1 short-term loan provider for every 7 banks on high street

The UK's high streets now contain one short-term loan company for every seven banks and building societies.

A study by the Bureau of Investigative Journalism found the main lenders in the market have 1,427 stores across England, Scotland and Wales. This is compared to a University of Nottingham study, which showed traditional financial institutions had 10,348 branches in these countries.

For the first time, the study mapped the locations of all short-term loan outlets managed by the biggest companies in the UK. Previous methods of compiling this data had relied on local surveys.  

The bureau measured the number of stores per 100,000 residents throughout the nation. It claimed the results showed a disproportionate balance of short-term loan companies in areas considered to be the most deprived.

However, it can be said that these businesses are merely responding to demand levels, just like any other firm would. In order to achieve success, companies must recognise available opportunities and create a service that will satisfy the needs of their customers.

Indeed, the Consumer Finance Association, the trade body representing the majority of payday loan providers, stated it would be incorrect to accuse them of targeting the poorest parts of the country. In a statement, it pointed out members had stores spread throughout the UK, which have a broad cross-section of residents. It also outlined a number of factors lenders had to consider when opening new branches, such as rate and rent costs, high street prominence and the level of competition from other stores.

According to the study, Lewisham in south-east London contains the highest proportion of short-term lenders. Results showed the area had 7.6 stores for every 100,000 residents. The borough has been ranked as the 16th most deprived local authority in the country by the Department for Communities and Local Government (DCLG). 

Meanwhile, the towns of Harlow in Essex and Halton on the Mersey were named second and third on the list, with an average of 7.3 and 7.2 outlets respectively. Halton came in at number 32 in the rankings of the most poor locations in the UK.

It could be argued, however, if payday lenders were deliberately targeting the most impoverished areas in the country, there would be more correlation between the concentration of stores and the DCLG's statistics. Indeed, the Guardian reported a new branch has just been opened in the affluent north London suburb of Muswell Hill, showing the businesses are expanding in all parts of the nation.

The popularity of short-term providers has increased dramatically since the financial crisis. Figures showed online and high street stores lent around £2 billion to one million borrowers during 2012. Meanwhile, the Competition Commission found internet-based companies were responsible for 80 per cent of loans.

In contrast, banks and building societies have been slowly reducing the number of branches. Barclays, for example, recently announced plans to close up to 400 stores across the country. 

By Joe White