Business Banking Insights - Summer 2017 by Lesley Brydon

Business Banking insights Summer 2017

Agriculture sector remains resilient despite economic uncertainty Agribusiness in focus CYBG’s £6bn lending pledge Fuelling Britain’s SMEs

Business Banking insights • Summer 2017

Contents Introduction

03 In Focus: Agribusiness

07 In Numbers

Welcome to the first edition of our Business Banking Insights newsletter.

How we’re helping specific agricultural businesses achieve their potential

Clydesdale & Yorkshire Banks target £6bn of new lending to support growth amongst Britain’s SMEs

Each quarter we will provide in-depth insight into a business sector or industry and an update on some of our biggest banking deals.

05 T&O Harrison

We hope you enjoy it.

04 Andrew B Young

Renewable energy key to diversification success A new generation provides investment inspiration for family farm

06 King Stone Dairy Farm

Artisan products key to business strategy for Oxfordshire farm

09 Shetland Mussels

Mussel supplier set to double production as part of expansion

10 P2i

Pioneers of liquid repellent technology set for growth

07 Business Banking Roundup 11 Geoghegan Group Our £1bn support for Small and Medium sized Enterprises across the UK

07 In Practice

Care home develops a new site in Surrey

Business Banking insights • Summer 2017

IN FOCUS: AGRIBUSINESS Brian Colquhoun Head of Commercial Banking and Agriculture, Clydesdale and Yorkshire Banks

Click here to view our video (Video will open in your web browser)

Agriculture sector remains resilient despite economic uncertainty Despite the uncertainty generated by the election of a minority government and lack of clarity regarding our future trading relationship with Europe, I remain optimistic about the state of the UK’s agricultural sector. You’re probably asking, why? After all, total income from farming, which is defined as income generated by production within the agriculture industry across the UK, fell 7% last year, as compared to 27% in 2015.** My chief reason is that despite all the political and economic shocks the sector has faced over the last few years it has remained incredibly resilient. What’s more, the decline in income from farming slowed last year. One of the positive side effects of the ongoing uncertainty has been the slide in the value of the pound, which has fallen 15% since the EU referendum last June. Predictably, this has made British exports of agricultural produce more competitive on the international markets in the short term. At the same time, the price of agricultural products has risen in the past year, which has also helped British farmers. Indeed, what we have witnessed at the farm gates over the past year already tells a positive story, with wheat prices increasing from around £110 to £140 per ton since last June.** Notwithstanding the short term benefits for those farmers who currently receive their subsidy in Euros, given the current strength of the Euro, one major challenge for the sector will be adapting to a world without EU farm subsidies which currently make up a significant

proportion of farmers’ income. This issue looms large for agricultural businesses and they will want assurances from the Government that alternative income streams will be available once the UK formally leaves the EU. With agricultural businesses so dependent on factors that remain out of their immediate control, many are continuing to work proactively to establish new revenue streams. At Clydesdale and Yorkshire Banks, we work with many farmers who are diversifying into renewable energy, technology or research & development to generate new income streams. Last year we experienced a 15% rise in loans made to the agricultural sector. Agriculture remains the foundation of many regional economies and through our £6 billion lending commitment we are continuing to provide funding to many innovative agricultural businesses throughout the country.* One such business is agricultural and amenity contractors T&O Harrison based in Merseyside, which specialise in one-pass direct drilling and all aspects of tree work and site clearance. They secured a six-figure sum from Yorkshire Bank to fund the development and installation of a biomass boiler and solar panels, both of which will provide increased income to the farm for at least 20 years. The boiler also heats on-site offices, the workshop and the farmhouse.

It is these kinds of projects which will help agricultural businesses work to their strengths and provide secure and stable income streams in the years to come. Many farmers up and down the country are demonstrating genuine entrepreneurial spirit by diversifying into new areas and we are fortunate to be working with many of them. There is no getting away from the fact that times have been tough for the agricultural sector over the last few years. However, given the challenges, it has adapted extremely well. Ultimately, whilst there has been significant debate around the UK’s economic future there is a limited amount farmers can do to tackle external issues such as Britain’s future trading relationship with Europe or the future of farm subsidies. Having said that, my observation is that many agricultural businesses are being very proactive, diversifying their businesses and looking to engage new customers from across the world. So, with this in mind, I think the sector can remain cautiously optimistic about the future.

