The British government’s excitement around the progress of its retail banking hubs initiative has been overshadowed by the news that UK economic growth has slowed for the second consecutive month.
HM Treasury announced this morning that the 100th local banking hub has been opened, located in Darwen, Lancashire. The community bank is operated by the local Post Office, with NatWest, Santander, Lloyds, Halifax and Barclays also participating due to these banks’ large number of customers in the area.
Community banking hubs have been a core financial policy of the Labour Party for over a year, with the party first unveiling plans in December 2023 while the official opposition.
It was later included in the party’s July election manifesto, and following its win in that same election is now government policy. The government’s primary goal is securing continued access to cash for local communities.
Labour had been particularly critical of the decline of retail banking under its Conservative predecessor, arguing that the numerous bank closures by a number of prominent high-street firms has left many communities in ‘banking deserts’.
Tulip Siddiq, Economic Secretary to the Treasury, said: “We are delighted to see the continued growth of banking hubs, which are playing an essential role in meeting the needs of communities where traditional banking options have declined.
“These hubs are not only vital for residents and businesses, but they also play a key role in revitalising our high streets, bringing footfall back to town centres, and repurposing unused buildings for community benefit.
“The success of these hubs proves that shared banking services can provide a solution that benefits everyone, from residents to local businesses.”
HM Treasury states that the Darwen banking hub will protect access to cash and banking services for 10,000 local residents and 150 shops within one kilometre of the town centre.
Though the majority of UK consumers are moving more and more towards digital banking services, in line with a general trend seen across many developed economies. However, data from a number of companies and the Financial Conduct Authority (FCA) show continued use of cash.
NatWest, Nationwide and the British Retail Consortium (BRC) have all released statements or published data in the past year showing that cash use remains common among British consumers, even if only carried in case of an emergency. The FCA has also introduced new rules around access to cash protection.
Not all good news
The opening of the 100th banking hub is a cause celebre for Labour’s financial policies, with the government hoping to open 230 of a planned 300 community banking centres by the end of next year.
“Access to cash and face-to-face banking services remain vital to millions of people and businesses who rely on it,” said Gareth Oakley, CEO of Cash Access UK.
“We’re delighted that banking hubs, alongside deposit services, are proving to be successful and are making a real difference to communities and high streets up and down the country.”
However, the progress of the government’s retail banking hubs initiative has been overshadowed by the news that UK GDP declined by 0.1% in October – this is 0.1% less than before Labour stepped into government in July.
Britain’s economy has been plagued for a few years, dating back to the financial crisis of 2007/08. Years of austerity, the impact of Brexit and the COVID-19 pandemic, among other factors, have taken its toll on the country’s economy, business, and public.
This year marked a year of positivity with more than three consecutive months of economic growth. This then flatlined over the summer, but did not decline. The decline this month comes nearly two months after Labour’s budget, and may suggest that the economy is simply adjusting to the government’s new fiscal policies.
The government is hoping that its policies around financial services and banking, like the community banking hubs, will help reverse economic issues like today’s decline. Other policies include attracting overseas investment and business activity, pushing for acceleration of Open Banking, responsible use of AI and creating better conditions for financial services.
Rachel Reeves, Chancellor of the Exchequer, commented on today’s economic figures: “We are determined to deliver economic growth as higher growth means increased living standards for everyone, everywhere. This is what our Plan for Change is all about.
“While the figures this month are disappointing, we have put in place policies to deliver long term economic growth. We have put public finances back on a stable footing, capped the rate of corporation tax at the lowest level in the G7, established a £70bn National Wealth Fund to drive growth in our towns and cities, launched a 10 year infrastructure strategy and are creating pension mega funds to boost investment in British businesses, infrastructure and clean energy.”
