Memorandum by Merlin Entertainments Ltd
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
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 masterplana
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
(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.
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
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.
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.