HIGH Street banks have slashed funding of small and medium firms in Scotland by around £465m in four years as branches have shut down.

New research using data from UK Finance, the banking trade association, reveals that the value of the borrowing has fallen by 5.8% with the hardest hit being in the poorest neighbourhoods of Scotland.

It comes at a time when Scotland has lost one in three bank branches in just eight years, with over 400 closing since 2015, making it one of the worst affected areas in the UK.

And the Federation of Small Businesses in Scotland has said that the trends show the requirement for shared banking hubs to improve access to finance.

Last year three of the biggest banks, Lloyds, NatWest and Barclays, banded together to provide banking hubs for small businesses.

Six opened last year - all in England - Birmingham, Manchester, Crosby, London, Leicestershire and Bristol.

READ MORE: Bank of Scotland chief says it is 'committed to branches' as it unveils flagship

The Scottish Government has previously called for banking hubs for personal customers after a swathe of closures from RBS, Clydesdale and TSB. The suggestion is that different banks would take turns, using the same office on alternate days.

The new analysis shows that the five local authorities in Scotland where the biggest drop in lending occurred saw an average cut of 32.4% in business finance from 2014-2018 The researchers which analysed UK Finance data said that the local authorities which saw a larger drop in SME lending also had more significant falls in bank branches.

Some 22 out of 32 local authorities in Scotland saw a fall in SME lending between over the four years.

An analysis of the data by lenders iwoca found that of 16 Scottish local authorities which had the largest drop in lending for SMEs, 11 saw at least one in five of their bank branches shut between 2014 and 2018. Conversely, in the 16 local authorities which had the smallest fall in lending - or where funding for SMEs rose - only five saw 20% or more of their branches close.

Renfrewshire with a 37.5% drop in lending, tops the list of local authority areas borrowing declines. It lost two of five bank branches over the four years.

Falkirk, which lost 20% of its branches suffered a 29.3% drop in SME funding and East Renfrewshire with a 27.6% borrowing has lost one in three bank branches.

READ MORE: One in four ATMs now charge Scots customers to withdraw cash

The largest rise in SME funding was in Shetland Islands (75.4%), which has seen not lost any bank branches.

Christoph Rieche, CEO and co-founder of iwoca, which carried out the analysis of the data said: "SMEs are vital for the health of the economy. Our mission is to give business owners the funding they need so that they can do what they love, and by doing so, creating jobs and supporting communities right across the country.

‘It’s therefore concerning that in many parts of the country, major banks aren’t serving small and microbusinesses with the funding required to help them thrive.

Colin Borland, FSB’s director of devolved nations, added “Despite some pockets of Scotland where the figures seem more buoyant, it’s clear smaller firms aren’t tapping external sources of finance as much as they used to. This has a knock on effect on business investment, supply chains and ultimately growth.

“And given that Scotland has faced a disproportionate number of bank branches disappearing from local communities, we should hardly be surprised that their lending figures are taking a hit. That’s why we need to see the big banks come good on their promise to deliver shared banking hubs.

“Individual businesses should shop around for sources of finance, looking at traditional options like the banks, but also organisations like FSB who also have funding platforms available. Ultimately, we want lots of different finance providers fighting over the Scottish small business market.”

Iwoca said that government data also reveals that SME lending has fallen most in the poorer neighbourhoods in Scotland. Analysis shows that two-thirds of the most deprived areas in Scotland are in those local authorities which saw the largest drops in funding for SMEs.

Earlier this month the Herald revealed that one in four of Scotland's cash machines are now charging customers to take their money, while the number of ATMS also drops despite the decline in bank branches.

New figures from the UK’s largest cash machine network reveal that there are now 1396 pay to use ATMS in Scotland - 565 more than this time last year.

In the past four months alone, nearly 300 free cash machines have been lost to Scotland - at a rate of 75 a month.

It comes after banks have cut the fees paid to ATM operators when a customer uses a free cashpoint, causing many to switch to paid-for models.