Bank Closures: Impact on Rural Communities

Lord Bishop of Newcastle Excerpts

Thursday 13th February 2025 Lords Chamber

Asked by

[The Lord Bishop of Newcastle]

To ask His Majesty’s Government what assessment they have made of the number of bank closures in the past decade and the impact on people in rural communities.

[The Lord Bishop of Newcastle]

My Lords, I thank all noble Lords who are taking part in this short debate and look forward to listening to each of the contributions that they will bring. While this debate has its focus on diverse rural communities, I know that the issue before us is not solely rural.

Last month, Lloyds Banking Group announced that it will be close 136 bank branches across the country. The Tyne valley in Northumberland will see another three branches close their doors—two in Hexham and one in Prudhoe—meaning that customers in Hexham will need to travel over 15 miles to Consett to visit their nearest Lloyds branch.

Lloyds’ announcement comes after a decade of decline in the number of high street banks. Figures from Which? show that 6,266 bank branches have closed across the UK over the past 10 years, representing 63% of branches open at the start of 2015. If bank branches continue closing at such a rate, we face living in a society where those unable to bank digitally are financially excluded.

However, it is not the closure of banks that is at the heart of this issue; it is the stripping away of essential services without adequate alternative provision. With the number of customer transactions at the Lloyds branch in Prudhoe having almost halved in the last five years, its closure is understandable. Online banking is indeed far more convenient for many, but where does that leave those who rely on the services that in-person banking provides, those living in rural areas whose broadband is unreliable, those who struggle to understand online systems and fear the risk of fraud, those on low incomes who rely on cash to manage their budget, and those in need of advice to set up a mortgage or business for whom a phone call cannot compare?

While the rise of online banking has increased the ease of managing money for many, the support that face-to-face services provide continues to be vital, especially to some of the most vulnerable people. An Age UK survey reveals that the use of online banking is as low as 14% among the 85-plus age group. A complete transition to digital banking risks financially excluding many older people, making it harder for them to manage their money and fully participate in society.

The closure of banks also reflects the wider issue of declining high street services. We should not underestimate the contribution of such services to fostering a sense of connection in diverse communities—this is not, as I said, solely an issue of rurality—in the context of a culture with increasing isolation and loneliness.

Access to cash also remains essential, with 5 million people continuing to use it every day. The closure of local banks puts pressure on small rural businesses, some of which experience a lower footfall because of less access to cash in their area. Many owners are forced to travel further distances to deposit cash and carry out their banking, leading to reduced opening hours. There are also those with special needs, for whom using banking apps is not an option.

I welcome the new duty that the Financial Conduct Authority has placed on banks to assess the impact that the closure of a branch will have on access to cash in the area and to ensure that adequate services are implemented ahead of closure. However, cash assessments address only part of the issue. Those regulations do not protect vital face-to-face services that people rely on. The assessment of cash access in Prudhoe completed by LINK last month deemed that there are already cash access facilities within a mile radius of the Lloyds branch that will close this coming May. It therefore concluded that no further services, such as a banking hub, are needed in Prudhoe. The assessment does not, however, consider the impact on access to face-to-face services within the community as they lose the town’s one remaining physical bank branch.

I fully support the introduction and rollout of banking hubs, enabling communities to access in person the fundamental function of banks from a range of providers where bank branches are scarce. I praise the Government for their commitment to open 350 hubs over the next five years and particularly the recent announcement of plans to open 10 new hubs, including in Alnwick and Amble in Northumberland and in Whitley Bay in north Tyneside. Nevertheless, I remain concerned about the pace of the rollout. According to Cash Access UK, the provider of banking hubs, it takes approximately 12 months to open a hub, as it must secure a suitable property and appoint operators and community bankers. What steps are the Government taking to speed up the rollout of banking hubs in light of increasing bank closures, and what certainty do they have that the FCA will fulfil its duty of ensuring that no community is left with a gap between the closure of a bank and the opening of a banking hub?

Considering the current rate of bank closures and recent announcements from Lloyds, I am concerned that 350 hubs will not be enough to fill the gap in services that the rapidly closing bank branches are leaving. Are the Government open to increasing this target to meet the needs of diverse communities?

Finally, while banking hubs are essential in providing face-to-face services, I also believe that they have a key role to play in bridging the digital divide. Banking hubs are well placed to offer training and support to those who do not find it easy to manage their finances online and to equip them with the digital skills to do so. What steps are the Government taking to encourage banking hubs to provide training to enable people to manage their finances online and to promote digital inclusion and thereby reduce digital poverty?

Online banking is an innovative tool to manage our personal finances, but it should not come at the expense of removing essential services from rural communities, nor the digital and financial exclusion of some of the most vulnerable people in society. I urge the Government to ensure that no one is left behind and I look forward to hearing the Minister’s response.