- Farmers face multiple cost challenges as fertiliser increases nearly three-fold on 2021 prices, whilst fuel, feed and energy costs continue to rise
- NatWest Group to offer individual farms a range of measures to help including capital repayment holidays, increased overdraft limits and reductions in the interest rate on small loans to help tackle cost challenges
- NatWest Group has published a white paper finding that near-term investment, policy incentives and common metrics are needed for UK agriculture to transition to a sustainable food system
Businesses in the UK agriculture sector are facing inflation of over 30%[i] and price hikes in the region of 200% for fertiliser, gas and fuel, and a raft of other cost pressures on feed, electricity and seeds, as a result of the combined impacts of inflation, Brexit, and the War on Ukraine on supply costs to the industry.
The bank’s analysis has found that costs on fertiliser have increased three-fold, with the cost per tonne now sitting at around £850[ii], up from £280 in May 2021, due to much of the manufacturing taking place in Russia and Ukraine. Energy costs are also continuing to affect the market with gas up 200% on 2021, and electricity up 40%. These combined input cost pressures are squeezing the farming industry’s margins tighter.
In response to these pressures, NatWest Group is today introducing a package to help support customers in the agriculture sector, with individual financial support available for those hit by increased farm running costs. The announcement comes as the bank also published a white paper recommending a series of longer-term interventions that should be taken by policy makers, financial services and the sector itself to achieve a nature-positive transition.
The bank will offer capital repayment holidays – where the business only needs to pay the interest on a loan for an agreed period, reducing the amount due each month – as well as increases to overdrafts. Capital repayment holidays are subject to credit approval and it may take longer to repay the loan and cost more in the long run. Payments may also increase afterwards. For smaller businesses in the agriculture sector, the bank yesterday announced reductions in interest rate on its range of Small Business Loans up to £40,000, by between 0.5% and 1.35% dependent on term and amount.
In March, NatWest Group launched a new Green Loan and Green Asset finance product, allowing businesses to borrow with no fees to invest in eligible clean energy, clean buildings, clean transport and agriculture. These loans can help future proof their business by investing in assets such as solar panels, electric vehicles or heat pumps. The products are one of the ways the bank is delivering on a commitment to lend £100bn of Climate and Sustainable Funding and Financing by 2025.
Ian Burrow, Head of Agriculture at NatWest, said:
“We are here to support our customers in the farming sector through this challenging period. Our agricultural managers have in-depth knowledge of the sector, including being able to offer individual financial support, where needed, to help customers navigate high energy, feed and fertiliser prices. We would urge affected customers to get in touch with their local agriculture relationship manager to discuss how we can help.
“As always, we are also here to support our customers in the long-term. That’s why we encourage customers to discuss the impact on their own individual business with a relationship manager to establish how we may be able to support them.”
Financing the transition in the agriculture sector
NatWest Group has also published a new white paper into the need for a sustainable transition in the sector, titled ‘Financing nature-positive transitions in the agriculture sector’. The report finds that near-term investment in agricultural infrastructure, ambitious policy incentives and a common set of metrics need to be prioritised if the UK is to benefit from a sustainable food and farming system.
Dr Maria Carvalho, Head of Climate Economics and Data, NatWest Group said:
“There are huge Commerical opportunities in farmers transitioning to lower-carbon, nature positive methods of food production – from a reduction of input costs, to unlocking price premiums from food retailers, and accessing the benefits of green finance. This is an opportunity for a new and sustainable revolution of the food system in balance with the planet and the wellbeing of society.”
Last July, the bank joined forces with the Sustainable Food Trust to launch the Global Food Metric, an internationally standardised framework for measuring the sustainability of farming and food production. The metric provides a summary for farmers to highlight strengths and areas for improvement, allowing to take action to reduce their emissions.
To contact NatWest’s agriculture team, email agriculture@natwest.com or your local agricultural manager. Business customers can also call NatWest Business Banking on 03457 114 477.
Disclaimer:
This is for media use and not a financial promotion.
Green Loans and Green Asset Finance:
Green Loans with no arrangement fee are open to applications from eligible UK businesses with an annual turnover of less than £25m (other than for eligible UK Real Estate Finance businesses for whom alternative eligibility criteria may apply) who are seeking to take out a loan to acquire assets that fall within the eligible list developed by the bank and subject to review and change on an ongoing basis. Security may be required. Fees (other than arrangement fees) may apply. Over 18s only. Subject to status, eligibility and approval. Business use only. Any property or asset used as security may be repossessed or forfeited if you do not keep up repayments on any debt secured on it. Failure to comply with the terms of the loan agreement could lead to an event of default under the loan and (depending on their terms) may also impact other facilities of the borrower. Terms apply.
NatWest Group Green Asset Finance is available to over 18s which meets the NatWest Group Climate and Sustainable Finance Inclusion Criteria for your business size. Security may be required. Fees (other than arrangement fees) may apply. Available to UK customers for business purposes only. Available for borrowing over £25,000 and less than £10 million. Subject to status, eligibility and approval.
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Capital repayment holidays:
Capital repayment holidays are subject to credit approval and it may take longer to repay the loan and cost more in the long run. Payments may also increase afterwards.
Business Loans & Overdrafts
Security may be required. Product fees may apply. Over 18s only. Subject to status, business use only. Any property or asset used as security may be repossessed or forfeited if you do not keep up repayments on any debt secured on it.
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[i] Anderson’s Agflation update April 2022
[ii] DEFRA March 2022
