Scottish farmers remain loyal to their banking providers but that loyalty is being challenged by rising charges according to a survey by NFU Scotland.

Ahead of a scheduled meeting with the main Scottish banks, NFUS has again surveyed its members on their ability to access bank finance and the cost of that finance.  There were 109 responses to the online survey.

The survey revealed that on average, respondents were paying an overdraft arrangement fee of 1.34 percent, with the fee peaking at 4 percent and as low as 0.31 percent.  On overdraft interest rates, the average was the Bank of England base rate plus 3.69 percent.  At one end of the scale, one respondent was paying base plus 8 percent while another was down to base plus 1.25 percent.

The survey also underlined the loyalty that still exists between farmers and their banks as 75 percent of respondents had been with their banking provider for more than 10 years and loyalty of 50 years or more was recorded. 

However, the 69 comments posted included several concerning examples of sharp practice and reduced customer care which had soured the relationship and prompted some to consider changing their lender.

NFU Scotland Chief Executive Scott Walker said:

“The banking issues raised by Scottish farmers through this survey appear to be no different to the pressure being faced by all small businesses.  We will share the survey results with the main Scottish banks and we will be meeting them soon to discuss their relationship and treatment of Scottish farm businesses.

“It is clear that Scottish farmers are loyal to their banks with the majority of respondents having banked with the same institution for more than 10 years.  The survey also showed that the majority of farmers who responded have had no problem accessing bank credit.

“However, the cost of accessing that credit has increased – in some cases by huge levels - over the last 12 months and a very wide range of interest rates are being charged.  Several of the respondents have found a sharp change in the attitude of banking staff in recent times.

“There is also a strong feeling among respondents that the farmers are paying the price for the reckless availability of credit that brought so many of the banks to near collapse.  That has upset some, as agriculture remains a stable and safe sector to lend to.   Given the traditional loyalty of farmers to their bank, it is reasonable to expect that loyalty to be reflected in service, the fees paid and the access to credit.

 “We hope banks appreciate that agriculture is in a better place than many business sectors but is highly capital intensive and can face real spikes in both costs and returns.  

“On the basis of this limited survey, many farm businesses are still able to secure credit, but having to go through more hoops to secure it and at a higher cost than before. Both for the rural economy and wider economic activity, we would want banks to play their part in easing this spiral of pressure.” 

Notes to Editors

There were 109 responses to the NFU Scotland on line survey on banking.  Of the respondents, 80 were owner-occupiers and 29 were tenant farmers.  A summary of the questions and responses follows:

1. “Which bank do you do the majority of your business with?”

• Clydesdale – 40
• RBS – 37
• Bank of Scotland – 22
• Lloyds – 5
• HSBC – 2
• AMC – 1
• Barclays – 1
• Halifax – 1

2. “How long have you banked with them?”

• 1-5 years – 14 (13%)
• 5-10 years – 13 (12%)
• More than 10 years – 82 (75%)

3. “Do you have an overdraft facility?”

• Yes – 100 (92%)
• No – 9 (8%)

4. Overdraft limits

• Lowest – £5,000
• Highest – £1,000,000
• Mean – £138,882

5. Overdraft arrangement fees

• Lowest – 0.31%
• Highest – 4%
• Mean – 1.34%

6. Overdraft interest rates

• Lowest – Bank of England + 1.25%
• Highest – Bank of England + 8.75%
• Mean – LIBOR/Bank of England + 3.69%
  (Note – 91% of respondents are on Bank of England Base Rate (BoE), 2% are on LIBOR (L) and 7% weren’t sure if interest was pegged against BoE or LIBOR).

7. “Have you been refused credit from any bank in the last three months?”

• No – 80 (80%)
• Yes – 14 (14%)
• Not applicable – 6 (6%)

8. “Has your cost of credit changed in the last 12 months?”

• Yes, it has gone up – 55 (56%)
• No, it is unchanged – 36 (36%)
• Yes, it has gone down – 4 (4%)
• Not applicable – 4 (4%)

Ends

Contact Bob Carruth on 0131 472 4006