Brian Colquhoun 07764 145 977 Brian.Colquhoun@cybg.com

* Terms and conditions apply. All lending is subject to status and applicants must be aged 18 or over. Please note that security may be required. Any asset used as security will be at risk if you break the agreement and may be sold to repay debt. ** Source: Defra 2017: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/615850/agriaccounts-tiffstatsnotice-25may17.pdf

Business Banking insights • Summer 2017

IN FOCUS: AGRIBUSINESS Family-owned since 1967, Andrew B Young made a name farming cattle and crops, but turned to investment in renewable energy, opening up a new revenue stream for the business. The strategy of building renewable energy capabilities was born in 2016, when funding from Clydesdale Bank supported the construction of an anaerobic manure digester. After a careful seven month installation project, engines were running by August 2016. The farm and its owners haven’t looked back since. The digester brings both operational and financial benefits. Crops processed by the digester create a product with a far greater nutritional value than was originally expected. The digester has also been processing more crops than originally anticipated, meaning the farm has been able to save up to £40,000 per year on fertiliser, and reduce costs associated with the amount of farm land rented. Contact Andrew Denniss 07825 842 341 Andrew.Denniss@cybg.com

Renewable energy key to diversification success Throughout our partnership with Clydesdale Bank, they have been extremely supportive and open to new ventures. Whenever an opportunity has arisen, they have been very supportive. The bank manager has worked closely with us, shown interest and has been very forward thinking. James Young Farm owner

Business Banking insights • Summer 2017

IN FOCUS: AGRIBUSINESS

A new generation provides investment inspiration for family farm

Oliver Harrison, farm owner, gives Ross Clark, Yorkshire Bank business advisor, a guided tour of the recently installed solar panels

T&O Harrison, a family-run wheat farmer in Merseyside has demonstrated how investment can inspire all generations. The farm is currently progressing two major projects, following a six-figure funding package from Yorkshire Bank: the construction of a grain store with solar panels, and the installation of a biomass boiler. These are being managed by Oliver Harrison, who part-owns the farm alongside his parents, Thomas and Olive. The long-term financial benefits of the initiatives can already be seen. The grain store will allow the farm to expand its business by storing grain for another local producer. The solar panels fixed to the store roof will bring additional income to the farm for at least another 20 years, with power produced being used on-site and sold to the National Grid. The installation of the biomass boiler was completed in 2016, and it has already begun

generating income for the farm. The majority of heat will be used to dry grain and woodchip. The boiler also heats on-site offices, the workshop and the farm house. Oliver Harrison, Owner, T&O Harrison, said: “The service we have received from the bank has been brilliant. They are able to give us decisions quickly, which really helps in the day to day running of our business. There’s no long chain of approvals when you need something done and it’s this personal approach that we really value. You know you’re dealing with a human, not a computer.” Contact Ross Clark 07468 707 663 Ross.Clark@cybg.com

There’s no long chain of approvals when you need something done and it’s this personal approach that we really value. You know you’re dealing with a human, not a computer. Oliver Harrison Part-Owner, T&O Harrison

Business Banking insights • Summer 2017

IN FOCUS: AGRIBUSINESS

Artisan products key to business strategy for Oxfordshire farm Haine Famers of King Stone Dairy Farm, Oxfordshire have an on-site cheesemaker, providing real differentiation in a crowded dairy market.

