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Level Playing Field


Mick and Maggie

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I get ever more intrigued by the whole BW/CaRT/BWML story. So I started to do some background reading. I started by reading some of the older press articles. I came across one article which highlighted a side of BW and cataloguing its headlong rush into acquiring marinas. It actually provides some interesting insight from around the time that the new marinas were being touted.

The article of interest is entitled 'Nationalisation by Stealth: British Waterways acquisition of canal marinas, by Tim Coghlan managing director of Braunston Marina. The article was published in Boating Business on the 1st of May 2003.


The main thrust of Tim's article was: It is a simple fact that for at least the last five years every single canal marina that has been sold - of any modest size or more - has been mysteriously been acquired by British Waterways (BW), and without those marinas first being offered on the open market. It is because of their deep pocket from inner city waterside property developments on land acquired on nationalisation in 1948, that BW has been able buy up everything that has - dare I say - come on the market. Robin Evans, [who was at the time] BW's new chief executive, recently admitted in a press interview that BW had now acquired 17 marinas, only building two of that total. Thus in a few years, from a standing start in the mid 1990s, BW has become by far and away the largest marina operator on the canals. Taking on board the possibly thousands of canal linear moorings which it already operates, BW is now effectively in a monopoly position on several canals. BW also now controls most of London's Docklands and, having acquired Cumberland Basin, it now has a complete monopoly of moorings - basin and linear - in central London, as boaters are already discovering, with moorings prices going through the roof. It is only in west London that the private sector still has a significant presence. And this will soon be challenged by the new large BW Marina at Cowley.

However, there was one phrase used in the article that sticks out more than any other. As part of the interview with Evans, he said 'The issue is competing with the private sector on a level playing field.' That was just over eleven years ago. BW/CaRT now hold as close to a monopoly position over the inland waterways today as its possible to get. But I wonder if the Evans statement still holds good today. Is the playing field level?

Tim went on: For BW, marinas are about as good a way of trading as any. This is now more so, following its recent successful challenge to paying rates on its canals, including astonishingly, its marinas - on the basis that the canals as a whole are loss makers. It is incredible that a private sector operator has to pay substantial rates on its premises, even if it leases them from BW, but if BW operates that same marina, no rates are payable! And, of course BW, does not pay itself a connection charge.

You can read the whole article Here

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As the owner of a private marina, Tim Coghlan has a strong vested interest, but yes it does seem that back then BW were intent upon buying up marinas and used their monopoly in some areas to push up prices. But there are several flaws in the argument:

 

BW didn't pay connection fees to itself, but while the marinas were in the same organisation there was no point. If they were charging similar mooring fees to other marinas, effectively the connection fee was part of the profits transferred to the rest of BW. If BW mooring fees were lower (were they?), that would be sharp practice, rather like when British Airways temporarily cut their transatlantic fares and traded at a loss on those routes in order to drive Laker Airways out of business.

 

Since TC wrote that article, BWML has of course been separated as a company owned by the CRT and most of its marinas enjoy the advantage of not paying NAA fees. That's not a level playing field if BWML uses its size to undermine rivals as BA did, but as has been frequently pointed out in Dispute at Pillings, anyone setting up a new marina knows when they plan it that they will have to pay NAA fees, so there is no moving of goalposts.

It's still the case however that we can regard part of BWML's profits remitted to CRT as effectively being a NAA fee in all but name.

 

It's OK by me that CRT doesn't have to pay rates on its canals, given that they're a non profit-making body and there is a national consensus that canals are a Good Thing and should be preserved. Is it still the case now, since BWML was separated, that private marinas pay business rates but BWML doesn't? That would definitely be unfair. I'm guessing he meant business rates and that council tax is applied in the same way to residents of any marina, with enforcement just depending on the attitude of the council in question?

 

I think it's desirable that any residential moorings in central London are much more expensive than elsewhere. It raises money to pay for maintenance of the canal network, and anyone who thinks they deserve to get one at the same sort of price they'd pay in say Birmingham is living in a fantasy world. If these moorings were priced so low, demand would vastly exceed supply because half of London would be keen to live cheaply in a prime location. How on earth then could the limited supply of moorings be fairly allocated? I'm sure those already on one would say "first come, first served" but then they would, and why should everyone else effectively subsidise them?

