Select Committee on Environment, Transport and Regional Affairs Appendices to the Minutes of Evidence


Memorandum by Merlin Entertainments Ltd (RI 05)

1.  INTRODUCTION

  Merlin Entertainments welcome the Committee's Inquiry into rail investment. Our memorandum is solely concerned with the impact on businesses of Railtrack's network investment proposals, particularly those renting premises from the company. We recognise that the committee cannot consider individual cases, but ask that members address the general issue and consider the proposals outlined in our memorandum.

2.  OUR COMPANY

  We are a leisure and entertainment company and our registered office is at 3 Market Close, Poole, Dorset BH15 1NQ. Our enterprises include the Sealife Centre, the National Seal Sanctuary and the London Dungeon. We employ approximately 500 people. The business that provoked our decision to submit evidence to the committee is the London Dungeon, Tooley Street, London SE1 in the London Borough of Southwark and located in railway arches rented from Spacia, the property lettings arm of Railtrack plc. We have an excellent relationship with Spacia and are endeavouring to negotiate an extension to our lease.

3.  THE LONDON DUNGEON

  The London Dungeon employs approximately 50 people, attracts some 700,000 visitors per year and is recognised as one of London's major tourist attractions. The footfall generates an estimated £10m for the local economy and we play a not insignificant role in the local authority's regeneration strategy in what is one of the most deprived boroughs in London. The London Dungeon is also the most profitable part of our operation.

4.  THE ISSUE

  In 1999 we were contacted by Railtrack and advised of two major development schemes that would have a significant impact on our business.

  The first is the Thameslink 2000 project. We were presented with a Compulsory Purchase Order, which obviously forced us to seek legal representation and set in train protracted and costly negotiations with Railtrack. Railtrack have subsequently announced that escalator bays are to be located in the Dungeon. At the time of writing we are still in discussions with the company.

  The second is the London Bridge masterplan—a major property development in and around London Bridge Station. Again, the development would have major implications for our business and we objected to the London Borough of Southwark. We understand that following Merlin's and other objections, Railtrack are to submit a revised application to the council, but to date, we have received no further details.

  Our objections to both are based on the following grounds:

    (a)  During previous construction works, for example the Jubilee Line Extension in 1996, visitor numbers to the Dungeon dropped by some 25 per cent.

    (b)  Our experience in the leisure industry suggests that prolonged disruption in an area lead to a long-term loss of visitors as word of mouth takes effect. This is worsened by the switching of hard won tour operator services to other areas. Once lost, this business base can take years to re-build and is sometimes not regained at all.

    (c)  In order not to inconvenience commuters Railtrack works are nearly always carried out at weekends and holidays periods (Christmas, Easter, Summer) thereby causing maximum damage to our business.

  The above points indicate a level of disruption from both schemes that will have a major impact on the London Dungeon and arguably force us to close or re-locate.

5.  NEGOTIATIONS WITH RAILTRACK

  Throughout our negotiations, matters have been complicated by the fact that the Thameslink 2000 project and the London Bridge masterplan are dealt with by two seemingly quasi-autonomous organisations within Railtrack, the Thameslink 2000 Directorate and the London Bridge Development Team. Officials from both try to be helpful, but their approach is unco-ordinated with the two arms of the same company seemingly unaware of each other's proposals and their likely impact on our business. Both the Thameslink 2000 Directorate and the London Bridge Development Team also seem unaware of our relationship with Spacia and the commercial advantages to Railtrack of our concluding negotiations for the extension of our lease.

  While we have no criticism of any Railtrack official, it is our view that the bureaucratic and uncoordinated nature of the company makes it difficult to reach agreement with parties affected by its development proposals and is a source of cost and frustration to those trying to negotiate with them.

6.  GENERAL PRINCIPLES FOR CONSIDERATION BY THE COMMITTEE

  Merlin recognises that investment in the rail infrastructure is needed. We also accept that tenants of premises located near the operational railway must expect a degree of disruption as a result of Railtrack discharging its statutory obligations. However, we feel that a number of important principles are at stake here and respectfully ask that the committee give consideration to the following suggestions.

6.1  Equity in Negotiations

  Railtrack are a large well-resourced organisation. The small and medium sized businesses affected by its investment proposals are not and subsequently disadvantaged in any negotiations. They do not have the resources to mount a legal challenge, particularly if the development in question is the subject of a Public Inquiry. For most businesses, time spent in negations with Railtrack (who inevitably wish to meet in working hours) has cost implications.

  In our view, this is contrary to natural justice and we ask the committee to consider whether public funds (subject to the applicant's resources) should be made available to cover the costs for individuals and small businesses endeavouring to negotiate with Railtrack.

6.2  The Cost to Business

  Depending on the level of disruption and/or days' trading lost, Railtrack may consider compensating businesses affected by its investment proposals. However, Railtrack advise they are under no obligation to pay the legal and other cost incurred. Unlike Railtrack, small businesses do not have extensive in-house legal departments and to date, Merlin has spent an estimated £30,000 on legal and other consultants' fees, a sum we can ill-afford. If we are unable to reach an accommodation with Railtrack over their Thameslink 2000 proposals and are forced to take our objection to the Public Inquiry, we will have to instruct counsel and the cost will be even higher.

  There is also the issue of managerial time. The London Dungeon is the most profitable part of our business and key to the viability of the company. Since threatened with the Compulsory Purchase Order an estimated 10 per cent of managerial time (at Chief Executive level) has been devoted to this matter.

  We suspect that smaller companies and traders, ineligible for Legal Aid, and unable to spend valuable time unconnected with day to day operations have been forced to agree Railtrack's terms irrespective of the costs they have incurred or the damage to their business.

  We ask that as part of its investment programme, Railtrack should be liable to meet an objector's reasonable costs.

6.3  Network Investment or Property Development?

  We welcome improvements to rail services and recognise that major investment in track, signalling and stations is necessary. However, some of what Railtrack describe, as "network investment" appears to be property development as we fail to see how the retail and office premises proposed under the London Bridge masterplan will benefit current rail users, improve performance or increase capacity.

  It is quite legitimate for Railtrack to increase its income and maximise shareholder value by non-rail-related activities but we feel it is unreasonable for the company to describe such activities as "network investment". We suspect that such activities are included in this definition in the hope that such proposals will be favourably received by planning authorities and public inquiries.

  We ask the committee to consider whether Railtrack's statutory powers need clearer definition in order to exclude non-rail-related activities such as office and retail developments.

7.  CONCLUSION

  We welcome improvements to rail services and recognise that any business choosing to operate near the operational railway must consider the risk that its commercial activities may be disrupted by essential maintenance or improvement works. However, for the majority of business so affected, negotiations with Railtrack are an unequal battle with a large, wealthy corporation armed with statutory powers. We respectfully ask the committee to give consideration to redressing the balance.

June 2000


 
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