Images © King Stone Dairy

We have already built a strong working relationship and look to continue this into the future and share our knowledge while building our business. David Haine Owner, King Stone Dairy Farm

The 300-acre farm has a herd of Brown Swiss crosses powering a successful dairy business which has been passed down three generations. It is also home to Rollright Cheese, which uses the farm’s milk to create an award-winning, washed rind cheese based on Reblochon. The product was winner of ‘Supreme Champion’ at the Artisan Cheese Awards 2016, the ‘Gold Medal’ in the New Cheese class at the Great British Cheese Awards 2016 and is sold in retailers across the country. Funding received from Clydesdale Bank will allow the farm to expand the cheese business

and continue to diversify income streams into artisan production as well as raw materials. David Haine, one of the owners of the farm commented that he is “very pleased to have the support of Clydesdale Bank and I look forward to working with them. We have already built a strong working relationship and look to continue this into the future and share our knowledge while building our business through Rollright.”

Contact Justin Hayward 07766 504 473 Justin.Hayward@cybg.com

Business Banking insights • Summer 2017

BUSINESS BANKING ROUNDUP

Fuelling Britain’s SMEs Click here to view our video (Video will open in your web browser)

Despite uncertainty over the economy and Britain’s future trading relationship with Europe, the past six months have been extremely busy for Clydesdale & Yorkshire Banks, with over £1 billion being provided to help drive the growth and investment plans of a range of small and medium sized businesses (SMEs) across the country. These finance packages have ranged from the tens of thousands to tens of millions of pounds, from Scotland to South East England, providing much needed capital to businesses as diverse as care homes to farms and technology companies.* What all these funding deals have in common is that they are fuelling the growth of SMEs across the country – providing essential finance for the hiring of new workers, investment in infrastructure or diversification of businesses into new areas. We have provided funding to almost 4,000 businesses, across almost every sector, with a spread of loans across all parts of the economy, demonstrating our commitment to supporting the success of businesses across the UK. There is no getting away from the fact that Brexit and the election of a minority government are considerable challenges, but the activity we have seen in the last few months tells us that the business community remains ambitious and continues to adapt to the new world.

Business Banking insights • Summer 2017

IN NUMBERS

Clydesdale & Yorkshire Banks target £6bn of new lending to support growth amongst Britain’s SMEs over the next three years Over £2bn of funds available for businesses in 2017 from Britain’s biggest regional bank, with at least £1bn focussed in our core regional markets FUNDING TO FUEL GROWTH IN 2017

£1bn £350m UP TO

£200m £650m

to support the day-to-day finance needs of SMEs

to provide facilities for medium sized businesses seeking finance for growth

in SME lending for the agriculture sector to support the UK’s rural economies for sectors that provide lending for major property purchases, financial services and the UK’s industrial base

SME SURVEY Findings based on 750 SMEs

52% 41% 35%

2,000+

number of mediumsized growth businesses that received funding from CYBG in the last 12 months SCOTLAND

of SMEs plan to use bank finance to invest in either new infrastructure or capital equipment or plan to buy or refurbish premises

expect to seek a loan in the next 6-12 months say access to finance is the key factor that will help them grow and prosper

£300m+ NORTH WEST

£300m+ MIDLANDS

of SMEs are seeking funds to hire new staff

This document may contain forward looking statements, based on assumptions and/or targets. Actual results may differ. Certain figures used are subject to rounding. This document does not constitute an investment or research recommendation, or any other form of investment advice, and no reliance should be placed on, and no liability or responsibility is accepted for, any information contained in this document in respect of any investment decision. All lending decisions are subject to status.

All figures Q2 2017

YORKSHIRE

think access to bank finance is challenging

FUELLING EMPLOYMENT IN OUR REGIONAL ECONOMIES:

24%

£400m+

20%

£100m+

Business Banking insights â&#x20AC;˘ Summer 2017

IN PRACTICE

Mussel supplier set to double production with multi-million pound finance package Shetland Mussels is already one of the largest suppliers of mussels to restaurants, wholesalers and retailers all over the UK. In order to take expansion plans to the next level, they have recently received a multi-million pound finance package from Clydesdale Bank, which will be used to purchase new production equipment. In such a specialised sector of aquaculture, the use of new equipment will allow harvesting to increase from 948 to 2434 tonnes of mussels by 2020. But it is not all about production, as the new funding will also allow the business to hire more staff in Shetland, where they are already a major employer. Contact Graeme Johnston 07739 656 978 Graeme.Johnston@cybg.com

