Preston City Council agrees to invest in new community bank but scheme branded ‘vanity project’ by opponents

Preston City Council has agreed to purchase £250,000 worth of shares in a new community bank, the Local Democracy Reporting Service (LDRS) can reveal.

It comes as the North West Mutual announced where it plans to open its first branches in Lancashire.

The city council has had £1m earmarked to invest in the launch of the venture for the past six years – but this is the first time it has stumped up hard cash to support the project.

The authority’s leadership says it wants to provide residents with an alternative to large-scale banks, but opposition politicians have condemned the commitment of taxpayers’ money to the project with, they say, no guarantee of getting it back.

The North West Mutual concept revolves around creating an “ethical” customer-owned bank that provides accounts, loans and other services only to individuals and businesses based in the region it will serve – the North West of England. The aim is to strengthen the local economy by “recycling” an estimated £900m of money within it – rather than allowing the cash to leak out to other parts of the country.

The organisation is planning to apply for a banking licence later this year and wants to open its first branches by the end of 2026, with a full rollout planned by spring 2027.

The bank is promising to offer what it describes as a “bricks, clicks and flicks” model – combining traditional high-street outlets with online banking – and it has now revealed the scale of its proposed branch network.

Sixteen fully-staffed banks are proposed for Lancashire – in Preston, Chorley, Leyland, Skelmersdale, Garstang, Lytham St Annes, Fleetwood, Blackpool, Lancaster, Morecambe, Clitheroe, Blackburn, Burnley, Accrington, Rawtenstall and Nelson.

They are amongst more than 60 possible bases being eyed across the region, along with a head office at a yet-to-be-disclosed location, which it is intended will open this summer.

North West Mutual chief executive Dave Burke said of the branch plans: “Our aim is to provide access to as many people and businesses in the North West as possible, with 95 percent of residents and small and medium-sized businesses within a 30-minute drive to a branch.

“Whilst we have specific locations in mind to achieve this, we also want to listen to the people and businesses of the region and welcome thoughts and suggestions on branch locations.”

Labour-run Preston City Council’s decision to buy shares in the North West Mutual was taken during a behind-closed-doors meeting of members late last month. The move was opposed by the Liberal Democrat and Conservative groups, who have long criticised the authority’s planned involvement in the scheme.

As the LDRS has previously revealed, the only other two councils to have publicly pledged their support for the bank – Liverpool City Council and Wirral Council – have since walked away from the idea. The North West Mutual said last month it was “in discussions with a number of local authorities and other potential investors”.

Speaking to the LDRS about Preston’s ongoing commitment to the bank, council leader Matthew Brown said he was “delighted” to hear of plans for a branch in the city.

“For far too long, much of our mainstream banking system has failed to serve our communities and local businesses.

“Across the North West region, more than half of our branches have disappeared in the last 10 years and small businesses especially struggle to secure the finance needed to expand.

“At Preston City Council, we want to do something about that by directly investing in the North West Mutual as a viable cooperative and ethical alternative.

“Market research shows the public would welcome this new model of banking owned by – and run in the interests of – local people,” Cllr Brown said.

However, Liberal Democrat opposition group leader John Potter branded the bank “an ideological vanity project by Preston Labour”.

“Instead of spending £250k of council tax money locally for our benefit, they want to use it to create a risky new bank which will charge customers £60 per year to use it (see more below).

“Once the £250k seed funding is in the bank, we can’t get it back and we don’t have any voting rights on how it is used. There are plenty of credit unions and building societies which are free to use instead, so why would anyone switch to this?

“Preston Labour should be pushing for banking hubs [new facilities that provide in-person banking services to customers of all banks] in areas like Fulwood which have just lost their last bank – not wasting taxpayers’ cash,” Cllr Potter added.

Meanwhile, Conservative group leader Stephen Thompson warned the authority was playing a high-stakes game.

“My concern is that Preston City Council are gambling with taxpayers’ money that the proposed bank will come into being. [It is] one thing to back the idea, it’s another…to put up money with no guarantees of a return – a risk I would not take with taxpayers’ money,” Cllr Thompson added.

The share purchase was approved by 22 votes to 17.

When Preston first offered its support to a North West community bank in 2019, it was estimated a total of £20m would be needed in total to bring it into being.

Last month, before the £250k share investment now agreed by the town hall, the North West Mutual said around £1m had been invested in preparing the banking licence application, along with developing the systems and financial model for the new bank and analysing its potential market.

Mutually beneficial?

Responding to the Liberal Democrat claim that customers of the new North West Mutual would be charged £60 a year for their accounts, chief executive Dave Burke said no final decisions had yet been taken about “product pricing”, which would be subject to detailed customer research. However, he acknowledged that “a small monthly fee for a personal current account is being considered – and £5 per month [or] £60 a year is the current working assumption”.

But Mr. Burke said the benefits of banking with the North West Mutual also had to be factored in – and stressed many customers would still end up better off.

“We respect that people have a choice about which bank they have their current account with and recognise that not all people would want to pay.

“Our research shows that almost 40 percent of personal current account (PCA) customers in the North West have a monthly or annual fee for their existing PCA [Financial Lives Survey 2020] and just over 40 percent would pay for one, ranging from £5 to £20. So there’s a precedent for paying and an appetite to pay within the customer base of the region.

“People want there to be a positive reason for paying a fee. We believe we have several. We will open 60-plus branches at a time when branches continue to be closed. Importantly, these branches will also have more convenient opening hours and won’t be restricted to the times when a significant majority of people are at work and struggle to access them.

“In addition, we will be paying interest on all positive current account balances, at a higher rate than the majority of high street banks. Our mutual status also makes a positive difference here, in that all customers will be members and benefit from sharing in the profit of the bank. As an example, a PCA customer with an average balance of £1,000 could expect an annual surplus…of £35 [based on earning £20 in annual interest and a £75 annual profit share, minus the £60 account charge].

“In short, there is evidence of enough people already paying for their PCA and being willing to do so. Plus, we believe the branch network, its extended availability and the returns from interest and profit sharing make this a very attractive and realistic proposition.”

Where else might the bank be opening?

In addition to the 16 proposed branches in Lancashire, these are the other possible locations for the North West Mutual:

Cumbria – Barrow-in-Furness, Carlisle, Kendal, Keswick, Penrith and Whitehaven.

Greater Manchester – Altrincham, Ashton-under-Lyne, Bolton, Bury, Droylsden, Eccles, Hyde, Harpurhey, Hyde, Leigh, Longsight, Manchester, Manchester Victoria, Oldham, Rochdale, Sale, Salford, Stockport, Stretford, Urmston, Wigan and Wythenshawe.

Liverpool and Merseyside – Bebington, Birkenhead, Bootle, Crosby, Formby, Huyton, Kirkby, Knowsley, Liverpool, Prescot, Speke and St Helens.

Cheshire – Chester, Crewe, Ellesmere Port, Knutsford, Macclesfield, Northwich, Runcorn, Warrington, Widnes and Winsford.

Banking by numbers

7.4 million – people in the North West Mutual Bank’s regional target market

494,000 – small and medium-sized enterprises (SMEs) in the region, employing more than 1.65 million people

£239bn – business turnover by North West SMEs in 2024

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