Jason Bunting | 19 October 2026

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Contents

Foreword by Gareth Thomas MP

Foreword by Irene Campbell MP

Executive summary

The case for credit unions

Investing in credit unions

Recommendations

Conclusion

Appendix I: Methodology

Appendix II: Credit unions in Pride in Place constituencies

Foreword by Gareth Thomas MP

When an unexpected bill arrives, millions of people in Britain today are simply unable to find the money to make ends meet. Millions more are unable to save for that day, with 1 in 10 people having no savings whatsoever. Too often, banks haven’t met that need. In that context, it’s little surprise that an increasing number of people have been turning to illegal lending. Meanwhile, hundreds of thousands of businesses face barriers in accessing affordable credit, particularly outside London and the South-East, acting as a hamstring on good growth.

Credit unions and Community Development Finance Institutions (CDFIs) exist to fill these gaps. They offer fair, affordable loans and a route into saving for people the mainstream system has left behind, and a growing number lend to small businesses that need affordable credit to expand and invest. As part of the co-operative movement, owned by their members, they keep wealth circulating locally in the communities that generate it. As bank branches close, they are often among the crucial lasting financial institutions on the high street.

I’m pleased the Government is starting to recognise that potential. It has unlocked millions of pounds for credit unions through the Fair4All Credit Union Transformation Fund, published the Financial Inclusion Strategy and begun the work of reforming the common bond.

Now, with a manifesto committing to double the size of the mutuals and co-operative sector, and Britain’s first Labour and Co-operative Party Prime Minister, we have a golden chance to go much further. Banks should be given a central role in that agenda. They have the capital, the customers, and the reach that credit unions and CDFIs lack, yet too often they have not served the people and places that need affordable finance most.

In January, I introduced the Banks (Financial Exclusion and Access to Finance) Bill, which would require our major banks to work with credit unions and CDFIs to tackle the unsustainably high levels of financial exclusion. The response from organisations and the public was hugely encouraging, and calls for a Fair Banking Act are growing, including in this report. A Fair Banking Act would put that principle into law, bringing transparency to which communities banks serve and opening up opportunities for those traditionally excluded. Giving credit unions and CDFIs access to banking hubs would be a positive and worthwhile next step in ensuring that communities have a route into this local architecture for financial inclusion.

A Fair Banking Act should form part of a new national commitment to affordable finance that is raised locally and benefits communities. Legislating for it would build on the Government’s progress so far, giving credit unions and CDFIs the support they need to grow, and helping to build fairer local economies across the country.

Gareth Thomas MP, Chair of the APPG on Community Development Finance Institutions & Chair of the APPG on Mutuals

As the former Chair of the APPG on Credit Unions, I’ve heard a lot of stories about what credit unions mean to people. Often, they’re about a credit union stepping in when an unexpected bill or an unforeseen cost stretches a family’s budget to its limits. Or they’re about someone who had never managed to save before and is now building the habits for the future. Without credit unions, too many people would be left with high-cost credit and risky lenders. For anyone under pressure, the difference between a fair loan and an exploitative one can shape years of their life. More and more, though, I hear people talk about the ethical, secure place to save which credit unions offer everyone in our communities, whatever their means.

But credit unions do so much more than serve their individual members. They also strengthen the places they belong to, as pillars of their communities. Local savings are reinvested locally rather than drained away, and the credit unions themselves are owned and democratically controlled by their members. That makes them an often-under-appreciated source of good growth in every postcode. I see this in my own constituency, where 1st Alliance in Kilwinning plays a vital role in community life, including through its partnerships with local organisations.

I’m really pleased that this Government is recognising the role of credit unions and backing them in policy. The new Financial Inclusion Strategy and Fair4All Finance’s £30m Credit Union Transformation Fund are a real step forward, investing in those institutions to ensure they have the capacity and ability to scale. Credit unions also have a central part to play in our commitment to double the size of the co-operative and mutual sector. Credit unions belong to a proud tradition of working people pooling their resources to look after each other in our communities. That tradition is as relevant today as it has ever been. When every part of those sectors can contribute, the overall economy grows faster and more fairly.

