Effects of bank branch closures on SMEs

From 1989 to present day, there has been a 53% decline in bank branches, according to a report by Move Your Money. The British Bankers Association also reveals that lending to small to medium sized enterprises (SMEs) had fallen wherever a branch has been closed by an average of 63%.

The stats

Areas where all bank branches have closed show this figure to have increased 104%. This has resulted in £1.6 million less lending in just one year, and proven damaging in areas already under commercial and economic pressure.

“This reduction in the growth of small and medium enterprise (SME) lending both reflects and drives lower demand, meaning businesses have less opportunity to sell, grow, and provide employment,” according to campaign manager for Move Your Money, Fionn Travers-Smith. As a result, this dents the confidence of local businesses, leading to a rise in failing businesses.

To alleviate the impact of bank closures on local communities, banking protocol dictates that banks must be transparent and open to scrutiny regarding decisions to close branches. This opens the opportunity to formulate a proportionate response and assess the effect on the bank branch environment. Such decisions must be a necessity to avoid the abandonment of entire communities. Communities must be consulted prior to closure, allowing people to express their concerns and influence a bank’s decision. A full independent public review must be undertaken, and examine why private competition is failing and whether government intervention is feasible.

However, as banks have closed branches, a new wave of business lenders and finance products have grown up. The Alternative Finance industry is now stepping into the void left by mainstream banks. If you want to know what business finance solutions are available to you, simply contact us.