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By Dan Ilett, 27 February 2006 08:15

NEWS

Bank branch closures, resulting from the rise of internet and phone banking, are hitting small businesses and poor customers hardest, according to researchers.

The use of new distribution channels, and services available at Post Offices, have led to branches being closed, a study by the University of Nottingham and the Economic and Social Research Council found.

Professor Andrew Leyshon of the University of Nottingham said there was a net closure of nearly 3,000 bank and building society branches between 1995 and 2003.

But these closures are unevenly distributed, with branch networks "increasingly located in Middle England, in suburban areas and small towns", he said in a statement.

The study found that overall, between 1995 and 2003, the average rate of bank closures was 20 per cent.

The highest rate of closure - almost 24 per cent in that period - was in 'multicultural metropolitan areas', which included poor inner city areas.

Leyshon warned these closures could cause big problems for some customers.

He said: "The closure of branches in many areas creates a severe problem for many customers, particularly for those lower-income consumers who tend to be heavier users of branches and for small businesses who rely on branches for their cash transmission services."

Around half of a bank's customers will visit the branch at least once per month, and some banks are also investing heavily in new technology for their remaining branches.

A report from analyst house Forrester last year said banks are currently restructuring their approach to customer service. The report suggested that while banks are investing heavily in IT to support new banking methods - set to hit €100bn by 2010 - they should put more effort into customer service.