Retail banking closures in the United Kingdom. Are neighbourhood characteristics associated with retail bank branch closures?

Abstract

The United Kingdom retail banking sector has been through many changes over the past decade, driven by economic, technological and pandemic factors. This is perhaps most evident through the rationalisation of the branch networks, primarily through branch closures. There is a concern that these closures can have differential effects on certain sections of society, reducing or eliminating their access to cash and financial services. In this study we utilise comprehensive branch-level data and a discrete time-hazard model to identify whether certain neighbourhood types have been disproportionally affected by these closures during the period 2015 to 2021. We find that building society branches are least likely to close, and that competition and the presence of alternative banking facilities (including Post Office branches) influence likelihood of closure. Crucially, neighbourhood type matters, with rural communities continuing to be most impacted, along with those where the predominant work activities are less concentrated, or largely absent. However, in contrast to earlier studies, we find that affluent neighbourhoods were more at risk of branch closure than more diverse and economically challenged neighbourhoods. We conclude by considering these findings in the context of recently introduced legislation to protect access to basic banking and cash withdrawal and deposit facilities.