Procurement · 6 August 2018

Government urged to protect archway traders ahead of £1.5bn Network Rail sale

Network Rail archway traders
Network Rail is expected to sell its commercial estate by the end of 2018

The government has been urged to intervene in the sale of Network Rail’s property portfolio to protect the archway traders facing an uncertain future.

Network Rail – the UK’s largest small business landlord – announced last year that it’s commercial assets would be sold by the end of 2018. For the archway tenants running enterprises, there is no guarantee of security once the property falls into new hands.

Four buyers are still in the running to purchase Network Rail’s £1.2bn-£1.5bn commercial estate, with a final sale expected by the end of 2018. Campaigners claim a sale would not guarantee the interests of thousands of traders operating in rail archways.

Pressure on the government to protect such businesses after the sale of Britain’s 4,455 railway arches has come from Guardians of the Arches and the New Economics Foundation, whose calls are heard as new research demonstrated the value of archway businesses to the economy.

According to findings from the New Economics Foundation, small archway businesses contribute £725m to the economy every year, with each firm worth on average over £160,000 to GDP.

A survey of archway traders also a strong manufacturing presence, with one in four businesses operating in the productive sector. Meanwhile, the 30% on tenants in vehicle sale and repair alone contribute £200m to the economy each year.

Nhi Chu, co-owner of Chu’s Garage in Hackney, East London is one business owner hit with a substantial rent increase ahead of Network Rail’s sale that the founders believe is unsustainable.

My family has been running a garage out of the same arch for 30 years, after escaping Vietnam as refugees,” Chu said. “In that time we have built up trust in the community and we have a large and loyal customer base.

“Now, thanks to a huge rent increase by Network Rail in advance of the sale of the estate, we are on the verge of going bankrupt.”

Chu's-garage
Photo: Sarah Ainslie for New Economics Foundation

Chu added: “We have a simple request of the government. Intervene in this sale and show that you really do support independent traders and entrepreneurs. Now is the time to stand up for small businesses and the people who rely on them.”

The highest rent increase demand received by an archway trader was received by a 93-year old garage owner in Clapham. Campaigners uncovered that the tenant of 60 years received a letter informing of a proposed rent increase from £33,000 per annum to £147,000 – a 345% increase in a single year.

Looking outside of the capital, Sarah Arnold, researcher at the New Economics Foundation, said small business owners across Britain were at risk.

“When you add up all of the ways in which they contribute to the economy – not just their own activities but the local supply chains they create – it amounts to a lot. But all of that dynamism is under threat.”

“Every day we speak to small business owners who have had to shut down or relocate because of massive in-year rent increases, often leaving arches vacant for years.”

Arnold added: “With the impending sale of the estate, their future is even more uncertain. When you look at how much these arches businesses contribute to our economy, it doesn’t make any sense to put all of that at risk.”

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East End

 

The East London traders fighting for their existence

For independent traders in London’s East End, it’s business as usual. Same rent increases, same business rates hikes, same feeling of abandonment by policy makers. But they aren’t going down without a fight.

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In June, Guardians of the Arches began collecting support for an open letter to be delivered to transport secretary Chris Grayling, and has so far received almost 8,000 signatures.

The campaign has picked up support across the political spectrum, with Labour Party leader Jeremy Corbyn and Richmond Park MP Zac Goldsmith both calling for archway traders to receive assurances.

In a statement, David Biggs, managing director of Network Rail Property, maintained that the sale of its commercial estate would not endanger existing traders.

“We are selling a thriving estate of small and independent businesses and we believe the portfolio is a highly attractive business with growth potential,” he said.

“We are proud that we have so many independent and diverse businesses thriving on our commercial estate, and for the tenants that run these it will be business as usual once the estate is sold. All lease arrangements will transfer to the new owner and all arrangements and protections will stay in place.

“We believe a new owner will bring more investment to the commercial estate, benefiting tenants and local communities, and creating jobs and stimulating economic growth.

“The sale is completely unconnected with periodic rent reviews which are part of our normal business activity. Our rents are based on local property market values with the vast majority of reviews, around 85%, agreed at an increase of 10% or less.”

In 2016, Network Rail published a video to demonstrate how small businesses are transforming Britain’s rail archways into innovative commercial spaces.

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ABOUT THE EXPERT

Simon Caldwell is deputy editor at Business Advice. He has a BA in politics and communications from the University of Liverpool, and has previously worked as a content editor in local government and the ecommerce industry.

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