No longer a job to bank on: The drastic pruning of high street branches has a long way to go, says Lisa Vaughan

NOT SO long ago, a job with a British bank was a job for life. No longer. The British banking industry is undergoing a revolution in which droves of staff, from top management to clerks, are losing or leaving their jobs.

Bifu, the Banking, Insurance and Finance Union, estimates that 70,000 banking jobs have been lost in the UK since 1990 and believes another 25,000 are at risk. It is all part of a restructuring more far- reaching than the job shedding caused by recession in other industries. It began before the slump and may continue well beyond it.

The banks are going about it in a big way. Royal Bank of Scotland has announced a five-year reorganisation, Project Columbus, which will cut 3,500 jobs by 1997 and aims to save pounds 200m a year. It involves specialised branches, staff retraining, branch selling, and automation. TSB, scene of last week's strike, recently integrated its insurance and banking salesforces, shedding about 800 jobs.

At the heart of the redundancies is technology, a bandwagon on to which banks scrambled in the belief that they had to change and compete or die. Noel Howell, of Bifu, says: 'What we're seeing is the cumulative effect of a decade of billions of pounds worth of investment in technology. The recession has made it worse by the mega-lending blunders by all banks.'

Technology means fewer branches, fewer people. Hundreds of high street branches are closing annually, more than ever before. Of the 2,000 that closed their doors in the past decade, more than half have gone since 1990. None the less, there is widespread agreement in the industry that Britain is still overbanked with 18,000 bank and building society branches, each serving an average 3,000 people. Sir Nicholas Goodison, TSB chairman, says there will be further rationalisation. 'There are just more banks and building societies than the market needs.' The interiors of those branches that remain open are undergoing radical change - another catalyst for job losses. From resembling cheque-processing centres with a small amount of space in front for queuing customers, branches are now being fashioned as sales outlets with self-service facilities such as automated teller machines (ATMs). In some branches, the clerk's traditional roles of paying cash, taking deposits and giving account balances can all be done without human contact.

In the back-office, staff numbers are also shrinking because advanced computers at regional centres have reduced the paperwork they used to do.

It may be difficult for employees made redundant to accept, but the changes in the outdated British banking system are overdue. Robert Law, an analyst with Lehman Brothers, says the 1980s boom encouraged banks to spend too much. Costs spiralled out of control and staff expanded as banks raced for lending business amid intense competition.

'The shakeout you're seeing in the banking sector is long overdue and probably healthy,' Mr Law says. 'I don't think that banking service will suffer unduly, though banks will be pushing customers to use more efficient ways of banking like ATMs to cut costs.'

All the banks and many building societies are following the same strategy: cut costs by increasing automation and reducing staff, increase income from fees and commissions, and sell products through the branches.

There is also the school of thought that questions the need for any branches. Midland's 24- hour telephone bank, Firstdirect is attracting more than 10,000 new accounts monthly in its fourth year. Most rivals are also seriously exploring direct banking.

TSB hopes to launch two pilot telephone banking schemes by February. In the Newcastle area, it is adding 24-hour telephone banking to its large branch network. In Watford, where it has few branches, the bank will offer 24- hour phone banking and remote ATMs to see how customers cope without branches.

John Ginarlis of PA Consulting, which has advised banks on restructuring, believes banks can make huge cost savings with telephone banking. He says customers will accept it as they did ATMs and debit cards if it is more convenient.

Banks claim all this change will lead to better service. But considering how unpopular they have become, the banks must be careful that in modernising they do not alienate clients further. For business customers, and personal customers in rural areas, closing branches could pose a big disruption and make them switch to another bank.

Hugh Pye of Robert Fleming says it is a mistake to close too many branches as far as corporate customers are concerned. A study by Fleming found that the quality of corporate customer deteriorated with the distance from the branch, because good customers defect to another bank where they can drop in and get personal attention.

The banking union is also concerned that staff are being let go too suddenly and some banks are managing the job losses poorly.

Recruitment has dried up, affecting school leavers' prospects. Managers are having to juggle several branches, and service can suffer.

Banks say they will manage the change. 'Where customers are touched by the changes . . . is a crunch issue,' says Cameron McPhail of Royal Bank of Scotland. 'It could influence the way our customers feel about us.'

(Photograph omitted)