19 May 1995

Competition hots up among lenders

By Tim Relf

LOWER borrowing by UK farmers has led to intensified competition among lenders to secure their business.

But farmers, traditionally seen as an attractive long-term proposition, are becoming increasingly selective in their choice of financier.

"Increased support payments and devaluations of sterling have improved many trading accounts over the past couple of years," says Henry Graham, who heads the agricultural team at the Clydesdale Bank. "In times of improved profitability, borrowers are in a better negotiating position."

Clydesdale has recently introduced a package offering a 2% cut in rates for the first year of loans to small businesses, which has proved popular among farmers.

The changing balance of power is also acknowledged by David Hughston, agricultural marketing manager at the National Westminster Bank. "Two years ago, farmers would say: I have an idea, will you lend me the money? Now they say: This is what I am going to do, what will you lend it to me at? "

Borrowers, he says, can afford to be more selective.

"The lending market has never been more competitive," agrees Jimmy McLean, head of agricultural services at the Royal Bank of Scotland. "Some farmers have a stable income outlook and are now looking to minimise risk on the cost side. In the past, banks tended to be reactive towards farmers. Now they are more proactive."

In addition to interest rates, competition among lenders is intensifying in other areas – notably quality of service.

But, though most lenders stress their doors are "open for business", the objective of securing quality customers and avoiding a "duff book" remains as strong as ever.

&#8226 Latest Bank of England statistics put total lending to UK agriculture at £6.26bn as at Mar 1995. One year earlier it was £6.33bn. &#42