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BfS survey highlights significant market failures in the provision of local banking in Scotland

Businesses and local economies are being hammered by persistent bank closures across Scotland.

According to a survey by Business for Scotland, 47% of business owners predicted that bank closures would have a negative impact on their business.

This survey has highlighted significant market failures in the provision of local banking in Scotland. We anticipated that our members in rural areas would likely report difficulties, the issues were the same for cash handling businesses in rural and urban areas right across Scotland.

Although 51% of respondents were unsure of the impact bank closures would have on their business in the longer term, of those that expressed an opinion, 96% stated it would have a negative impact on their business, and only 4% predicted a positive impact.

Almost 21% of respondents said that they now had to travel an additional 15min – 1hour to access banking facilities, whilst 9% said that the closures had extended their travels by an additional 1-2 hours.

Additionally, 21% of the respondents said that they now would have limited access to business support and advice.

“This survey has highlighted significant market failures in the provision of local banking in Scotland,” said BfS CEO Gordon MacIntyre-Kemp.

“Rural areas and smaller towns seem to experience a wider societal impact, as cash handling shops such as local grocers, petrol garages, newsagents, gift shops and pubs are core to creating and maintaining a sense of community and vital to tourism as well as making rural life more accessible.

“In the cities also, businesses that are paid in cash are having to go longer without banking the cash, and as well as slowing cash flow it can be a major fear for small business owners that holding extra cash makes them more of a target for violent crime.”

According to research by Move your Money, local bank branch closures on average decrease SME lending growth by 63%. This figure is increased to 104% for those businesses that lose their last bank in town. On average, this amounts to £1.6million less funding for areas without a bank in town, which in turn has an impact on areas that already are under commercial and economic pressure.

“Lack of facilities and easily accessible advice makes starting a business harder and more stressful than it needs to be and when people have less access to cash to make smaller purchases from local businesses they tend to travel to areas that have a bank and therefore shop there instead,” said MacIntyre-Kemp.

“Our members would like to see an innovative response from the so-called High Street banks, such as banking hubs or perhaps sharing premises rather than the current closure strategy which is harming local businesses, local economies, and making it even more challenging for startup entrepreneurs to get their businesses off the ground.”

Another suggestion was to set up a national retail bank owned and run by the Scottish Government. This is an interesting concept given the clear market failure, and could be vital in safeguarding business operations and even protecting local communities from depopulation.


About the author

Michelle Rodger

Michelle is a former national newspaper journalist who co-founded an award-winning IT business before launching Tartan Cat Communications. A social media and crowdfunding expert she manages media and communications for Business for Scotland.


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