British Waterways to keep canalside property
21 April 2009
British Waterways (BW) has welcomed the Government's decision to retain its canalside property portfolio endowment in single public ownership.
BW chief executive, Robin Evans said: “This is the right decision. It recognises the importance of British Waterways’ property portfolio endowment to the long-term sustainability of the waterway network, as well as the public value that we have unlocked from the estate.
“In the last decade canalside property has produced the largest source of commercial funding for our historic canals, rivers and docks, it has fuelled their recent renaissance, reinforced their importance to modern Britain, and helped to breathe new life into derelict watersides. This decision underlines the Government’s commitment to the long-term future of the waterways.”
The next step is for BW to work with governments on the practicalities of setting up a wholly-owned BW subsidiary to develop its property management further.
The decision follows a detailed study of British Waterways’ canalside property portfolio endowment in England and Wales by BW, Defra, Shareholder Executive and HM Treasury as part of the Operational Efficiency Programme asset management strand led by Gerry Grimstone, which reported to Ministers.
The study recognised British Waterways’ track record of success in delivering both revenue and wider public benefits from the non-operational property in its ownership. It recommended that the property should be moved into a wholly-owned BW subsidiary to enhance BW's focus on optimising returns from its property while also ensuring excellence in management of the waterways. The change will also increase clarity of the income generated from British Waterways’ property for maintenance of the waterways.
Ends
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Notes to editors:
The full text of the Treasury announcement is as follows:
“British Waterways is a public corporation, which owns and maintains over 2,000 miles of canals, rivers and supporting infrastructure in England, Wales and Scotland. It owns a significant land and property portfolio alongside the waterways, which assists British Waterways to deliver wider public benefits and urban regeneration. The study considered the parts of this portfolio in England and Wales.
“British Waterways has achieved significant growth on its canalside property portfolio. Under current economic conditions it is important British Waterways remains focused on maximising gains from its property while also delivering excellence in management of the waterways. This will be enhanced by managing the canalside property portfolio through a dedicated, wholly-owned subsidiary of British Waterways. The change will also increase clarity of British Waterways' current funding model. British Waterways and the Department for Environment, Food and Rural Affairs (Defra) will work closely with HM Treasury and Shareholder Executive to take forward this change and on the company's long-term strategy, which will consider the appropriate business model to provide a sustainable future for the waterways and ensure delivery of a wide range of public benefits.”
Also see: www.hm-treasury.gov.uk/vfm_operational_efficiency.htm
Background information
1. What is the OEP?
The Operational Efficiency Programme (OEP) is a HM Government (HMG) wide exercise to examine, as part of £30bn of savings targeted by the Comprehensive Spending Review 2007, a number of different workstreams to look at whether efficiencies and better value for money can be delivered.
These workstreams are:
1. Back office/ IT
2. Collaborative procurement
3. Asset management
4. Property
5. Local incentives/ empowerment
BW’s property portfolio endowment in England and Wales was examined as part of the Asset management workstream’s scope, along with a number of other HMG assets.
2. Who is in charge?
Gerry Grimstone, on behalf of HM Treasury, led the OEP Asset management workstream and reported findings to Ministers
3. Why was BW involved in the review?
BW’s property endowment was included in order to consider and compare the current and appropriate alternative future business models for delivering best public value.
4. Who carried out the review?
A joint working group comprising of representatives from Treasury, Shareholder Executive, Defra and BW undertook the review and submitted a joint report to Gerry Grimstone. They received advice and analysis from Deloitte, Gerald Eve and KPMG.
5. What did the report say?
The review recognised BW’s track record of success in delivering both revenue and wider public benefits from the non-operational property in its ownership. It analysed a number of different business models for managing the endowment and recommended that the property be moved into a wholly owned BW subsidiary.
6. What exactly is BW’s ‘non-operational property portfolio’?
It is the land and buildings which do not directly form part of the operating waterway network. Some of these were historically endowed to British Waterways while others were purchased by it as part of its long term investment to improve income for the network.
The portfolio comprises residential, industrial, office and leisure properties, all of which are managed to generate revenue for the upkeep of the waterways and to enhance its amenity and generate public benefit to local communities.
7. What is the value and scale of this portfolio?
It is currently valued at circa £500m, comprises around 1,600 individual properties generates an income of circa £45m per annum.
8. How does BW currently manage its portfolio?
The majority of the non-operational property is managed by the BW Property Director, Stuart Mills, and his team of specialist surveyors. They work with their BW colleagues, public and private sector parties to optimise the value created from the property. The portfolio is actively managed with land and buildings let out on long and short term leases, bought and sold to achieve best value and developed in joint ventures with public and private sector partners. The same team will manage the property in the new subsidiary.
9. What are the public benefits that the portfolio delivers in addition to the income for waterway maintenance?
BW manages its property portfolio to enhance the lives and economies of local communities. This public benefit is often in the form of the regeneration of waterside areas to create attractive, vibrant, mixed use developments where local people want to live, work and play. BW seeks to create increased public access, enhanced public open space and viable economic activity on its waterside land through the active management of its property portfolio.
10. What are the public benefits delivered by the waterways referred to in the statement?
BW has estimated that around £500m p.a. benefits are derived from the waterways largely from public use of the network and associated amenity and public health benefits, plus others connected to drainage/flood risk management
11. What will be the effect of creating a wholly owned subsidiary?
Under current economic conditions it is important British Waterways remains focussed on maximising gains from its property while also delivering excellence in management of the waterways. This will be enhanced by managing the canal-side property portfolio through a dedicated, wholly-owned subsidiary of British Waterways. It will also reinforce the focus of the BW property management team on optimising returns from the portfolio and provide improved transparency of the income generated for the maintenance of the waterways.
There will be no change in the day to day management of the portfolio and none of the current tenants and occupiers will be affected. The portfolio will become owned by a separate company with its own board. This company will be wholly owned by British Waterways so ultimate ownership and governance will not change.
12. Is the setting up of a subsidiary a first step towards disposal?
Full and partial sale of the portfolio were options considered by the review and were rejected having considered the impact on delivery of Government objectives. The subsidiary is being set up for the reasons given in the answer to question 11.
13. What does the statement phrase “will consider the appropriate business model to provide a sustainable future for the waterways” mean?
This refers to BW’s longer term strategy for closing the funding gap which they are due to launch shortly. Consideration will be given by Governments and BW in future to possible changes to the business model based on how the strategy progresses.
14. How does this help close the £30m funding gap?
We anticipate that the greater transparency and focus created by the subsidiary will further enhance the excellent performance achieved to date. The increased clarity on how the waterways are funded will help Government work with BW to consider the appropriate level of funding for BW in future spending reviews
15. Is this part of a wider review of BW?
BW has been considering its future strategy to close the existing £30m annual funding gap. It will shortly be announcing its 10 year strategy and starting a period of public consultation on it.
16. What happens now?
BW will work with HM Treasury, Shareholder Executive, and Defra on the detail of creating the subsidiary. It will take some months to set the company up and transfer all the legal title of all the properties.
17. What about assets in Scotland?
Scottish Government will now consider with BW if property assets in Scotland should also be included in the subsidiary
18. Where does the rest of the money come from to maintain the waterways?
BW generates over £100m of commercial income from its property, boat licences and moorings, wayleaves and utilities, and grants from other private and public sector organisations. A further £70m comes directly from Central Government via Defra and the Scottish Government.