Overdrawn on PR goodwill account

Why are banks which supposedly exist to serve their customers seemingly determined to alienate the people on whom their profits depend?

Barclays Bank is at the centre of a storm for closing "unprofitable" branches in rural communities, raising charges and sacking staff.

Other banks do the same, but Barclays has only itself to blame for the way the issue has blown up in its face. The axing of 171 branches follows rows over cash machine charges and high executive pay levels.

For the past 12 months, Barclays has had one obsession - how to avoid the fate of its arch-rival, the National Westminster Bank, which after years of poor profits was swallowed by the smaller Royal Bank of Scotland after a bitter takeover battle last March.

Not surprisingly, chief executive Matthew Barrett's priority since joining last September has been to rehabilitate Barclays in the City, where the needs of pensioners and rural communities, unfortunately, cut little ice.

Instead, the focus has been on performance, profits and incentives and getting rid of unprofitable branches. Staff have been told to concentrate on wealthy customers from whom the bank can make money, even if that means others leave.

But behind the scenes, senior Barclays executives admit that some of these issues could have been better handled. Clearly, the deal that Barclays struck with the Post Office to fill some of the gap left after the branches closed should have been in place before the closures were announced. Barclays could also have done what others, including Abbey National and Cheltenham & Gloucester, are doing - closing branches one at a time rather than in one big bang.

Significantly, one of the first acts by the Royal Bank of Scotland when it took over the NatWest last month was to halt the bank's branch-closure programme in its tracks.

But the fact that Barclays did not iron out the contentious issues in advance seems indicative of an industry which has for so long been able to lord over its customers, rather than listening to them.

Barclays' argument that the internet makes it inevitable branches should close is not universally shared.

The City, having pushed for much of the last decade for massive branch closure programmes, is starting to change its mind. The evidence from a host of takeovers is that where branches close, customers are irretrievably lost.

To make profits you need customers, and alienating them en masse is a big mistake indeed.