Of course, there is much more to do. Only around 2% of people in Britain belong to a credit union, compared with 64% in Ireland, 28% in Canada and 20% in Australia. Many credit unions struggle to invest in the technology they need, or to reach the people who would benefit most.

This report sets out practical ways forward. Drawing on the lessons of programmes like Big Local, it shows how targeted investment can help credit unions reach more people and keep more money circulating in the communities that need it most. It also backs the convincing case for a Fair Banking Act, which would require our largest banks to work with credit unions, collaborating with them in local communities.

Credit unions belong in any conversation about good growth in every postcode. As the Government seeks to devolve more power and resources to communities, credit unions are natural trusted, local and accountable partners. By backing their potential and putting local finance in local hands, we can build an economy that is fairer for everyone.

Irene Campbell MP, Former Chair of the APPG on Credit Unions

Executive summary

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Across the UK, credit unions act as everyday vehicles for financial inclusion, opening the door to financial security for those furthest from it and keeping wealth circulating within local communities. In an economy too often built on short-term extraction, credit unions serve as anchor institutions in local places, protecting people against the worst impacts of economic shocks, boosting household incomes and preventing some of the most vulnerable members of our community from falling further into financial distress. Yet beyond supporting the most disadvantaged, credit unions sit at the heart of communities as a sound, ethical financial choice for people of any means to save.

Official statistics show that over 2 million people in the UK are now members of credit unions, and the sector has recently gained a higher profile in government policy. This increased recognition can be seen through the Government’s manifesto commitment to double the size of the mutual and co-operative sector, the publication of a new Financial Inclusion Strategy, and the launch of the new Fair4All Finance Credit Union Transformation Fund.

Yet despite these welcome steps, the membership of credit unions in England remains low compared to other Anglophone countries. This is a missed opportunity, since a lack of sustained support for the credit union movement is a lost source of local wealth that could otherwise strengthen town economies and improve the living standards of financially vulnerable people across the country.

A new national commitment to credit unions is now needed to address this challenge and seize the opportunities presented by credit unions, built on the work of the Government so far. This is a cause closely aligned with the new administration. In Greater Manchester, the Prime Minister previously provided support to the SoundPound group of credit unions as Mayor and worked with those local institutions to introduce a discounted travel fare that opened new opportunities to people across the city-region, even describing credit unions as “fantastic institutions rooted in their communities”, suggesting they could “be an even bigger part in [the] mission to increase people’s financial resilience”. Now is the time to allow credit unions to play that bigger role.

In this short report, we outline how the new administration could boost the economic contribution of credit unions to the benefit of ordinary communities. To illustrate this, we conducted a constituency analysis by combining data from the Money and Pensions Service's (MaPS) Financial Fitness Tool with data about credit unions from the FCA Mutuals Register to synthesise new evidence on how credit unions are helping to address financial insecurity and vulnerability. We further combined this data with the 185 English Westminster constituencies which contain at least one Pride in Place Phase 2 funded neighbourhood, to illustrate how that funding could be used to boost the reach of credit unions, drawing on lessons from the previous Big Local programme.

We find that:

• 37 of the 185 Pride in Place Phase 2 constituencies have a community credit union
• 15 of these 37 are among England’s 100 most financially vulnerable constituencies
• Replicating a successful model of credit union expansion, based on the use of Big Local funding, would cost around £3.7m across all Pride in Place constituencies with a credit union

We contextualised this research with eighteen interviews, conducted across a range of credit union experts including CEOs, academics and advocates on financial inclusion. Based on this research, we argue that the government should seize the potential of credit unions by trusting them to help deliver good growth in the places that need it most. In order to do so, we recommend:

• Empowering Neighbourhood Boards established as part of the Pride in Place programme to consider the role of credit unions and local financial infrastructure
• Improving banks’ cooperation with credit unions to expand access to services through a Fair Banking Act

Communities across the UK face high levels of financial exclusion. Research from the University of Birmingham has revealed that more than 9 million adults were declined credit from April 2022-2023, with 39% of adults who responded to a 2023 survey saying they did not expect to save any money in the next 12 months. Similarly, research by the Money and Pensions Service found that one in six adults have no savings whatsoever, and another five million have less than £100. Other evidence has found that millions of people are unable to build adequate savings buffers because they are excluded from mainstream credit. Meanwhile, our own research found that nearly one-third of 25-to-34-year-olds have zero or negative wealth. The picture varies across the country, with 28% of working age adults in Wales having zero or negative financial wealth, compared to just 18% in London.

