Barclays clinches Post Office deal

Barclays faces storm of protest over branch closures

UK banking giant Barclays has announced details of a deal allowing customers to pay in cash and cheques and withdraw money from local post offices.

This country is littered with the carcasses of businesses that have failed to move with the times.

John Varley, Barclays

Britain's second-biggest bank has been under pressure to justify its decision to close 171 branches, with the loss of 7,500 jobs.

The closures come at a time when Barclays has made record profits of £2.5bn and is offering top executives big pay rises and share options said to be worth up to 20-times salary.

The bank says the new deal will mean that 155 of the 171 areas affected will have the post office banking service within the next three weeks.

On the day that up to 40,000 people are estimated to be losing their branch service, Barclays hopes the deal will allay the storm of protests around the country.

Notice in bank window

John Varley, director of retail banking, told BBC News Online that Barclays would be extending the post office service across England and Wales as soon as possible, probably in the summer.

He said it would go some way to overcoming the effects of transferring banking resources into online and telephone services.

He also said he believed it would help to maintain post offices in many areas where they might otherwise disappear over the next few years.

Bitter opposition

Critics have said the post office service is no substitute for full banking facilities.

Derek French, director of the campaign for community banking, said the service would not be available to voluntary organisations or businesses.

Many customers have signed petitions against the closures

Environment Minister Chris Mullin said Barclays customers should "vote with their feet" and Conservative leader William Hague said the closures were "outrageous".

Liberal Democrat leader Charles Kennedy said: "This is going down like a lead balloon in many parts of the country, particularly when people see juxtaposition of this alongside the rather megalomaniac scale of salary increases awarded to top executives."

But Mr Varley emphasised that he believed there was no alternative for the bank but to transfer resources, especially as less than 40% of customers used its branch network.

He said the whole industry had been aware of the need to restructure for some years and that Barclays had in fact been slower than its competitors.

It is just the same as in football - if you want the best people you have to pay for them.

John Varley, Barclays

"This country is littered with the carcasses of businesses that have failed to move with the times," he said.

"Look at NatWest, our biggest competitor - taken over. Look at Rover - going out of business.

"It is in the interest of Barclays, it is in the interests of Barclays' customers and its employees to be successful. If we are profitable, that is a good thing, not a bad thing."

He said Barclays would still have 1,700 branches and a nationwide presence, and that in most areas hit by closures there was another branch within three miles.

Pay-back

Barclays has also been fiercely criticised for giving its top bosses huge pay rises at the same time as trimming back its branch network.

The chairman, Sir Peter Middleton, had a salary increase from £408,000 in 1998 to £1.76m last year. The new chief executive, Matthew Barrett - who joined in October - was paid £1.3m for three months' work.

There are also reports of share options for top executives worth up to 20-times salary.

Mr Varley refused to confirm the figures but said competition in the industry was "white hot and unremitting", and that it was right to give staff incentives.

"It is just the same as in football - if you want the best people you have to pay for them," he said.

More of the same

The changing trends in how people use banking services means that many more branches are expected to close over the next few years.

Deloitte Consulting predicts a 30% reduction within five years.

The post office arrangement is unlikely to pacify those most bitterly opposed to the closures.

But it is expected to be seen as a way of retaining a presence in rural areas. Lloyds TSB and the Co-operative Bank already have similar deals in operation.