A new report from Cass Business School advises that establishing a state-owned UK Post Bank would ensure the long-term sustainability of the Post Office by diversifying its portfolio of activities and increasing revenues.
The report states that a Post Bank would enable other important economic and financial goals by:
– Improving access to finance for Small and Medium Enterprises.
– Advancing financial inclusion by reaching those who do not use banking services or who are likely to be affected by local bank branch closures.
– Rebalancing the UK economy away from London and other major urban centres.
Establishing a Post Bank would also align the Post Office with the successful strategy of other postal operators around the world including Italy’s Poste Italiane and France’s La Banque Postale.
Post Office banking services are currently provided by the Bank of Ireland UK. However, the report recommends that this partnership should end because the Bank of Ireland is still dealing with the aftermath of the financial crisis and is unlikely to invest substantially in the Post Office.
Report author Professor Barbara Casu Lukac, Director of the Centre for Banking Research at Cass, said the partnership with the Bank of Ireland has not delivered the expected and potential results for the Post Office.
She said: “Our analysis suggests the revenues the partnership between the Post Office and the Bank of Ireland has brought in remain significantly lower than post banks around the world and it has not delivered a full range of banking products for Post Office customers.”
“A Post Bank would reach the large groups of people and small firms who do not currently use banking services. It would also reach customers who are affected by the massive branch closure programmes operated by banks, often in rural areas.”
“We estimate that the initial equity should be in the region of £2 billion – the same amount the government has put into the Post Office in the past seven years. The profits this would bring in would eliminate the need for an ongoing annual subsidy for the Post Office, putting it on a sustainable footing for the future. The current macroeconomic conditions are also ideal to raise the initial capital, due to the low interest rates environment.”