These levels of exclusion are not only morally harmful by constraining the ability of ordinary people to participate in the economy but are also damaging to economic growth since they constrain demand and prevent wealth-building among ordinary people, locking them out of opportunity. The unequal consequences of financial exclusion challenge the fairness of opportunity in today’s economy, since when some people are shut out of financial security, it undermines the equal chance we should all be able to expect to contribute to today’s economy.

Polling as part of the 'This Place Matters' project by UCL Policy Lab with Citizens UK and More in Common has found that financial insecurity is one of the strongest predictors of whether British people felt disconnected from society, with 63.5% of people with an income under £10,000 reporting such disconnection. As those familiar with credit unions will be aware, these locally rooted financial providers help stave off challenges of financial inclusion faced in communities, by providing loans to people who are locked out of traditional lending.

Credit Unions have been strongly linked to financial inclusion by lending to more low-income people since their inception. The Windrush generation was instrumental in bringing the credit union sector to Britain, when a group of British-Caribbeans set up Hornsey Co-operative credit union in 1964 in response to the financial discrimination faced by Caribbean migrants. Meanwhile, the first credit union in Northern Ireland was set up by, among others, John Hume, later a leading figure of the civil rights movement, in response to widespread financial exclusion.

Today, those who have benefitted from credit unions include people with poor credit ratings who might otherwise have fallen prey to more risky or problematic lending such as doorstep lending or loan sharks. For example, Leeds Credit Union reports having saved its members £11.4m compared to using doorstep lenders.

“When a household is financially vulnerable, one fault in their car or one failed fridge or freezer can be the difference between staying afloat and facing a downward spiral of increasingly costly credit. The resilience of having £1,000 in savings is the firewall that stops that spiral”.

Katrina Murray MP, House of Commons, 16.07.25

“There’s a massive gap between a bank and a high-cost lender, and credit unions fill that gap in such an amazing way. Why are we not capitalising on that?”

Kathryn Fogg, CEO, Northern Community Bank

Increased levels of financial inclusion have been found to expand opportunity, unlock investment and boost growth. Moreover, the evidence strongly suggests credit unions offer “fairer lending, promote financial inclusion and reinvest in members”. As ABCUL (now All Together Money)’s evidence to a Treasury Committee inquiry noted:

Credit unions provide affordable and inclusive personal lending services, reducing household cost of credit and mitigating negative market outcomes. Credit unions lend at lower values than banks, lending as little as £50 and with interest rates capped at 42.6% APR, or 3% a month, they are the cheapest in the market for many of those with limited credit options seeking small-sum credit.

Further, credit unions have acted as a safeguard against the impacts of the closure of financial providers. The profits of some of the major financial institutions have been well reported, amounting to more than £45bn in 2025. Yet at the same time as these profits have soared, the number of local bank branches has steadily declined. From 1986 to 2023, the number of UK bank branches has fallen from 14,689 to 5,745, while the number of high-street bank branches has fallen by 62% since 2010 alone. This has major implications for a range of vulnerable groups, including people with disabilities and other vulnerable groups. Recent analysis has made the case that the disappearance of community places such as the bank represents a civic threat, “remov[ing] places where people become visible to one another” and leading in part to the decline of the social contract. By contrast, credit unions can provide much-needed locally visible financial architecture (though have also struggled with opening hours and visibility in local communities).

“We’re still in the high streets and in many cases have taken over and refurbished old banking institutions- there is a kind of sense of rejuvenation and pride in place”.