Upon consulting with Clydesdale Bank, we immediately found that they understood our business model and growth aspirations. The support and commitment that the Bank has provided will enable Shetland Mussels Ltd to fully action its development plan by 2020. Richard Tait Owner & Director, Shetland Mussels

Business Banking insights • Summer 2017

IN PRACTICE

Global leaders in waterproofing technology set for expansion

P2i are pioneers of a liquid repellent technology used by smartphone manufacturers to waterproof devices, and are ready to take the next step in their growth. With their headquarters in Oxfordshire, P2i has already applied its innovative water resistant nano-coating solution to more than 175 million smartphones. Globally, 900,000 smartphones are damaged by liquids every day, at an estimated cost of $96bn to the mobile ecosystem every year, according to analyst firm IDC. Liquid damage is the second most common type of phone damage, behind smashed screens. The £10 million financial package from Clydesdale and Yorkshire Banks will be used by P2i to fund a period of forecasted growth and allow them to expand their business even further. The firm already has 142 members of staff and 123 granted patents. The deal was delivered by the bank’s Growth Finance team, a specialist UK-wide team that provides senior lending for innovative and rapidly expanding businesses with strong intellectual property assets and existing venture capital.* Ady Moores, Group CEO, P2i, said: “This significant funding is a continuation of our long-standing relationship with Clydesdale Bank. As an internationallyfocused business we are looking to expand our presence in Asia, where we already have facilities in Shenzhen and Taipei. Today, nine out of the top ten handset manufacturers come from this part of the world, so it is particularly important that we are able to service this market properly and take advantage of the business opportunities opening up there right now. Contact Usman Ali 07810 637 445 Usman.Ali@cybg.com

Business Banking insights • Summer 2017

IN PRACTICE

Care home group develop new site in Surrey Family owned Geoghegan Group are developing a new care home in Surrey, generating employment and increased capacity. The new home, built on the site of an existing Geoghegan Group residential property in Woking will be larger, expanding from 39 beds to 57. Support for the development was provided by a £13 million finance package from Clydesdale Bank. The project will involve careful phasing of building work over the course of two years to ensure minimal disruption to current residents. Employee numbers are set to increase, with the development creating 20 new jobs, taking the total number of staff to 80.

Geoghegan Group Director, Charles Geoghegan, said: “The finance package that we have received from Clydesdale Bank underlines their willingness to look at different types of projects and find bespoke funding solutions for their clients. The expert support they offer is what attracted us to them and we are already working closely with them to progress our exciting project.” Contact Johnny Rowe 07799 865 449 Johnny.w.Rowe@cybg.com

This document has been prepared for information purposes only by Clydesdale Bank PLC (â&#x20AC;&#x153;CBâ&#x20AC;?) together with input from selected third parties. Some of the information contained herein has been prepared by CB and some has been provided by those third parties. CB has exercised reasonable skill and care in drafting and collating this document and, so far as it is aware, the information and statements contained herein are based on sources it believes to be accurate at the time of issue. However, the information is indicative and prepared for information purposes only and does not purport to contain all matters relevant to a particular situation, investment or financial instrument. The information is not advice so is not intended to be relied upon and in all cases anyone proposing to use the information should independently verify and check its accuracy, completeness, appropriateness and reliability. You should consult your own tax, legal, accounting and business advisors before engaging in any transaction. So far as laws and regulatory requirements permit, CB, each member of the CB group of companies and each third party contributor to this document does not warrant or represent that the information, recommendations, opinions or conclusions contained in this document is accurate, reliable, complete or current; and (ii) excludes its liability for any and all loss or damage suffered by you as a result of your reliance on any of the information contained within this document. Yorkshire Bank is a trading name of Clydesdale Bank PLC which is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. (Financial Services Register No. 121873). Credit facilities other than regulated mortgages and regulated credit agreements are not regulated by the Financial Conduct Authority. Clydesdale Bank PLC. Registered in Scotland (No. SC001111). Registered Office: 30 St. Vincent Place, Glasgow G1 2HL.