Several of the UK’s biggest banks are converting underused parts of their high street branches into office space as an alternative to bringing staff back to larger buildings and high-rise headquarters during the pandemic.
Virgin Money and Metro Bank have already drawn up plans to add new facilities for flexible working in branches. Lloyds Banking Group, which has the UK’s largest branch network, will start testing a similar policy from October.
The moves are part of efforts by banks to adapt to the long-term impact of Covid-19, as it becomes clear that large central offices are unlikely to be able to accommodate the same numbers as they did pre-pandemic for some time.
Although most expect a permanent increase in homeworking, executives are also concerned about providing facilities for staff who struggle to work from home, and for internal and external meetings.
Trade unions are encouraging other banks to follow suit in the hope that making better use of existing space will reduce pressure to close branches. At the same time, some in the property industry are hoping it is the start of a trend and that companies in other sectors will make similar moves.
Mark Dixon, chief executive of IWG, the world’s largest provider of flexible short-term office space, said the pandemic was forcing all large businesses to reconsider the logic of leasing expensive city-centre offices.
Mr Dixon is hopeful that others will copy banks in retaining a central “hub” but letting staff base themselves in satellite “spoke” offices scattered across various locations.
“Hub and spoke will be a major change for the property industry. We were doing it for quite a few companies pre-Covid, but demand is exploding,” he said.
Dan Frumkin, Metro Bank chief executive, said his bank would have to spend “a little bit of money redesigning some of the space so it’s fit for purpose” over the next few months.
In the long term, however, he said spreading employees across its branches would help Metro cut operating costs, reduce its carbon footprint and make it easier for branch staff to move to jobs that would previously have been based at head office.
Metro has more experience than most in using its bank branch space for different functions, having built its headquarters above a central London branch when it opened 10 years ago. However, banks with much older and bigger branch networks are now also changing their approach.
In a message sent to staff earlier this week and seen by the Financial Times, Matt Sinnott, Lloyds’s people and property director, said the bank would test whether “surplus space in branches” could be an effective replacement for staff who previously commuted to one of its main offices.
Some larger buildings would also be “hibernated”, he said, so that Lloyds could “prioritise cleaning and resource in those which need to remain open”.
Virgin Money said it had already added hot-desks and meeting rooms above a small number of branches, and was “working through the details” of doing the same in a number of others.
The number of bank branches in the UK shrank by more than a third between 2015 and 2019, according to figures from the Local Data Company. Many have predicted that the pandemic will lead to further closures as customers stay away from branches and banks try to cut costs. Earlier this week, the Co-Operative Bank said it would shut a quarter of its network by the end of the year.
However, unions are hoping that repurposing some of the near-6,000 remaining branches could reduce the pressure for closures.
Dominic Hook, national officer at Unite, said it was “vital” that banks maintained their presence in high streets.
Mark Brown, general secretary of BTU, which represents staff at Lloyds and TSB, said “the economics of branch closures could change with branches being reconfigured into local satellite sites”.
Banks have an advantage over other businesses considering “hub and spoke” models because they already have the property estate in this form. Other companies could have a harder time finding desk space for a dispersed workforce and are often already tied into lengthy leases.
Despite the optimism of office providers like IWG, some remain sceptical that the trend will last.
Colm Lauder, analyst at Goodbody, said: “Companies tried it in the 1990s, having more of a suburban presence, but attracting younger staff was difficult. Younger, brighter, more mobile staff wanted the urban experience, not the suburban one. That’s a dynamic I think we’ll retain.”
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