The second of three mini reports into farm business banking focusing on day-to-day banking has been released today. The main features covered are bank charges, current accounts and banking services.
The first report can be found here:
http://www.nfuonline.com/Our-work/Economics-and-International/Farm-economy/NFU-banking-survey/
Farm Businesses know there’s no such thing as free banking
For many, personal banking in general is a relatively costless service. People can open a current account, arrange an overdraft facility and make and take cheque payments, direct debits and cash without having to pay anything. For many businesses these services can cost money. The evidence compiled by the NFU shows these service cost have been rising rapidly for farmers and in many cases have counteracted reduction in interest rates.
Bank charges have increased dramatically since 2008. The typical farm turning over £250,000 in 2009-10 paid 13% more in bank charges than in 2008-09. 12.3% farmers and growers use personal bank accounts for business banking, to get around the charges however the majority do have business specific accounts. This is probably due to the cost of borrowing on overdrafts using personal bank accounts.
According to the survey 5.9%, 3,200 of farmers and growers across England switched current accounts over the past two years. A further 7.4%, 4,140 across England are currently considering switching. This represents a significant amount of business and it is likely the number considering switching has risen because of changes in charges by banks over the last few years.
A significant barrier to switching current accounts is how easy or difficult farmers and growers feel the process will be. Of those who had switched in the past two years, 22.8% of farmers found switching difficult. This compares to 38.9% of farmers who haven’t switched, who expect it to be difficult. Farmers and growers who haven’t switched think it will be harder than it actually is.
Horticultural businesses pay the largest bank charges, LFA grazing the least. The services required from banks vary for example horticultural businesses tend to have more employees therefore need to make large numbers of regular payments.
Even with innovations in telephone and online banking, 70.7% of farmers and growers still think branches are very important for their businesses. Even 57.9% of farmers and growers who use online banking think the branch is very important for their business.
What is the NFU doing about day-to-day banking for farmers and growers?
The NFU will be taking the results to the major banks to find out why there’s so much variation in bank charges levied on different farming sectors. It will also provide feedback on how the banks customers rate their switching process.
Members can read the full report by clicking on the attachment to the right
- Tim Mason - 27/06/2011
Is there a breakdown of which banks are 'pulling the plug' on farms and those that are willing to take farms on? We have just changed from Natwest to Lloyds TSB after being with Natwest for well over 50 years. Their solution to our trading problems (as they saw them) was to appoint 2 'special Relationship managers' whose first decision was to double account fees and offer no extension to our facility to get us past harvest - this was in spite of the fact that they held 3 times the security to the 'exposure to risk' they had. Lloyds on the other hand were more than willing to accept us as customers at very acceptable terms. The only downside was the expense of transferring security from one to the other (Natwest charge £95 per deed - which can add up when the farm is made up of several small farms acquired in the past).