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Press release: Cash vital for local growth, councils say

Author: Dominic Leigh   |  

Press release: Cash vital for local growth, councils say

A report published today by the think-tank Localis has found that cash is vital for local economic growth, with local economies likely to suffer if access to cash is restricted.

The report includes a survey of over 100 key local government stakeholders, including chief executives, leaders, finance-related cabinet members and chief finance officers, which reveals that:

  • Four in five (80 percent) respondents said that cash was important or very important to the economic vitality of their local area.
  • Three quarters of respondents said that local economic growth would suffer if access to cash was reduced in their area.
  • Over a quarter of respondents said that local businesses had raised concerns with them about lack of access to cash.

Cash is particularly important for older people and those from disadvantaged backgrounds who rely disproportionately on it as a form of payment, the report finds.

While the total value of cash payments is likely to remain stable at around £250 billion per annum over the next decade, the report highlights a number of challenges that could mean access to cash is threatened in the future. These include the adoption of new payment methods, online banking and shopping and the closure of bank branches.

In light of the threats to cash, the report recommends that policymakers consider the following options if cash accessibility becomes a bigger problem in the future:

  • The Bank of England could encourage banks to work with relevant local partners to leave a “cash availability legacy” when they close a branch, in the form of a subsidised ATM, support for the maintenance of banking services in community or private sector premises, or the roll out of more ‘Smart ATMs’ that allow people to access other banking services.
  • The Government could provide financial support, for example using receipts from the existing bank levy, to support the work that independent ATM operators are already doing to install free-to-use cash points in remote and deprived areas.
  • Local authorities are given the power to use a one-off levy on the biggest out of town retailers (so-called ‘Tesco tax’) to generate money to invest in high street infrastructure, which could fund the installation of ATMs to support access to cash.
  • Councils work with the ATM industry to assess how community hubs, such as leisure centres, libraries, town halls and one-stop shops, could be used as locations for ATMs, if there is sufficient footfall to make this commercially viable.

Launching the report, Alex Thomson, chief executive of Localis said:
“Our research shows that cash is vital for local economies and communities, particularly for people from disadvantaged backgrounds who rely disproportionately upon cash. It is crucial that we keep a close eye on access to cash to ensure that it does not decrease, and if it does, consider the policy options available to help support the availability of cash.”

Ron Delnevo, Executive Director Europe, ATM Industry Association (ATMIA) said:

“As this report makes clear, cash will continue to play an important role in the lives of millions of UK citizens for the foreseeable future. Cash therefore needs to be available conveniently and securely, 24/7. To achieve this, we need to see more truly “Smart” ATMs, which enable people to access 99 percent of services currently available at bank branches, including depositing and withdrawing cash. In so doing, they could in time become the single most important financial services touchpoint for millions of citizens and tens of thousands of businesses in the UK.”

ENDS

Press enquiries:

Dominic Leigh (Researcher)

020 7340 2660 (office) | dominic.leigh@localis.org.uk

Notes to Editors:

  1. The report, Is cash king? Examining the importance of cash for local economies and communities, has been sponsored by Cardtronics UK, the largest independent cash machine provider in the United Kingdom.
  1. The full findings of the report are as follows:
  • Our survey of 107 local government stakeholders – of which more than a half were Chief Executives, Leaders and Deputy Leaders – points to the value of cash for local businesses and communities:
    • 80 percent of respondents said that cash was important or very important to the economic vitality of their local area.
    • A third (35 percent) said that the reduction in the number of high street bank branches has created cash accessibility problems locally.
    • Over a quarter of respondents (28 percent) said that local businesses had raised concerns about lack of access to cash with them.
    • Such concerns were linked to the closure of bank branches in 85 percent of cases; high transaction costs for non-cash payments and the pressure to offer more non-cash payment methods in a half of cases (48 percent each) and a reduction in the number of ATMs in a third (33 percent).
    • Three quarters of respondents (77 percent) said that local economic growth would suffer if access to cash was reduced in their area.
  • These findings underline the continued importance of cash, which is still used for the majority of retail payments (52 percent) with a half of retailers (52 percent) relying heavily on cash payments.
  • There is also significant demand for cash from the 1.6 million people in the UK who, according to the Payments Council, rely disproportionately on cash. This includes over a million people (1.13 million) who are unbanked and tend to come from disadvantaged backgrounds, as well as older people. Many of these people find it easier to budget using cash than with other payment methods.
  • A range of new technologies pose a threat to the ability of businesses and people to access cash, such as contactless cards and the increasing use of online banking and shopping.
  • With the growth of online banking, the rate of brank branch closures reached 650 – a dozen per week – in 2015, particularly hitting rural communities, with historic towns such as Glastonbury left without a single branch.
  • Taking trends towards new forms of payment into account, the Payments Council projects that the total volume of cash payments in the UK will fall by a quarter from 18 billion in 2015 to 13 billion in 2023.
  • However, the value of cash payments is expected to remain stable, only decreasing by 5 percent from £257 billion in 2015 to £245 billion in 2024.
  • These statistics tally with evidence from the Bank of England, which suggested that demand for cash is likely to remain substantial for the foreseeable future and the absolute amount of cash used for transactions is likely to remain resilient.
  • Despite this optimistic assessment, things can change swiftly. For example, the value of cash in circulation having declined by 17 percent from 2010-2014 in Sweden as it moved towards becoming a ‘cashless’ society.
  1. The full recommendations made in the report for supporting the availability of cash, if it is threatened in the future, are as follows:
  • The Bank of England could work with high-street banks, the ATM industry and local communities to encourage banks to leave a cash availability ‘legacy’ when they close a branch, in the form of a subsidised ATM, support for the maintenance of banking services in community or private sector premises or the roll out of more ‘Smart ATMs’ that allow people to withdraw and deposit cash and access other banking services.
  • The Government could provide financial support, for example using receipts from the existing bank levy, to support the work that the ATM industry is already doing (e.g. through LINK’s financial inclusion scheme) to ensure that a sufficient number of free-to-use cash points are installed in remote and deprived areas across the UK.
  • Local authorities could be given the power to use a one-off levy on the biggest out of town retailers (so-called ‘Tesco tax’) to generate money to invest in high street infrastructure. If councils were to take up this option, they could choose to spend some of this additional revenue for investing in the provision of ATMs – either directly or through granting them discretionary business rate reliefs – if the number of ATMs declines significantly.
  • Local councils and Local Enterprise Partnerships (and other interested bodies such as BIDs) should consider the availability of other sources of cash, including ATMs, in their economic strategies to ensure that they are supporting those retailers/street markets that continue to rely on cash.
  • Councils could work with the ATM industry to assess whether community hubs, such as leisure centres, libraries, town halls and one-stop shops might be used as locations for ATMs. It is likely that in the coming years local authorities and other parts of the local public sector will increasingly look to co-locate services in community hubs. Such hubs, will therefore have a high number of visitors, so potentially providing the footfall necessary to ensure that an ATM achieves a sufficient number of transactions to be commercially viable.
  • Using council facilities as places where people can be guided through the process of making electronic payments and acting as venues in which such payments can take place, while also providing information about the importance of budgeting and the particular role that cash can play in helping people to manage their personal finances.
  • The Government should work with the payments industry and mobile phone companies to expand the use of entry-level mobile banking and payments for those without access to bank accounts.