Martin Fisher, ILCU

“There’s a very strong argument that it’s the for-profit financial institutions that ought to be engaging and supporting the establishment of credit unions, knowing that this is a category of people within their community that don’t have access”

Professor Helen Haugh, Cambridge Judge Business School

Credit unions also play a crucial role in ensuring that wealth circulates throughout the local economy, since interest paid to a credit union is reinvested in members and the local institution. Instead of leaking out to distant shareholders, a credit union returns surpluses to its own members rather than paying it out to external investors or head office. It’s not hard to see how original deposits, once reinvested in the form of loans and the annual dividend, could produce multiple rounds of economic activity in one local community.

Payroll deduction schemes also contribute to this circulation of local wealth. In Preston, the City Council developed access to payroll savings with the local credit union, which “contribute[d] to a revolving loan fund available not just to council staff, but also to community members of the credit union, supporting access to finance in deprived areas of the city”. Further, research from Fair4All Finance into the social impact of credit unions across Merseyside found that members in that region retained as much as £23.5m annually, which would likely otherwise have gone to higher cost lenders.

“These are not distant financial giants; they are member-owned, community-run mutuals that put people before profit…More widely, credit unions circulate money locally. It is not siphoned off to faraway shareholders; it stays in the community, helping neighbours and strengthening the local economy.”

Kenneth Stevenson MP, House of Commons, 16.07.25

“The monetary and social value of credit union dividends is considerable…that’s money going back to its members- where we take the interest off a loan, reinvest in services and give it back to our members, that money disappears with some other providers”

Sean Lynch, CEO, Citysave Credit Union

“Any surpluses that they generate stay within that community rather than being paid back as dividends to shareholders or going back to central HQ. That’s a real strength in terms of community wealth, because local money that stays in the economy gets regenerated within that economy rather than moving out”

Anita Mangan, University of Bristol

“The alternatives are commercial banks which tend to be centred in London and are increasingly abandoning towns. There could be a very important role for credit unions with a national network, linked into the building society sector and underwritten by government through their regional policy”.

Professor Jonathan Michie, University of Oxford

“There is a tension between the impulse to see a greater role for credit unions in supporting people with lower financial resilience and the reality that you need [credit unions] to be much more popular and bigger in scale to be able to do that. And then they have a broader income spectrum using their services, more people saving, they're offering more services and then being able to recycle that or use some of that money to deliver services that may increase financial resilience among low-to-middle income households.”

Adam Butler, StepChange

There is also potential for devolved authorities to engage substantively with credit unions, in line with the new Government’s agenda. As Mayor in Greater Manchester, Andy Burnham MP supported a partnership between GMCA and a group of 12 credit unions: the SoundPound Group. This group of credit unions began in 2016 and brought credit unions from across Manchester together. Through working with the GMCA, the credit unions partnered with Transport for GM to introduce a discount for public transport through credit unions. As devolution gathers pace, effective local leadership will be essential to expand this model. Of course, this should be caveated with the understanding that credit unions need improved technology to be able to support such partnerships.

“That’s probably where the future for credit unions is, providing payroll savings to local organisations, becoming a name that local organisations recognise and a trusted source for small loans or an alternative savings product- that’s a niche that they fit very well into”.

Professor Adele Atkinson, University of Birmingham

Despite this potential, membership of credit unions in Britain remains low. According to House of Commons research, other Anglophone countries have far higher levels of membership. Around 2% of the population in Britain are members of credit unions, compared to 40% in Northern Ireland, 64% in Ireland, 27% in Canada and 20% in Australia. It’s not hard to imagine that a significant improvement in support for credit unions, and their expansion into new localities, would help close this gap.

Investing in credit unions

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The case for credit unions is, to some degree, recognised in the Government’s Financial Inclusion Strategy and the £30m Credit Union Transformation Fund set up by Fair4All Finance. But not all parts of government have caught up with this thinking. By circulating local wealth, acting as anchor institutions for left-behind places and providing vital community space in areas of untapped potential, credit unions not only act as mechanisms to support financial inclusion, but can also be understood as levers of place-based economic development. Increased investment in credit unions would support the most vulnerable in society. Importantly, such investment would also produce economic activity and locally rooted good growth which can support a town economy in other ways, notably by counteracting the impact of wealth extraction.

