Coronavirus: Ian McConnell: Branch closures: Flicker of hope extinguished as banks resume normal service

As the coronavirus crisis took hold, big players including Clydesdale owner Virgin Money UK, Bank of Scotland parent Lloyds Banking Group, and HSBC moved to put on hold a raft of previously announced branch closures. The news would likely have come as a relief to many, staff and customers alike, given the grim immediate backdrop as well as the huge and widespread branch closure programmes we have experienced for years now.

Lucy Dimes, who is chief strategy and transformation officer at Virgin Money UK, said of this institution’s decision to put branch closures on hold last March: “Our primary focus is on supporting our customers and protecting our colleagues during this challenging time. As a result of the impact of coronavirus in the UK, we have decided not to proceed with the integration changes we announced in February.”

Amid all the talk of a “new normal” – albeit much of it fanciful or over-optimistic and wide of the mark as people understandably sought to find positives in an utterly miserable situation – it was tempting to wonder for just a moment whether banks might be rethinking their relentless branch closure programmes.

There was at this time a much greater focus on local communities, as people reacted collectively to the pandemic and also saw their horizons narrowed by coronavirus-related restrictions implemented to save lives. And, as many people found themselves with entirely unexpected financial troubles, an increased need for future face-to-face contact with experienced banking staff seemed obvious.

This temptation to wonder if we might be at a watershed moment for branch closures was of course only fleeting. Such a permanent change of behaviour from the banks on branches seemed most unlikely at the time and, sadly, so it has proved.

Bank branch closures have in recent months been firmly back on the agenda, and show no signs of abating.

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And the branch closures that had been put on hold have, in fairly short order, been resumed by various major banking groups.

For example, on July 1 last year, Virgin Money UK declared: “The following previously announced actions will recommence: 22 branch closures as a result of lower usage, and 30 branches to be consolidated into another Clydesdale Bank/ Yorkshire Bank/ Virgin Money location within a half mile radius, to eliminate duplication; consultation over role reductions in central offices...”

Ms Dimes said then: “While the decision to recommence these redundancies and branch closures has not been taken lightly, we are committed to integrating Virgin Money under one brand as a sustainable, innovative business that invests in improving its customer offer for the future. The measures we’ve put in place during the lockdown will continue to help customers engage with alternative and improved ways of banking with us.”

In days gone by, the closure of a single branch could stir up quite a reaction. However, in recent years we have seen a seemingly endless tide of large-scale branch closures from a raft of players in the sector.

Among these announcements, TSB revealed last September it would be closing 73 branches in Scotland alone, and a total of 164 across the UK.

Only last month, Santander announced 111 branch closures across the UK, including four in Scotland.

Royal Bank of Scotland, renamed NatWest at holding company level, has also closed large numbers of branches in recent years.

Before the pandemic struck, there were signs of significantly revived interest among politicians on branch closures, and this has to some extent continued, but it has so far failed to stem the relentless tide of retrenchment.

According to consumer champion Which?, banks and building societies have closed, or scheduled the closure of, 4,188 branches since January 2015.

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Banks sometimes highlight the proximity of Post Offices to branches that are being closed. However, while some transactions can be handled at Post Offices, various more complex, and important, matters which can be dealt with in bank branches cannot.

And then there is the importance of banks having a presence in communities, especially rural and remote places where in the past customers have been able to benefit from a strong relationship with their local branch and those who work in it.

Businesses also rightly highlight the importance of bank branches to enabling them to lodge cash. This might not be quite so great an issue right now, with major sectors in which many of these businesses operate wholly or largely closed because of coronavirus-related restrictions, but it will be a very big deal again soon enough.

Many personal customers will have visited branches less frequently during the pandemic, but will want to revert to usual patterns as things return to normal over coming weeks and months.

Yes, digital banking is growing. And that is convenient not only for those sections of the customer base which prefer to transact in this way but for banks which are always, it seems, looking to cut costs.

However, citing big percentage declines in footfall at branches in justifying closure decisions is cold comfort for the many personal and business banking customers desiring continued access through this channel. Whatever happened to “the customer is always right”? Or the concept of customer choice? Some people might view digital banking as an “improved” offering but many others will not and will conclude justifiably that branch closures constitute a major deterioration in service.

Some retailers have enjoyed particular success by ensuring an “omni-channel” approach, allowing customers to buy from them online or in a store, or by telephone. In many cases, it has seemed that letting the customer choose has been good for business in retail.

However, in the banking sector, it seems these days as if customers do not have much of an option in terms of voting with their feet, given branch closures have been unveiled by so many institutions and with no sign of this pattern changing.

In such an environment, it is difficult to see anything stopping the closure of branches, although it would be good to see continued and increasing pressure exerted by politicians on this front.

It was interesting to see the Financial Conduct Authority raise the issue of bank branch closures amid the grim second wave of the pandemic back in late January.

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In a statement headed “FCA asks banks to reconsider branch closures during coronavirus lockdown”, the regulator said: “In January 2021, the Government and devolved authorities announced new restrictions across the UK due to coronavirus (Covid-19). Some banks and building societies have informed us that they are either going ahead with branch closures already announced, or announcing new branch closures during the current lockdown.”

The FCA added: “We are concerned that these activities could have significant consequences for customers. It may be harder than usual to reach all customers under the current restrictions and engage with them on closure proposals effectively – for example, small businesses that are temporarily closed.

“Some customers may need to access in-branch services to help them prepare for closures but may be unable to do so. Customers may also need additional help to access online banking and making payments. We want firms to review their plans against our existing guidance and ensure that they continue to comply with our principles.”

It was an interesting intervention, with its emphasis on the customer.

What is clear is that, over the last year, millions of people and many tens of thousands of businesses have faced huge financial challenges amid the pandemic.

Unemployment has surged in Scotland and throughout the UK, with worse to come even as vaccine success enables further reopening of the economy. Businesses have faced enormous pressures through having to close for extended periods, or from having seen their activity much restricted.

There is a strong argument that individual customers and small businesses will have even greater need for consistent face-to-face contact with bank staff in branches, given the challenges many will face coming out of the pandemic.

If the banks are interested in supporting customers over the long haul, they should provide this.