NatWest Group, the UK’s biggest bank for business with 40,000 agriculture customers, has today confirmed an additional £1.25bn lending package to the UK farming community. This is to help it deal with a variety of cost pressures, and to aid them in making the transition to more sustainable practices. The announcement builds on an earlier set of measures for the sector that was announced in June.

Businesses in the UK agriculture sector are facing inflation of over 25% 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.

In response to these pressures, NatWest Group is confirming £1.25bn of support to the farming sector. The bank will deploy this money through a variety of routes, including green loans, conventional loans, asset finance and increased overdrafts, to add to capital repayment holidays and reductions on small business loans that announced last month. 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.  In addition, 150 of the bank’s agriculture relationship managers have already been trained by the University of Cambridge and University of Edinburgh in sustainability so they can signpost farmers to the latest support on offer.

The bank’s analysis has found that costs on nitrogen fertiliser have increased almost threefold with the cost around £760[ii] per tonne – 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.

Ian Burrow, head of agriculture at NatWest, said: “The UK farming sector is currently facing unprecedented cost pressures, caused by a perfect storm of external factors. Inflation, supply chain challenges and the war in Ukraine are combining to cause steep rises in the cost of essential materials for the sector such as fertiliser and feed, on top of the broader challenge of fuel and energy costs that the wider economy faces. Together these impacts are putting intense pressure on profit margins, and we know the sector needs access to funding to navigate through the coming months.

“We are boosting our financial support for farmers by £1.25bn to help them through this challenging period. Our agricultural managers have in-depth knowledge of the sector, including being able to offer this individual financial support, where needed. We would urge affected customers to get in touch with their local agriculture relationship manager to discuss how we can help.”

Financing the transition in the agriculture sector

Last month NatWest Group 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.