Free-to-use cash machines closed down at a rate of more than 250 a month in the first half of the year, sparking concerns that small business are losing out.

The number of ATMs fell by 1,300 to 53,200 between the end of January and the start of July, a report from cash machine network LINK revealed.

The 2% reduction in free-to-use machines reflects a fall in the demand for cash as newer payment methods – such as contactless – become more dominant.

Meanwhile, pay-to-use ATMs fell by 11%, leading to a loss of 1,500 machines. There are now 11,900 of the facilities dotted around the UK.

A total of 76 protected ATMs – those which are located one kilometre or more away from one another – were lost in the period.

Of those, 43 had Post Office over-the-counter services available nearby while 12 could not be accessed by the public. Some 21 machines were shut down with no alternative access to cash.

The Federation of Small Businesses expressed concerns that the closures could hit small business owners in remote areas.

In March, the FSB and Which? launched the Save Our Cashpoints campaign in a bid to get the Payment Systems Regulator to halt LINK’s closures.

National chairman Mike Cherry called on the watchdog to act as he warned of further damage to “small businesses and high streets”.

“Access to cash for small firms is vital, particularly to those in rural or hard-to-reach areas, but these figures highlight that more and more of these firms are losing that crucial access,” he said.

“Link assured cashpoint users that closures wouldn’t take place in areas where the next nearest free-to-use ATM is more than 1km away, but 76 of these have closed in the first half of 2018.

“Coupled with the continued stream of bank branch closures throughout the country, all too often it is small businesses who are being hurt the most by these changes.”

He added that reduced access to free cashpoints gives “free reign” to card payment companies wanting to increase charges on small firms.

LINK has said it is committed to maintaining broad geographical coverage of its network, ensuring that those who need to access cash the most can continue to do so.

The network announced in January that it would increase the subsidy it pays to operators from 10p to 30p, in an incentive to keep cash machines in remote areas open.

The firm has targeted 2,365 protected machines with “specific arrangements” to remain open.

Hannah Nixon, director of the Payment Systems Regulator, said of today’s figures: “This highlights the challenges of maintaining a sustainable ATM network when the demand for cash is falling.

“In the short-term, free-to-use ATMs continue to play a vital role in helping people access their money. The requirements we intend to place on LINK will help ensure that LINK achieves their commitment to protecting the geographic spread of free-to-use ATMs across the UK.”

LINK CEO John Howells said: “Consumers are continuing to switch from cash to alternative payment methods, and ATM volumes are falling six per cent year-on-year.

“Given this backdrop, it’s critical we protect cash access for those who rely on it, and maintain a comprehensive network of ATMs that’s spread right across the UK.

“The report today is part of our commitment to monitor the situation on the ground and do whatever it takes to ensure people continue to have the free access to cash the want.”

Alternative payment methods – including contactless and card purchases – have been on the rise in recent years.

More than three out of four retail sales were made by card last year, according to figures out this week from the British Retail Consortium.

Cash accounted for just 22% of sales, the report said.