Although bank branches are closing at an alarming rate in the UK, entrepreneurialism remains at a healthy level, according to new research by investment firm Lightyear.
Between 2016 and 2024, around 3,700 bank branches, an average of eight a week, closed across England, Lightyear has found. However, despite concerns that these closures would lead to reduced support for individuals and businesses alike, over two million businesses were created between 2018 and 2023.
These findings suggest that many new businesses are turning to alternative banking or savings channels. In fact, Lightyear suggests that digital-first, flexible financial management options for businesses may win over high street banks more than physical options.
Analysis of data on the closure of banks found that England is home to 41 ‘banking deserts’– local authorities that have seen at least one bank closure per 10,000 residents since 2016. These areas, many of which have still seen business growth, may be being served by the growing trend towards digital-first financial services.
Digital-only providers prevail
Westminster, in London, tops the list with 80 closures across the borough in the last nine years – 3.5 closures for every 10,000 residents. The less populous Westmorland and Furness saw 2.5 closures for every 10,000, while Derbyshire Dales residents saw two closures by the same metric.
Similarly, Camden, which qualifies as a ‘banking desert’ thanks to forty bank closures or 1.9 for each 10,000 residents, saw 1,267 new businesses in the last eight years.
Despite this, more new enterprises were founded between 2017 and 2023 (two million) than businesses deaths that occured (1.2 million in the same period).
According to RFI Global, nearly two in five UK SMEs now use digital-only banking providers, suggesting a broader trend of businesses turning to digital providers over high-street traditionalist channels to manage their money. With a potential market for business savings at £550billion, digital-first, flexible financial management options for SMEs may win over.
“That nearly two million new businesses have launched in England over the past nine years is a powerful reminder that entrepreneurial spirit is alive and thriving,” said Wander Rutgers, UK CEO of Lightyear. “But it’s also telling that this surge has come alongside the mass closure of high street bank branches. The traditional banking system is struggling to keep pace with the speed, flexibility, and digital-first mindset that today’s businesses need. Entrepreneurs are voting with their feet, and their funds, by turning to alternative platforms and products, like Money Market Funds, that are built for the way modern businesses need to save their money.”
