Network Rail receives flak for selling off Britain’s railway arches
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Network Rail has been criticised for its decision to sell off rail arches for £1.46bn to two investment groups over concerns that small businesses operating out of the premises will have their rents hiked.
Private consortiums Telereal Trillium and Blackstone Property made the purchase under a leasehold agreement, allowing access rights for the operation of the railway. Network Rail plans to spend the cash on infrastructure upgrades.
The deal covers Network Rail's commercial estate portfolio of around 5,200 properties, of which the majority are converted railway arches.
David Biggs, managing director, Network Rail Property, explained: “We are proud to have fostered so many small, independent, diverse businesses and communities across the country, [but] ultimately our role is to run, improve and grow the railway, and managing these properties isn’t essential to that. The new owners will invest in and grow the estate, and we can focus on our core business of running the railway.”
In recent years rents have been rising in the commercial spaces underneath railway arches, which are typically cheaper than other premises.
Companies occupying the spaces are now concerned that they may be priced out altogether with the latest sell-off.
General Secretary of the Transport Salaried Staffs’ Association (TSSA) Manuel Cortes said: “Mark my words, this is another example of the Transport Secretary, Chris Grayling’s lack of understanding when it comes to running our railways.
“He thinks he gets the price of everything but again he is showing he understands the value of nothing and railway safety has more in peril today than it was yesterday. It’s another Grayling disaster in the making.
“We will come to regret and very soon the sale of yet another national infrastructural asset which really make no business sense for the public purse.
“The renting out of arches space to small businesses has been generating around £150m per year. So over the next ten years, even with static rents, that’s £1.5bn which would have been a strong source of cashflow for Network Rail. It’s also £400,000 more than the £1.46bn sell-off price. So we the public, as tax payers are being double-short changed.
“But more than that, arches are vital structures underpinning our entire rail network and they require good maintenance to ensure they stay safe. Our engineering members warn us they are not yet satisfied that Network Rail have ensured adequate inspection access to those arches now they have been sold off.
“They are also concerned that without the cashflow generated by the profitable arches - precisely the ones that have been sold-off - there will be less regular funds to properly maintain our railways so more delays to rail journeys are sadly on the way. It really should not be allowed to go ahead.”
Mick Cash, general secretary of the Rail, Maritime and Transport union, said the sale was a “desperate one-off measure” which had the “dead hand” of the Department for Transport over it.
He added: “Once these properties are gone, they are gone and any organisation forced to flog off an important revenue stream for a short-term capital gain to plug financial gaps is in trouble.
“This is an ill-conceived and panic driven measure with long-term consequences.
“The plan also stinks of creeping privatisation where the family silver is knocked down to speculators regardless of the operational, security and logistical consequences of selling off the land assets beneath the tracks.”
However, Graham Edwards, co-founder and chairman of Telereal, said the new owners see the purchase as a long-term investment.
“We are tremendously excited by the prospect of working with [the arches’] entrepreneurial tenant base – made up of car mechanics, bakeries, micro-breweries, restaurants, and just about every type of business you can think of,” Edwards said.
“We will be investing in the portfolio for many years. We believe that the long term success of this portfolio rests on strong relationships with our tenants, as well as with local communities and local government.”
Lord John Bird, founder of The Big Issue magazine and a vocal backer of the campaign to save the arches, said: “As concerns continue to grow around the future of our high street, it’s more important than ever that these new owners work with the tenants of these unique and enterprising small businesses by valuing, enhancing and capitalising on their vast social and economic impact.
“Tenants must ensure these new owners don’t snitch on the deal. Throughout this process, the lack of consultation has been appallingly medieval.
“We rightly expected much, much more from a Government that says it’s on the side of Britain’s small businesses.”