A new specialist agricultural banking business, Oxbury, is set to launch in the spring to provide financial services specifically designed for British farmers and offered through their trade suppliers.
The company is backed by key agribusiness firms. The Oxbury founding distributor partners are AB Agri through its KW brand, Frontier Agriculture, Hutchinsons and Mole Valley Farmers, but the intention is to bring more partners on board – additional companies are already poised to join and more will be added as the bank expands across more agricultural sectors over time.
The initiative is the brainchild of Nick Evans and James Farrar, who are respectively managing director and chief executive of Oxbury FS plc. Mr Farrar developed Clearbank, launched in 2015, the first new UK clearing bank for 250 years.
Mr Evans was behind the pioneering First4Farming project to provide a common agribusiness back office portal in the early days of the internet and digital network technology. That company, founded in 2000, was acquired by the RELX division Proagrica in 2015.
Before F4F, Mr Evans had worked in agricultural finance at the Bank of Scotland. He saw the opportunity to combine his banking and IT skillsets to help the businesses that had benefitted from the F4F innovation to establish a dedicated source of agribusiness finance.
Mr Evans explains that the 2008 financial crash led to a severe tightening of the regulation around banking to prevent a recurrence of the overextended lending that caused the crisis. As a result, many of the market-leading agricultural finance providers of the time exited the market, while the clearing banks also restricted their lending to the sector. In turn, this has increased the pressure on trade credit.
Mr Evans says the need for an agricultural lending bank was recommended by last year’s Our Future in the Land report, which followed a two-year RSA inquiry chaired by Barclay’s chairman Sir Ian Cheshire. The report concluded that banking facilities for farmers in the UK do not function as they should – they are “cumbersome, poorly resourced with clunky legacy IT systems from the last century, and the low prioritisation of farming customers is reflected in thinly spread relationship management and limited IT investment”. The report recommended access to innovative finance to help UK farmers adapt to an uncertain future, with the backing of investors and lenders ready to proactively support them through appropriate financial products and risk assessment methodologies.
This gap coincides with Brexit and the phasing out of direct farm support payments which Mr Evans believes will accelerate the restructuring of UK agriculture, and increase the demand for diversification projects to optimise returns from land management.
The Oxbury project has been in development for two years and is ready to start operations once it has formal approval from the Bank of England’s Prudential Regulation Authority and Financial Conduct Authority (FCA). Getting to this stage has been difficult – Mr Evans says it has been one of the most complex and challenging processes in his professional life – but approval to commence operations is expected in May or June of this year.
The Oxbury business model is to be financially sustainable by raising deposits from savers to provide working capital and fixed term loans to farmers. The savings accounts will be guaranteed by the Financial Services Compensation Scheme and will be open to the farming industry and general public alike.
But the finance, whether term loans or working credit, will only be available to professional farmers who are current customers of the distributor partners – nominally those with at least 100 hectares of cropping or 100 cows, although the criteria will be flexible.
The term loans of 1-25 years can be used for a range of land-based investments – whether capital expenditure to improve farm productivity, for diversification projects, or climate mitigating measures such as renewable energy installations.
The short-term finance, branded Oxbury Farm Credit, will be the bank’s core product, continues Mr Evans. It is designed to provide a flexible, convenient and financially competitive alternative to a bank overdraft or trade finance when ordering farm inputs such as fuels, fertilisers, seeds, crop protection products and animal feeds.
The route to market is through Oxbury shareholder and partner businesses who will be able to offer Oxbury Farm Credit as a source of finance when taking orders, although the actual transaction will be carried out through a dedicated Oxbury regional relationship manager. Mr Evans is sensitive to the risk of misselling – there can be no incentivisation or pressure to use the Oxbury product – although he is confident it will be competitive with other sources of credit on the market.
The Oxbury board is chaired by ex-HSBC executive Huw Morgan, with its non-executive directors including former HSBC and AMC personnel. Frontier and Hutchinsons are represented on the board, but in governance rather than business roles to prevent conflict of interest, while senior trade figures Richard Banks and Brian Wells are founding investors.
The company currently has a head office staff based in Chester, although going forward the staff will include regional relationship managers to provide a human interface – market research found that farmer customers wanted a familiar face to deal with, alongside fast and fully accessible digital banking services. But most clearing banks now require a £2 million plus account to qualify for personal banking.
Starting the bank from scratch means there are no legacy costs, while Oxbury’s digital connectivity is based on proven integration software, notes Mr Evans, which also makes it easy for existing agribusiness users of F4F systems to join. Accounts will be accessed through secure online and mobile applications, using bespoke digital systems tailored to support the farmer to manage invoices, payments and cash through the system. This also reduces operating costs, meaning Oxbury can pay attractive interest rates on deposits while offering competitive charges for its credit facilities.
“Oxbury’s unique selling point will be its dedicated agriculture specialists who understand the industry; competitive rates; and fast, convenient operation through mobile and desktop devices,” concludes Mr Evans. “There is no other UK-based bank focussing its thinking, expertise and empathy solely on the agricultural market and the needs of British farmers.
“Oxbury’s founding team and investors are farmers and market leading agri-business companies that know the importance of farmers to the UK economy and rural communities. It is founded by the industry for the industry and is designed to work in partnership with long-established agri-businesses that farmers know and trust.”
David Hutchinson, chief executive of HL Hutchinson adds: “We know from our close and long-standing partnerships with our customers that Oxbury’s relationship-based approach to its customers matches our own approach and values. The current and longer-term trends in British agriculture are creating a requirement for new and innovative approaches to managing farm business cashflow and Oxbury is expertly and uniquely placed to provide flexible finance through its Farm Credit product.”
“Oxbury has designed an easy to use, intuitive solution through Oxbury Farm Credit which will allow our customers to buy their farm inputs and finance their payments at the optimum time that suits them,” states Frontier chief executive Mark Aitchison. “With our involvement in the whole supply chain from crop inputs through to grain outputs we understand the critical need for farmers to access flexible cash flow resources.”