Big Local funding

In considering how Pride in Place funding might be put to effective use in supporting credit unions, valuable lessons could be drawn from the Big Local funding delivered by Local Trust. This programme, which ran from 2011 to 2026, offered a unique and innovative approach to building wealth in communities- rooted in community development and convening local people in 150 areas to decide on their priorities for £1m investment in their communities. It offers valuable lessons on how non-prescriptive and long-term funding can deliver effective outcomes.

For example in Withernsea, a group of residents used £99,000 of Big Local funding as a loan with Hull & East Yorkshire Credit Union. The community partnership employed the funding to tackle doorstep lending and employ a part-time Development Officer, expanding the credit union’s presence and reach in the area. Over the initial four years of funding, the Credit Union members increased savings by 293%. Replicating Withernsea’s £99,000 capitalisation exercise across all 37 Pride in Place Phase 2 constituencies with an existing credit union would cost around £3.75m.

Pride in Place funding

Pride in Place is the current Government’s flagship programme for local economic development, and represents significant investment, with an estimated £5.8bn allocated to 284 communities across Great Britain. Each area is due to receive up to £20m of funding over a ten-year period to make long-term improvements. Distinctively from previous programmes, Pride in Place is community-led. Each area forms a ‘Neighbourhood Board’, bringing together local stakeholders, including community organisations, local businesses, the local MP and residents, to decide locally how the funding is used. Its ten-year time horizon is intended to support a more strategic, long-term approach than previous schemes, delivering “lasting change beyond the 10 years of investment”. The methodology used to select areas applied consistent indices, including an Index of Multiple Deprivation (IMD) and a Community Needs Index, to identify areas with the poorest outcomes, a significant improvement on the competitive, bid-led process used by previous schemes.

By late July 2026, the phase 2 Neighbourhood Boards were to have confirmed their membership, allowing them to draw up a Pride in Place plan from an indicative list of eligible interventions. Yet despite being designed in part to improve the financial resilience of the most left-behind places, the programme’s design gives little explicit attention to the role credit unions could play. Under “enabling community wealth building”, the indicative list of eligible interventions includes creating a regional mutual or community bank, and further down, a proposal that funding could support a credit union. But sector terminology in the guidance is thin, with no accompanying note on how a Board might establish or connect with a credit union or reach a sector body such as All Together Money. Most Neighbourhood Boards, as a result, are unlikely to put credit unions on their agenda unless prompted and are left to work out the sector for themselves.

The Pride in Place Strategy notes the decline of high-street banks and references the Heritage Revival Fund, acknowledging local bank closures as evidence of neighbourhood decline. But it does not contain a corresponding commitment to address financial services provision in those places. This is a structural gap, since the neighbourhoods are places where financial exclusion is acute. Yet because credit unions are only referenced in passing, there is no built-in expectation that Neighbourhood Boards will consider their expansion or adoption. This is particularly exacerbated by the low levels of awareness about credit unions in the population.

A better approach could marry these areas, meeting the target to double membership. There is therefore a strong case to empower local Neighbourhood Boards to learn from the examples of other projects and expand the services of a local credit union.

What the data show

In order to consider whether Pride in Place funding might be usefully applied to credit union expansion or development, we combined Pride in Place funding data with the Money and Pensions Service's (MaPS) Financial Fitness Tool score at constituency level, producing a picture of English Westminster constituencies which contained a Phase 2 Pride in Place funded neighbourhood.

Mapping Pride in Place-funded areas onto constituency-level credit union data reveals significant potential to use this funding to expand existing credit unions in some of the most financially vulnerable areas of the country:

• 37 of the 185 Pride in Place Phase 2 constituencies have a community credit union
• 15 of these 37 are among England’s 100 most financially vulnerable constituencies
• Replicating a successful model of credit union expansion, based on the use of Big Local funding, would cost around £3.7m across all Pride in Place constituencies with a credit union

Of course, to succeed, credit unions require a very balanced membership and should not be presented as a ‘poor man’s bank’. Indeed, credit unions are vulnerable to becoming fragile if their lending is too concentrated in one demographic, and it is important that credit unions are recognised as a sound financial choice across the population.

