1 bank branches per 10sq km and 1.1 ATMs, compared with 2.6 branches per 10sq km in urban areas and 31.3 ATMs.

While proposals to protect access to cash put forward by the banking industry, such as shared banking hubs, could play a role in preserving access to it, Which? believes they must be targeted and of sufficient scale to plug the gaps left by bank closures.

Ultimately current measures are voluntary and are therefore subject to change based on commercial decisions made by individual firms. At present, there is nothing to prevent banks from withdrawing from these measures at any point.

It has been almost two years since the government promised to protect access to cash. Which? believes legislation must be introduced in next month’s Queen’s Speech if the imminent collapse of the UK’s cash infrastructure is to be avoided. The government should also tackle the current lack of regulatory oversight of bank branch closures by appointing the Financial Conduct Authority as the key regulator to protect cash services.

Jenny Ross, Which? Money Editor, said “While many consumers have embraced digital banking, there are still millions, including the elderly, vulnerable and isolated, who aren’t yet ready or willing to make that switch – and they must be protected.”

“Our research highlights the devastating impact widespread bank branch and ATM closures have had on communities. With just two weeks to go until the Queen’s Speech, it really is now or never to halt the cash crisis.”

“Though banking industry proposals for action are welcome, what’s needed most is the legislation promised by the government to protect cash. This should also include making the FCA the key regulator to protect cash services.”

Responding to the findings Federation of Small Businesses (FSB) National Chair Martin McTague, who sits on the Access to Cash Pilots Board, said “With our bank branch infrastructure further decimated over the pandemic, this Queen’s Speech is the last chance saloon where protecting access to cash is concerned.”

“Four in ten small high street businesses say cash is the number one payment method among customers, and six in ten need to make regular cash deposits.”

“Since the Access to Cash Review was published, we haven’t seen meaningful movement in the numbers of customers and small firms that rely on cash day to day. But we have seen further closures of bank branches, and new limits on opening hours – choking off supply while demand remains.”

“Notes and coins are still important to the lives of millions of consumers, not least disabled people, the elderly and those on tight budgets. Physical currency is also a vital backup for when digital systems fail.”

“Online banking brings massive benefits in terms of productivity and efficiency. Policymakers and banks should be working hand in glove to get everyone online and up to speed with all the perks that managing finances safely online can bring.”

“But so long as the need for cash remains, free access should be protected. Often, it’s in areas where consumers are most reliant on notes and coins that pay-to-use machines pop up – every pound spent on accessing cash is a pound not spent with the local small businesses on which our recovery will depend.”

“Legislation and clear oversight by a single regulator in this space is overdue – the former was promised years ago. It’s time to turn positive words into positive action.”