Britain’s biggest banks are bracing themselves for talks with the Post Office over a new deal to allow millions of their customers to withdraw cash at its branches.

Sky News has learnt that a group of lenders including Barclays and HSBC are in the process of forming a shared interest group to represent the industry in talks with the government-owned company during the coming months.

The negotiations will be aimed at thrashing out a new Banking Framework Agreement, the latest iteration of which will expire at the end of next year.

Roughly 30 banks and building societies participate in the existing deal, paying in aggregate approximately £200m annually to facilitate customer access to the Post Office’s 11,500 branches.

The service is particularly valuable to those who still rely on physical cash after a nine-year period in which almost 6,000 bank branches have been closed across Britain.

Banking industry sources say they anticipate a demand from the financially challenged Post Office to hike the fee it charges them for using its sites, with some speculating that they expect it to seek up to £400m-a-year.

If such a demand does materialise, they added, the industry was expected to resist it vigorously on the basis of data showing that bank customers’ usage of the service has remained broadly flat.

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In 2023, more than £10bn worth of cash was withdrawn over the counter and £29bn in cash was deposited over the counter, the Post Office said.

The negotiations over a new agreement with the banks will kick off at a critical time for the scandal-plagued Post Office.

Reliant on an annual government subsidy, the network’s reputation has been left in tatters by the Horizon IT scandal and wrongful conviction of hundreds of sub-postmasters.

A Post Office spokesperson said: “Our partnership with 30 banks and building societies ensures that no-one who relies on cash is left behind, made possible by our Postmasters in almost every community of the country.

“This is all the more important following the introduction of the Access to Cash legislation and further highlights the critical role Postmasters play today, and in the future, in supporting customers with accessing their cash.

“We do not comment on ongoing commercial negotiations.”

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UK Finance, the banking industry lobbying organisation which is coordinating the establishment of the shared interest group, declined to comment.

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