Face-to-Face Banking: Rural Areas

Debate between Caroline Voaden and Mark Garnier

Tuesday 1st September 2026 Westminster Hall

[Mark Garnier]

My right hon. Friend raises another big argument that we could have on the issue of rural broadband, but it is worth making the point regarding internet connectivity that I was just coming on to. I know this is as painful in other constituencies as it is in Wyre Forest. According to the financial lives 2024 survey, adults living in rural areas were,

“disproportionately more likely to report having poor or no connectivity.”

We must also remember that many of our local businesses rely on face-to-face banking services. According to the House of Commons Library, an average small business deposits cash twice a month, withdraws cash once a month and gets change for their cash registers once a month. It is worth bearing in mind that, typically, we have about 3,500 businesses per constituency, so an awful lot of people rely on these services.

I remember the impact that was felt in 2015 when HSBC closed the last bank in Bewdley in my constituency; people were utterly dismayed. Happily, the post office stepped in and was able to help resolve the issues, but since then we have now discovered that that the post office is under threat. We are working on it, but it demonstrates the point that things are changing very quickly.

There is also a more subtle outcome of a sharp reduction in bank branches: the relationship between a bank and the local economy is being dramatically reduced, which has implications for our wider economy. Local branch managers living in a community, providing banking services to local businesses and understanding local economic opportunities as well as pressures, are well placed to understand the commercial value of a loan application by a local business. That is important.

An application for a business loan is usually something that business owners and managers want to get in place as fast as they can, but the reality is that applications for smaller business loans now take an average of nine months to be approved. That is not good for our local economies. Furthermore, banks need to lend money. That is the business they are in. Each loan creates a banking asset. Indeed, 95% of the money in circulation is the result of banks lending it into existence through fractional reserve banking. It is in the interest of both our banks and our economy that they lend, but if it takes too long, others will step in. That can be good, but it can be bad.

Private debt is gaining traction alongside private equity. Meanwhile, unregulated loan notes have been central to some recent mis-selling issues at the smaller end of the market. That is not the fault of the banks, but the lack of local banking services opens doors to alternatives, not all of which are properly understood, risk-assessed and regulated. However, we must recognise that banks are businesses. I do not want to be an apologist for banks, but they do provide a very important service, which they have to do in a profitable way. They have to make commercial decisions, and they have to consider the footfall in their branches and the take-up of digital banking.

[Caroline Voaden]

The hon. Member says that banks have to make profits. Last year, Lloyds made £6.7 billion in profit. Does he agree that £6.7 billion is such an incredible amount of money that asking banks to put more money into maintaining services for customers across rural Britain is not an exceptional or particularly demanding ask? The money is there. Nobody needs to be making £6.7 billion of profit a year.

[Mark Garnier]

As I say, I am not an apologist for banks, and I am keen to ensure that we get a balanced argument. The hon. Lady is absolutely right that that is an awful lot of money, but it all comes down to what should be the right and proportionate response. I do not disagree with her fundamental point, but the question is slightly more complicated.

I will give the hon. Lady an example from my constituency. Not so long ago, I went into a branch of Santander. It was a Thursday, and I was banking a cheque. I was the fourth customer that the bank teller had seen that week. It was utterly dismal, and that was in the centre of Kidderminster. The branch was closed the following week. There are issues for banks—whether they should necessarily be opening branches that could get one or two customers coming in a week. There is a balance to be struck. If a branch is not viable, should the bank keep it open?

We must look at the other opportunities. The last Conservative Government recognised that and were committed to retaining vital banking services. That is why we provided a system of free and convenient access to banks through the post office branch network, why we introduced protections for access to cash and why we enabled the development of banking hubs through the Financial Services and Markets Act 2023.

I am glad that the Government have continued our positive trajectory, especially through their commitment to 350 new banking hubs by 2030, but I also welcome the independent access to banking services review chaired by Richard Lloyd. We are interested to see its outcomes and recommendations, but would be grateful if the Minister gave us a clue as to when it will report. Decisive Government action could ensure support for underserved communities in good time and mitigate the impact of bank branch closures.

This and previous debates on this subject have shown just how much Members support bank branches, especially in rural areas. Members have emphasised how many of their constituents and local businesses still rely on those services, which is especially true in rural areas such as South Devon. It is vital that the Government step up to support communities who lack adequate banking services provision.

The publication of the access to banking services review will help to identify the next steps, but many people will be frustrated that the Government are undertaking another review and not taking action. As the previous Prime Minister, the right hon. and learned Member for Holborn and St Pancras (Keir Starmer), said, people are “impatient for change”. When it comes to this issue, our constituents do not want to wait much longer.