Two key recommendations emerge from this report’s analysis of the link between credit unions and local wealth-building.

1: Empower Pride in Place Neighbourhood Boards to consider the role of community credit unions and local financial infrastructure

As this report shows, 37 constituencies with neighbourhoods funded by Phase 2 of Pride in Place already have a community credit union in place, and MHCLG should produce supplementary guidance naming credit unions explicitly- including a practical note on how a Neighbourhood Board can partner with or help capitalise an existing local credit union, modelled on the Big Local precedent. Financial inclusion data could also be built into the programme’s selection and monitoring methodology, so places are flagged as needing intervention rather than simply being permitted to fund one if a Board happens to think of it. Neighbourhood Boards should be connected directly to the credit union sector, including named contacts so Boards are not left to work out the sector for themselves. It’s a timely moment to be considering this question. Neighbourhood Boards confirmed their membership in late July and submit ten-year plans to MHCLG at the end of November. Those plans will last a decade, yet no practical guidance exists on how a Board would go about this. The Government could usefully address this blind spot.

“Politicians have got a big part to play in this – they have a duty, at every opportunity, to talk about their local credit union.”

Cllr Carmel Swan, Derby City Council, June 2026

2: Improve banks’ cooperation with credit unions through a Fair Banking Act

Large banks currently treat credit unions as, at best, an afterthought. This should be addressed through the introduction of a Fair Banking Act to require mainstream banking institutions to disclose their performance. The Act would also require the creation of a clear rating system for banks, ratings which could be improved by collaborating with credit unions. As the Finance Innovation Lab, coordinating the Fair Banking for All campaign, has highlighted, this legislation could unlock £3.3 billion per year in affordable credit. High street banks could demonstrate collaboration with credit unions by opening up access to banking hubs for credit unions. Credit unions currently have no formal route into that shared infrastructure, despite being exactly the kind of local, member-facing institution the hub model was designed to support. In seeking to improve banks’ cooperation with credit unions, the Government should examine the learnings from the Fair4All Finance pilot with more than 12 credit unions in Wales and England.

Taken together, these recommendations amount to the basis for a national commitment to affordable finance that is locally generated and circulated productively within local economies, with credit unions acting as the natural vehicle for that commitment. Such a commitment would be a natural step for the new administration, given the importance of credit unions within the co-operative movement.

Conclusion

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If the Government is serious about delivering good growth in every postcode, credit unions are among the most affordable place-based tools for doing so. To tackle wealth extraction and build an economy that works for all people and places, the Government must create more opportunities for wealth to stay in local places. Credit unions do exactly that, addressing financial exclusion, supporting local incomes and acting as a lever against the worst effects of bank closures and the wider marginalisation of towns relative to cities.

As such, credit unions should be embedded within the agenda of local economic development, instead of being treated as a footnote to it. The task now is to connect the existing infrastructure of credit unions to the funding and political attention it has so far lacked. Financial infrastructure is a place-based fairness issue. The Government should make a bet on credit unions, trusting them to help deliver good growth in every postcode.

This analysis combines three published datasets at 2024 Westminster constituency level. Funded places are the 186 English neighbourhoods announced under Phase 2 of the Pride in Place programme, each identified by its MSOA code and assigned to a constituency using the ONS MSOA (2021) to Westminster Parliamentary Constituency lookup.

Credit unions are those on the FCA Mutuals Register with live registered status, placed by registered postcode using the ONS postcode-to-constituency lookup. Financial vulnerability is measured using the Money and Pensions Service's (MaPS) Financial Fitness Tool score from its MoneyView 2026 survey, published at 2024 Westminster constituency level as the percentage of the population scoring 40 or below out of 100 ("low financial fitness").

A credit union is recorded as "present" in a constituency where it is headquartered, based on registered address. This does not mean the credit union serves only that geography: a community credit union may be based in one town but serve an entire county or beyond.

Interviews: This report draws on 18 semi-structured interviews conducted between May and July 2026, with credit union chief executives and staff, sector bodies, academics, elected representatives, and Big Local project participants.

Every Pride in Place Phase 2 constituency with a community credit union, ordered by financial vulnerability: