NatWest Group has announced an additional £1.25bn lending package to the UK farming community to help it deal with cost pressures and to aid the transition to more sustainable practices.
Agricultural businesses - of which the banking group has around 40,000 as customers - are facing inflation of over 25% and price hikes in the region of 200% for fertiliser and fuel, alongside the affects of Brexit and the war in Ukraine on supply costs.
NatWest will deploy 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.
In addition, 150 of the group’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 per tonne - up from £280 last May, 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, with electricity up 40%.
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.”
Last month, NatWest published a white paper into the need for a sustainable transition in the sector, which found 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 farming system.
Green loans with no arrangement fee are open to applications from eligible UK businesses with an annual turnover of less than £25m which are seeking to acquire assets that fall within the eligible list developed by the bank.
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