The productivity drivers of retail branch banking network growth: a case-study of National Provincial Bank 1870-1909

March 24, 2021 | Blog
Home > The productivity drivers of retail branch banking network growth: a case-study of National Provincial Bank 1870-1909

Funding for the project on which this blog is based was provided by the Economic History Society’s Carnevali Research Grant.

By Victoria Barnes (Max Planck Institute for Legal History and Legal Theory), Lucy Newton (Henley Business School), Peter Scott (Henley Business School) & James Walker (Henley Business School)

Bank of England. Available at Wikimedia Commons.

Research on pre-1945 British productivity growth in services, and its determinants, is severely limited by a lack of data.  There was no Census of Distribution in Britain until 1950 and analyses prior to this date have thus necessarily relied on rather crude and indirect proxies (Broadberry, 2006). One approach to overcoming this problem is the use of archival productivity data collected for sector-level surveys (e.g. Scott and Walker 2012); or similar data for large firms (e.g. Scott and Walker 2017; 2018), though this has hitherto been limited to the retail sector.

This project utilises data for the National Provincial Bank of England – the first clearing bank to assemble a nationwide branch network, with 135 branches in 1870 and 256 by 1909 (Barnes and Newton, 2018).  We will examine the drivers of productivity at both firm and branch-level.  Data were systematically collected for each branch, annually for 1870, 1875, and 1880-1886, and for June and December 1887-1909. Performance was recorded under 44 headings, including financial transactions, revenues, and staff and other costs. The project will also use a variety of other data, such as town populations and the railway network, together with a dataset of other banks’ branches in each town with a National Provincial branch.

These data shed important light on the economic fundamentals underpinning the pace and nature of branch development, allowing exploration of branch-level scale economies, the economics of branch development, and branching strategies. The retail branching literature identifies two effects expected to be found in retail banking: ‘competitive effects’ (where rival banks compete for the same customers);  and ‘cannibalisation effects’ – where opening a new branch in a nearby centre diverts custom from one or more of the firm’s existing branches (Shaw, Alexander, Benson, and Jones, 1998; Alexander, Shaw, and Hodson, 2003; Pancras, Sriram, and Kumar, 2012). For retail banking, there are also likely to be two further effects. The first involves ‘convenience effects’ – with customers being more likely to patronise a bank that has branches in the various towns where they shop or do business; and ‘balancing effects’, which augment the overall efficiency of the bank network, by balancing net excess savings in some parts of the country with net excess borrowings in others.

We will also examine the rationale behind National Provincial’s branching strategy. The retail literature (e.g. Laulajainen, 1987; Purvis, 2009) identifies strategies of ‘hierarchical diffusion’ from major urban centres to smaller towns; and ‘spatial diffusion’ whereby firms prioritise major urban centres  to rapidly gain nationwide coverage and customer growth.  The data will also allow analysis of how important transport infrastructure – particularly railways – was in determining expansion and branching strategies (Casson, 2009). The dataset will include all National Provincial branches, together with its City of London headquarters. We can therefore explore scale economies at both the establishment and firm levels, together with their interactions.

In addition to producing an article for submission to the Economic History Review, the project will also serve as a pilot project for a larger study of the drivers of clearing bank productivity growth and their determinants during the pre-1914 era.  Preliminary investigations indicate that similar ledgers are available for other banks, sufficiently comparable to enable analysis of relationships between branching and productivity growth.

To contact the authors:


Barnes, Victoria, and Newton, Lucy. ‘How Far Does the Apple Fall from the Tree? The Size of English Bank Branch Networks in the Nineteenth Century.’ Business History 60, no. 4 (2018): 447–73.

Broadberry, Stephen. Market Services and the Productivity Race, 1850–2000. (Cambridge: CUP, 2006).

Casson, M. C. The World’s First Railway System: Enterprise, Competition and Regulation on the Railway Network in Victorian Britain. (Oxford: Oxford University Press, 2009).

Laulajainen, R., Spatial Strategies in Retailing. (Dordecht: Reidel, 1987).

Pancras, Joseph, Sriram, S., and Kumar, V., ‘Empirical investigation of retail expansion and cannibalisation in a dynamic environment,’ Management Science, 58 (2012), 2001-2018.

Purvis, M. ‘Retailing and Economic Uncertainty in Interwar Britain: Co-operative (Mis)fortunes in North-west England,’ 127-143 in Elizabeth Baigent and Robert J. Mayhew (eds), English Geographies 1600-1950. (Oxford: St John’s College Research Centre, 2009).

Scott, Peter, and Walker, James, ‘The British “failure” that never was? The Anglo-American “productivity gap” in large scale interwar retailing – evidence from the department store sector,’ Economic History Review, 65 (2012), 277-303.

______ ‘Barriers to ‘industrialisation’ for interwar British retailing? The case of Marks & Spencer Ltd, Business History, Vol. 59 (2017), 179-201.

______’Retailing under resale price maintenance: Economies of scale and scope, and firm strategic response, in the inter-war British retail pharmacy sector,’ Business History, 60, 6 (2018) 807-832.

Shaw, Gareth, Alexander, Andrew, Benson, John, and Jones, John, ‘Structural Trends in British Retailing: the importance of firm-level studies’, Business History, 40 (1998), 79-93.