 

I have nothing against people who want to live cheaply on the canal system, indeed I think it's good that many do, it's all part of the rich variety of the system. But they can't expect to have their cake and eat it by hanging around cheaply in areas with high demand, whether on a residential mooring or by moving about just enough to stay within the much-discussed CRT rules based upon the 1995 Act. Something's got to give if these areas are not to become so clogged up with boats that navigation is no longer possible, and CRT find themselves with little alternative but to enforce their rules and to hope no-one can make a successful legal challenge.

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You can read the author's name it gives you more information than the x hundred words in the article.

 

I personally think that CRT need the money and if they owned every single mooring connected to the waterways and charged market rate for them I think it would be a Good Thing.

Cut out all the profit takers. The canal system is going to need shed loads of money over the next couple of decades to keep everything working.

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Is it actually a matter of public record what connection charge Tim Coghlan himself contributes for Braunston Marina, and hence whether he is actually paying at the rate that would apply for a new marina with a new network connection agreement. (Simple question to which I have not researched the answer).

 

The concern to me is that someone in his situation continues to oppose the creation of new marinas, (and I obviously don't just mean BWML ones), whilst continuing to expect to charge absolutely top rates for their own one.

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I think Peter X makes some very good points.

 

There's another aspect to this though, a private marina operator will obviously only set up in an area where there is an almost guaranteed market. BWML presumably have a wider brief and because of their size and their terms of reference will be able to run marinas even if they are not making money. If we want diversity on the network this is the only way to achieve it.

 

I have in mind developments like Plank Lane on the Leeds Liverpool - huge amounts of public money have been put into creating a marina basin but seemingly no-one in the private sector wants to take it on. The only hope is that at some point BWML will step in.

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When you think about it, buying and/or developing marinas is actually a pretty good move on the part of CRT.

 

Quite frankly, I think CRT, or whoever is in charge of maintaining whatever parts of your rivers and canals should, between fees, licenses, etc. AND tax funds from the general fund, be able to pay to keep everything in tip-top shape. Unfortunately, government is shirking its responsibility and CRT has to look for other means of an income stream. If it takes the money it is given/raises and spends it, it is gone forever. If it takes that same money and invests it, it can show a return forever, and ultimately yield many times the value of the original investment, especially when you figure the canals will be there 200 years from now, and probably 500 years from now. In these early years of CRT, it is imperative that CRT invest to guarantee a perpetual income stream.

 

Investing in marinas fits right in with CRT's business, and they can live with low-performing marinas that other marina operators might find borderline. Take Pillings Lock Marina, for example, since so much is known about it. PLM is a marina that cost about £4million to buy and build, and is probably worth £2.5million to £4million right now, depending on a number of variables, but, for this example, let's say CRT could get it for £4million. The marina, if I recall, has around 300 moorings and seems to have been about 70% full. Estimates of the rent PLM was receiving were around £400,000 to £500,000 Per Anum. Those are just slip rents. There should also be rent from a ship repair business on site and also a restaurant. The apartment on site should be used by the marina manager as his/her residence.

 

The operators of PLM claim that PLM has not been profitable because they have not achieved the high occupancy rate they had hoped for. At the same time, they financed the lion's share of the purchase and development costs, so PLM is making some pretty hefty loan payments. If CRT were to (hypothetically) take over PLM, they would pay £4million cash and not be saddled with any loan/interest payments. They could offer the marina management to a husband/wife (husband/husband - wife/wife - who knows these days, or cares) team and lease the cafe to someone who will pay them rent for the building and equipment and run the cafe themselves. Bottom line to CRT, after salaries, maintenance and so on would probably be around £300,000 net in the early years, or a 7.5% return on investment. The ROI would go up every year as rents were increased due to inflation. CRT would have its original £4million investment back in 12 - 14 years, and from then until eternity all income is new money. Eventually it would be hoped that CRT would have enough income to cover all necessary maintenance and repairs on the rivers and canals and to keep them in excellent condition.

 

The benefit of this to the boaters, in addition to the benefit of well-maintained canals, is that CRT may be able to keep a place like PLM open, where private owners simply could not. Having this marina space available at fair market rates would benefit all boaters, would it not? It would seem, then, that CRT owned marinas system wide would be something boaters should be in favor of. As long as they keep their rates at fair market value, and don't try to undercut private marinas, then private marinas shouldn't have any room to complain.

 

That's my opinion, looking at this from a distance. It seems CRT owned marinas could be a good thing for boaters in general.

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Is it actually a matter of public record what connection charge Tim Coghlan himself contributes for Braunston Marina, and hence whether he is actually paying at the rate that would apply for a new marina with a new network connection agreement. (Simple question to which I have not researched the answer).

