Foreword by gareth Thomas MP

Gareth Thomas MP notes that millions in Britain are unable to find money for unexpected bills, with 1 in 10 people having no savings whatsoever. Mainstream banks often fail to meet these needs, pushing individuals toward illegal lending. Credit unions and Community Development Finance Institutions (CDFIs) fill these gaps by keeping wealth circulating locally. While the Government has recently unlocked millions through the Fair4All Credit Union Transformation Fund, further legislation, such as a Fair Banking Act, is required to increase transparency and provide these institutions with access to banking hubs.

Foreword by irene Campbell MP

Irene Campbell MP highlights the role of credit unions as community pillars where local savings are reinvested locally rather than drained away. Currently, only around 2% of people in Britain belong to a credit union, a figure significantly lower than the 64% in Ireland, 28% in Canada, and 20% in Australia. Targeted investment is required to help these institutions improve technology and reach more people. A Fair Banking Act would require large banks to collaborate with credit unions, supporting the Government’s goal to double the size of the co-operative and mutual sector.

Executive summary

Credit unions serve as anchor institutions that protect vulnerable community members from economic shocks and prevent financial distress. Analysis shows that 37 of the 185 Pride in Place Phase 2 constituencies contain a community credit union. Replicating the Big Local model of credit union expansion across all such constituencies is estimated to cost approximately £3.7m, offering a route to strengthen town economies and improve living standards for the financially vulnerable.

The case for credit unions

Communities across the UK face high levels of financial exclusion, with research showing more than 9 million adults were declined credit between April 2022 and 2023. One in six adults have no savings, and another five million have less than £100. Wealth inequality varies geographically; 28% of working-age adults in Wales have zero or negative financial wealth, compared to 18% in London. Credit unions provide an essential alternative to risky doorstep lending; for example, Leeds Credit Union saved members £11.4m compared to using high-cost lenders. Interest rates are capped at 42.6% APR, making them the cheapest market option for small-sum credit.

The number of UK bank branches declined from 14,689 in 1986 to 5,745 in 2023, representing a 62% reduction in high-street branches since 2010. Credit unions mitigate these impacts by ensuring wealth circulates locally. In Preston, payroll savings schemes support a revolving loan fund for the community. Research in Merseyside found members retained as much as £23.5m annually by avoiding higher-cost lenders. In Greater Manchester, the SoundPound group partnered with local government to introduce discounted public transport fares through credit unions.

Investing in credit unions

The Big Local programme (2011–2026) provided valuable lessons in long-term funding. In Withernsea, a £99,000 loan to a credit union funded a Development Officer, resulting in member savings increasing by 293% over four years. Replicating this £99,000 capitalisation exercise across the 37 Pride in Place Phase 2 constituencies with existing credit unions would cost around £3.75m.

The Pride in Place programme has allocated £5.8bn to 284 communities, with individual areas receiving up to £20m over ten years. However, the programme currently provides little explicit guidance on the role credit unions could play. Out of 185 Phase 2 constituencies, 15 of the 37 with credit unions are among England’s 100 most financially vulnerable. There is currently a structural gap as Neighbourhood Boards are not prompted to consider credit union expansion.

Recommendations

The report makes two primary recommendations. First, it suggests empowering Pride in Place Neighbourhood Boards to consider the role of credit unions and local financial infrastructure. The Ministry of Housing, Communities and Local Government (MHCLG) should produce guidance on how Boards can partner with or capitalise existing institutions. Second, a Fair Banking Act should be introduced to improve cooperation between large banks and credit unions. This legislation could unlock £3.3 billion per year in affordable credit by requiring banks to disclose performance and share infrastructure like banking hubs.

Conclusion

Credit unions are affordable place-based tools for delivering growth and tackling wealth extraction. The Government should embed these institutions within the local economic development agenda, connecting them to funding and political attention to support financial resilience across every postcode.

Appendix 1: methodology

The research combined datasets from the FCA Mutuals Register and the Money and Pensions Service (MaPS) Financial Fitness Tool. Financial vulnerability was measured based on the 2026 MoneyView survey, identifying populations with low financial fitness scores at the 2024 Westminster constituency level.

Appendix 2: Constituency mapping

Mapping identified specific credit unions in vulnerable areas, such as Citysave Credit Union in Birmingham Ladywood (ranked 5th for low financial fitness) and EREWASH Credit Union in Derby South. These institutions are positioned to benefit from targeted Pride in Place funding to address local financial insecurity.