Earlier this month, Royal Bank of Scotland chief executive Ross McEwan came in for considerable criticism from politicians for the institution’s planned closure of some of its branch network.

Of course, the issue of bank branch closures is not a new phenomenon. In 1988 there were more than 20,000 branches and this figure had more than halved to around 8000 in 2017. Extrapolating these trends forward, some industry analysts estimate this figures could fall by a further 50% during the next ten years.

The reasons for branch closures are now well versed: factors such as technological change, changing consumer behaviour, bank consolidation and increased competition are all thought to create less demand for local branches. Trends intensified by the global financial crisis.

Much of the debate about the impact of this process has been framed with reference to the potential impact on consumers and personal users of personal banking services, especially with reference to the impact on financial exclusion. It appears that bank closures are occurring most frequently in poorer and more rural areas, potentially depriving parts of the population access to local banking services.

However, there is a growing body of academic evidence to suggest that the hardest hit group of customers is the critically important group of small and medium-sized enterprises (SMEs) who rely heavily on local bank branches. SMEs are crucial for the economy as they constitute 99% of all firms in the UK and generate 60% of new jobs.

Researchers at the Centre for Responsible Banking and Finance at the University of St Andrews have been intensively investigating issues surrounding SME finance for the last five years and this research suggests further branch closures could have serious negative ramifications for SMEs located in certain areas, especially peripheral and rural areas locations most affected by bank branch closures.

So what does this evidence tell us? Our econometric analysis shows that SMEs located in more peripheral regions in the UK, such as the Highlands, Borders and Dumfries and Galloway, face the greatest problems accessing finance. Given the geography of Scotland, it features a disproportionately large number of areas which are deemed peripheral according to the EU classification system we adopted for this work.

A notable finding from our work is that the firms most affected in these peripheral locations are innovative SMEs. In other words, firms deemed most important from a productivity perspective are the most affected by credit constraints in these areas. A worrying finding from our work is that firms in these areas are more likely to access expedient and expensive forms of finance such as credit cards to alleviate funding gaps.

In another study we found that SMEs located in areas with the least dense levels of bank branches faced the most acute problems accessing finance. The level of bank diversity proxied by the number of major banks didn’t affect access to finance. This suggests bank geography not levels of competition matter the most to enable SMEs access to finance.

What our work strongly suggests is that SMEs incur “liability of distance” effects and the more distant a small firm is from a bank branch the more likely they are to encounter credit constraints and this disproportionately impacts innovative firms. Furthermore, some other evidence suggests that when a bank branch disappears lending can fall by as much a 63% in the affected postcode location.

Overall, there seems to be strong empirical grounds for politicians to question bank branch closures on the grounds of restrictions on funding access for SMEs. Given the RBS is effectively a state-owned bank it seems entirely legitimate to question their aggressive branch closure programme. Of course, other high street banks are equally at fault of bank closures and also need to be properly monitored and assessed.

The issue of access to finance for SMEs is crucial for the health of peripheral regional economies. What this evidence strongly reveals is that the UK needs a much more strategic approach to its banking system if SMEs are to flourish.

Dr Ross Brown is a reader in entrepreneurship and small business finance at the Centre for Responsible Banking & Finance at the University of St Andrews.