The land that bank branches forgot

Mention a local bank branch closure and you might get a dry retort questioning how anyone will get hold of the money to spend in the wine bar that will soon stand on the site where the bank used to be.

However, the shrinking network of UK branches could soon receive a boost.

Over the next few weeks, high-street banks will face fresh calls to share a single branch in inner city and rural communities. This will first come in the form of a media lobbying blitz by the the Campaign for Community Banking Services (CCBS), which wants customers who have lost local branches to be able to use a "neutral" office to make cash payments and deposits, pay bills or order currency and traveller's cheques.

For its part, the community bank would offer neither its own accounts nor anyone else's products, and customers would remain with their existing banks.

To exert pressure, the CCBS is enlisting the help of MPs by resurrecting the community banking all-party parliamentary group, chaired by Colin Breed, Liberal Democrat MP for south-east Cornwall, and pushing for a trial scheme. The CCBS will also be lobbying the Treasury to encourage it to cajole the banks into taking part.

"Where it isn't viable to sustain a branded branch, franchises could operate under the umbrella of an independent and not-for-profit company," says Derek French, a director of CCBS.

The campaign group's research reveals that 4,000 branch closures over the past 10 years have left nearly 1,000 inner city and rural communities without a local bank. In the case of inner cities, "local" is defined within half a kilometre.

Some 1,081 communities have only one bank branch and 545 have just two. As many as 1,800 more outlets could close over the next five years, according to the CCBS.

At the end of last year, there were 11,274 across the country - a "branch density" of between a half and a third of that in most other European countries, adds Mr French.

The UK has 200 bank branches per one million people, a figure rising to 230 if building societies are included. On the Continent, France has 430 branches per one million of its population; in Italy, the figure is 530; in Germany, 660; and in Spain, 920.

The CCBS argues that there is a pressing need for community or shared bank branches because millions of customers and thousands of small businesses still need somewhere to pay in cheques and make transactions.

"Shared branches make a lot of sense, and we think it would be low cost for the banks," says Mick McAteer of Which?, the consumer body, which is supporting the CCBS campaign, along with Age Concern, the National Consumer Council, Help the Aged and the Federation of Small Businesses, among others.

"We want to get the Government on board to be more radical when it comes to finding solutions that the market cannot come up with."

This isn't the first time that plans for shared banking have been put forward.

A pilot scheme held two years ago crashed when the high- street banks taking part argued that it had been a failure.

The scheme involved the "big four" - Barclays, HSBC, NatWest and Lloyds TSB - and ran from 2 January 2002 to the end of the year. The idea was to allow personal and small business customers to use banking services through the branch of another participating bank in 10 locations across England and Wales. These included a Barclays branch in Coniston, in the Lake District; a Lloyds TSB in Donington, Lincolnshire; and an HSBC outlet in Cerrigydrudion, North Wales.

The British Bankers' Association (BBA) argues that an evaluation of the scheme, written by Professor Elaine Kempson, of the Personal Finance Research Centre at Bristol University, showed that each branch had an average of just eight personal customers and one business customer using the service each day.

The scheme was also found to have had an impact on post office branches near the pilot sites, said a BBA spokesman.

However, the CCBS claims it was unrepresentative since it was held in "10 untypical, remote rural communities". Too small and restrictive, it excluded urban areas and involved "no new thinking and no systems changes", says Mr French.

And tellingly, he adds, the banks failed to advertise the scheme in the target areas.

"Furthermore, eight out of 10 of the areas had historically had only one bank. This means it is likely very few people had used another bank other than the resident branch for many years."

Independently, the Britannia and Yorkshire building societies have shown that sharing can work. For three years, the two have let each other's customers use their branches for basic transactions.

However, the role of the Post Office in rural communities could remain a sticking point for the CCBS's new campaign.

Many sub-post offices have closed ­ and more are still threatened with closure ­ because benefit and pension payments now go straight into customers' bank accounts rather than being dealt with over a post office counter. The remaining network already offers the very services that the CCBS wants to introduce.

Anybody with a basic bank account (for those who don't want overdrafts) can already use a post office for simple over-the- counter transactions, as can regular current account customers of Lloyds TSB, Barclays, Alliance & Leicester, Smile and Cahoot.

But the CCBS doesn't think that the Post Office could be a "multi-bank substitute" for business and personal use. "This is because of limitations on space, security risk and an ownership structure that militates against financing improvements," says Mr French.