Branching out: why banks are back on the British high street | Banks and building societies

On a cool Friday morning in early December, Abington Street in Northampton is starting to come alive. Despite losing high street staples such as Marks & Spencer, Moss Bros and H&M in recent years, it still attracts locals for one weekend gig: banking.

Along the pedestrianized road, customers weave in and out of building societies HSBC, Barclays, Metro Bank and Nationwide. But it’s a rare case that defies a wider trend: more than 6,000 bank branches have closed in the UK since 2015 as bosses try to cut costs and push millions of customers to online services.

But relief for customers may be at hand, with banks now pausing closures and opening new locations in what appears to be a mini-renaissance for brick-and-mortar branches.

HSBC UK has promised to keep all of its remaining 327 branches open until at least 2027, while Barclays, one of the most aggressive in closing branches, has extended the opening hours of 87 of its nearly 200 branches.

Challenger banks also oppose the trend of closure. Among the smaller lenders, Metro Bank is opening three new locations in Gateshead, Chester and Salford, while Newcastle Building Society is using World War II to open a new branch in Newcastle city centre. He poured millions of pounds into a grade-listed building.

“It’s interesting that business decisions are starting to change,” Nikhil Rathi, chief executive of the Financial Conduct Authority, told MPs this month. “You’re starting to see more and more of the big financial institutions actually trying to make a virtue of the fact that they’re going to keep their branches open for a certain period of time, and that’s a shift.”

Nationwide has made one of the biggest commitments, promising to keep 696 branches open until at least 2030. The news came as a relief to Jatish and Sudha Shah, a couple in their 70s who had been worried their local Virgin Money branch in Northampton would be under threat after Nationwide bought the rival bank for £2.9bn in 2024.

Jatish, who is hard of hearing, often needs a private space to discuss his accounts. He visits the Virgin branch, just 300 meters from a Nationwide site, every few months to check the couple’s ISAs.

“I know we can do this online, and I’m quite capable, but I prefer to talk face to face,” he said. He added that if the branch had closed, the couple would have considered switching to another bank.

But overall, the decision to keep branches open does not reflect a reversal in customer behavior. According to KPMG research, the move to digital banking has led to an overall decline in the number of branch visits. The research found that a fifth of UK customers have not visited a branch in the last two years.

But banks see the benefit of connecting with customers in person, albeit over a much smaller and cheaper network. “There’s a sweet spot where you try to drive as many customers to digital channels as possible, but it’s still constructive to have physical locations,” said John Cronin, president of research and analytics firm SeaPoint Insights.

Part of the shift is about serving older and less technologically skilled account holders, but it’s also helping banks compete for small- and medium-sized business customers who need advice or help with paperwork.

This trend is also attracting digital natives, younger generations who have long had access to online-only services such as Monzo, Starling and JP Morgan’s Chase brand. Last year, 18 to 24-year-olds visited more bank branches than people over 65, with younger customers representing 72% of customer visits.

“The misconception is that younger customers only care about digital banking,” said Peter Rothwell, KPMG UK partner and head of banking. “While they appreciate excellent execution, most still value having a local branch, whether it’s for cashing in from a side hustle or a birthday gift.

“At the same time, older customers who expect not only convenience but also competitive prices and attentive service from their traditional banks continue to be some of the most loyal and financially important customers.

“To succeed, banks need to deliver on both fronts and deliver digital innovation without losing sight of the personal touch that is important for every generation.”

On Abington Street, many of the customers who flocked to Nationwide Friday morning were looking to withdraw money only from indoor cash machines. But some, like 73-year-old Diana Yates, who set out to cash in on their bond investments, had bigger fish to fry.

“I have online banking. However, due to my age and because I live alone, I do not trust that I can do things with large amounts of money on my own. He sits next to me and asks, ‘Is this possible?’ I have no one to say. “They will do everything with me in the branch.”

Gary Greenwood, a banking analyst at Shore Capital, said most banks are trying to become “recommendation centers rather than day-to-day operations.” This meant providing more advice and support on life events, such as taking out investments and a mortgage, or obtaining power of attorney in cases where a loved one could no longer manage their own finances.

This is where the banking centers are – It is insufficient for lenders to share a single location to compensate for local branch closures. Many centers only offer basic procedures and lack the personal touch, so many remain underutilized. KPMG said 72 per cent of individuals in the UK have never visited a banking centre.

Threats such as online fraud and digital service disruptions also make branches look more attractive. Although they are often connected to the same systems as the online service, knowing that issues can be discussed with their dedicated staff in a physical branch can provide a sense of security.

Greenwood predicts that over time, especially as older generations pass, branches will become more focused on narrow support functions. “Daily transactions will be handled through self-service terminals, and staff will focus on providing value-added advice and solving more complex problems,” he said.

Despite fears about the technology, Cronin believes AI can be a boon for branches, too. Bank bosses hope it will replace many manual processes in back offices and potentially increase the scope for face-to-face communication.

“That’s where the efficiency focus is,” Cronin said. “There were branches 10 years ago and they have largely ceased to exist. Maybe a new wave of branch closures may come.” [coming] in a few years [though]. “I think this is how it will play out: this is a pause rather than an end state.”