Is digitisation closing branches?

On the cusp of the next UK general election, a multitude of issues are being highlighted.

One currently neglected is the workers, particularly in the finance sector. Patrick Brusnahan speaks to Rob MacGregor from UNITE to see if the upcoming election is set to bring change or business as usual

UNITE’s finance division is in the middle of a difficult time. Membership in the financial sector is, according to Rob MacGregor, national officer at UNITE, ‘never going to set the world on fire’ and branch closures are becoming more frequent.

However, with the general election coming up, is there any hope that the situation could improve?

When speaking to RBI, MacGregor said: “No, I don’t get any sense that there’s going to be any material change. None of the main political parties have articulated the kind of radical manifesto we would look for to change the face of retail finance in this country.

“This is still a huge cultural issue within the industry to overcome and there’s a structural issue as well, but I don’t get any sense that any of the political parties actually have a sufficient grasp on what needs to be done or are prepared to be bold enough to actually take on the vested interests of corporate finance in the country.”

This might seem surprising considering that employment has been particularly highlighted in this year’s election campaigns. This is mainly due to the divisive issue of zero-hour contracts and the lack of available apprenticeships.

On whether these issues affect the retail finance sector, MacGregor said: “No, not really. There are some agency and contract labour issues, but by large, that’s not a particular issue in employment terms for finance workers.

“The general issue is if you look at the scale of digitisation in UK finance, the rapid advances of mobile applications and internet banking; what is the industry’s reaction to the technological revolution that is taking over the delivery of financial services in this country?

“We’ve seen a massive reduction in the number of physical counter transactions that take place in branches. The number of people who physically visit a bank branch is in decline. What is going to be the future of retail banking in this country and what will be the future of retail banking in this country and what will be the impact on general levels of employment?”

MacGregor believes the changes will come from the banks themselves, not due to any government intervention, and maybe not for the better.

He said: “With technological changes affecting retail finance, and we will see thousands of jobs go, what alternative employment strategies are there going to be in place for the next generation of workers? We’re not going to open up mines or new shipyards again to replace these jobs.

“There will be further consolidation and contraction in jobs. Again, what are the alternative strategies that political parties, indeed businesses, are likely to put forward to mitigate the consequences? At the moment, there are very few.”

While it seems that the situation is bleak, there are some bright prospects in the form of challenger banks.

MacGregor added: “Some of the challenger banks coming into the market (TSB, Virgin Money, METRO Bank) show some signs of optimism. However, it’s a question of scale as much as anything else. These are relatively small players. I mean, they’re doing well, but compared to the behemoths of Lloyds or Barclays, they’re still very small players.”

A very encouraging sign is Sabadell’s, Spain’s fifth-biggest bank, £1.7bn ($2.49bn) takeover of TSB. This is a move which might give a challenger bank some decent scale. Chairman of Sabadell, Josep Oliu Creus, said: “We think TSB has enormous potential for the UK market and we can help them execute… growth plans with much more success than on their own.”

On this development, MacGregor noted: “Obviously, Sabadell is a much larger organisation than TSB, so it may be able to provide the economies of scale that a challenger bank like TSB needs.

“The interesting thing will be what Sabadell’s plans are for the future. There will be a period of time where very little will change, but will it seek to use TSB as establishing a foothold in the British market and then undergo a process of expansion? As with all these things, we’ll judge not by what they say in terms of jobs and the like. So far, the signs have been positive.”

MacGregor concluded: “Most of the banks, like most of commerce in general, are looking very closely at the outcome of the general election. Like many of us, they have no idea how it’s going to pan out in reality.

“I think we may see further changes within the industry post-election. After all, this might not be the only election we have this year.”