Today we announced our investment into Oxbury Bank, the first agricultural bank to be founded in the UK since the 1920’s. When we first met the team a year ago, we were impressed by their vision and what they were building.
At Hambro Perks, we look to invest in leaders that are catalysing real change. In agriculture, we see a changing market where the needs of many are being left unaddressed. In agricultural digital finance we see a new vertical category of neo-banking emerging. And in Oxbury, we see a first-class team that are inherently able to deliver a positive impact across the United Kingdom at a rapid pace. We are proud to join them on their journey.
Of course, timing is everything so why do we think that now is the moment for Oxbury and agricultural finance can take the fintech market by storm?
When we look at investments, we think primarily in terms of quality of team, novelty and utility of product, and size of market, as well as the positive impact that they can have. In the case of Oxbury, it has unique advantages in each of these areas.
The Oxbury team combines sector knowledge, entrepreneurship and deep experience supported by the industry. The founding team knows first-hand how to build winning businesses in both fintech and agricultural technology — [Job title] James Farrar was previously CEO / COO at Clearbank and [job title] Nick Evans founded First4Farming (now ProAgrica — RELX). Since then, the team has grown with advisory support from experts in agriculture, commercial banking and financial regulatory bodies, and received backing from industry leading input providers, farmers and leading agricultural investors such as Wheatsheaf. Oxbury benefits from the input of individuals from across the supply chain, ensuring a product of quality that works for farmers first and foremost.
A product that brings smart technology to one of the most established industries
The British food and farming sector is worth over £120 billion and employs over 4 million people. It is a catalyst for the development of rural economies and is the UKs largest manufacturing sector, providing 64% of food eaten in the UK. 65% of all farm businesses in England now also have additional revenue streams such as farm shops or hospitality venues, generating an additional income of £740m[1]. However, conventional commercial banking has reduced financing provision to the sector by an estimated 27% over the last 10 years.
Oxbury was founded on the principle of understanding the needs of farmers from the ground up, and is dedicated to supporting the economy through sustainable financial provision for agriculture through its two key offerings:
· The Oxbury Farm Credit product is deeply integrated with the seasonal needs of farmers and growers enabling them to access credit on more flexible terms and to make it work in the specific circumstances of their business.
· The Oxbury Farm loan product adds to this, enabling farmers not only to better manage their working capital but to invest for the future through access to a secured lending platform.
It doesn’t stop here either. Oxbury enables depositors to invest in UK agriculture through its Savings products and continues to bring innovation to the lending space with dedicated products focused on the specific financing needs around fertlisers and dairy farming herds.
A large market with transformative structural change
Over the past 18 months, both the pandemic and the exit from the European Union have accelerated long-term structural changes to the British agricultural market and UK farmers. The removal of access to EU subsidies and labour, the long term consolidation of the farming industry and the impact of climate are just some of the major factors impacting the farming industry.
Just as the needs of the sector are greatest, the high street banks have pulled back from, despite agriculture having the lowest default risk of any major sector of the UK economy.
By the end of 2018 in the United Kingdom, long-term and short-term liabilities of farmers stood at £20.5 billion, and are forecast to increase by 3.2% year on year between 2021 and 2030. However, the Financial Times estimates that total government funding available to farmers will decrease by up to 30% over the same period[3]. To access a replacement funding scheme, many farms will need to invest in diversification projects such as eco-tourism and ESG projects. So not only will farmers have less grant funding available to them, they will also need further capital to invest in farms to unlock replacement capital. Oxbury has identified both this need and this opportunity, and is building a bank dedicated to solving for it.
Creating an impact for people and the planet
Beyond the value that Oxbury brings to people in the agriculture sector, it also aims to have a broader impact on the environment. The National Farmers Union has proposed a multi-pronged strategy to reduce farming’s contribution to emissions, and to help in offsetting the contributions of other industries. In order to meet these objectives, investment will be required in increasing productivity of agriculture, maximising farmland carbon storage and delivering bio-energy to boost renewable energy resources.
This plan is expected to play a key role in UK Government’s Net Zero 2050 plan, and will require considerable buy in from farmers and agricultural landowners to deliver on ambitious targets. Physical changes to agricultural land and practises will require long-term financing solutions, a core area where Oxbury can partner for good.
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