 

The concern to me is that someone in his situation continues to oppose the creation of new marinas, (and I obviously don't just mean BWML ones), whilst continuing to expect to charge absolutely top rates for their own one.

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I think Peter X makes some very good points.

 

There's another aspect to this though, a private marina operator will obviously only set up in an area where there is an almost guaranteed market. BWML presumably have a wider brief and because of their size and their terms of reference will be able to run marinas even if they are not making money. If we want diversity on the network this is the only way to achieve it.

 

I have in mind developments like Plank Lane on the Leeds Liverpool - huge amounts of public money have been put into creating a marina basin but seemingly no-one in the private sector wants to take it on. The only hope is that at some point BWML will step in.

 

 

I was speaking to a marina operator the other day. ( Not TC). At the moment he reckons demand is very patchy. One of his newer marinas is at 40 % occupancy, and is losing money another has a waiting list of over 100% of capacity. Cutting prices doesn't seem to help as much as improving facilities does.

 

BWML have a brief to make money, and there are rumours that they are not doing so well enough to satisfy their owners. I have even heard that CRT are thinking of selling off BWML. The capital raised can apparently be better invested elsewhere. Certainly I would not like to see a CRT (or anyone else) monopoly of moorings- that way lies unaffordable moorings and probably a major NCCC problem with thousands of boats on the towpath because they can't afford moorings and the boat won't sell for lack of people who can afford the moorings.

 

N

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I have just noticed that forum comments about NarrowBoat World on the seismometer are reading 7.9 on the 'holier than though' scale. There was a 7.3 recorded on the 'attitude of superior self-righteously piousness' and it was off the chart on the 'hypocritically and sickening sanctimonious' scale. So no change there then.

 

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I was speaking to a marina operator the other day. ( Not TC). At the moment he reckons demand is very patchy. One of his newer marinas is at 40 % occupancy, and is losing money another has a waiting list of over 100% of capacity. Cutting prices doesn't seem to help as much as improving facilities does.

 

BWML have a brief to make money, and there are rumours that they are not doing so well enough to satisfy their owners. I have even heard that CRT are thinking of selling off BWML. The capital raised can apparently be better invested elsewhere. Certainly I would not like to see a CRT (or anyone else) monopoly of moorings- that way lies unaffordable moorings and probably a major NCCC problem with thousands of boats on the towpath because they can't afford moorings and the boat won't sell for lack of people who can afford the moorings.

 

N

The way in which BWML works is that BW/CaRT invests in it by way of share purchase. Profit is then returned by way of dividend.

 

The problem is that BWML never made the sort of returns that BW were telling marina developers was possible (15%-18%).

 

Indeed, investigation some years ago found that BWML had provided no returns via dividend to its parent up to 2011!

 

Since that date, investment has been stepped up but there is the suggestion that some of that investment is being returned as dividend.

 

However, BWML's poor performance is only part of the issue. Trustees are also concerned with the reputational damage that its subsidiary is causing.

 

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Is it actually a matter of public record what connection charge Tim Coghlan himself contributes for Braunston Marina, and hence whether he is actually paying at the rate that would apply for a new marina with a new network connection agreement. (Simple question to which I have not researched the answer).

 

The concern to me is that someone in his situation continues to oppose the creation of new marinas, (and I obviously don't just mean BWML ones), whilst continuing to expect to charge absolutely top rates for their own one.

 

This article by Jim Shead has some quite interesting info about Braunston Marina, especially this paragraph:

 

 

When he bought the marina it only had 22 years of the lease still to run. Later the opportunity arose to buy the adjacent factory and to develop housing on the site but Braunston Marina was the leaseholder and BW owned the freehold. It was a chance to tidy the whole site up, bring in main drainage and improve access to the marina. A deal was done with British Waterways so that BW sold the freehold and Braunston Marina sold their leasehold on the land necessary for the housing development. At the same time BW gave the marina company a new 75 year lease which gave BW a 20% share on the turnover of the moorings - increasing the rent by almost ten-fold but avoiding any rent reviews in the period of the lease, thus giving a more certain future for investment and planning development of the business. This is one of the factors that makes moorings at Braunston expensive. "We are the most expensive canal marina in the country," said Tim. A disadvantage they overcome by leading in the quality of service, so that although there are moorings five miles away that are 20% cheaper Braunston Marina is full.

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