The sale of Network Rail assets could have seismic ramifications for SMEs based in railway arches
5 min read
02 July 2018
Real Business columnist Charlie Mullins discusses how Network Rail's sales of railway arches could impact SMEs.
I have always admired the ingenuity of entrepreneurs and their determination to make a success of their enterprises.
It’s one of the things that makes this country great. That someone can take a simple idea or service and turn it into a business is something that should be admired and encouraged.
I wrote recently about entrepreneurs that shunned using traditional premises by opening mobile businesses in the back of a van. It’s an idea that’s right up there with operating out of a storage unit or shipping container.
But using slightly alternative business premises isn’t a new trend and goes back many years. In fact, since the first railway bridges were built and someone had the brainwave of converting the arches into homes for entrepreneurs.
Up and down the country, many of the UK’s 5,500 railway arches have become the business premises for car garages, bike shops, graphic designers and even plumbers.
Yes, that includes Pimlico Plumbers. Surrounding our premises in London, including underneath the railway line into Waterloo station, we have 15 arches, covering around 40,000 sq ft, including a couple for our Pimlico Plumbing & Heating Merchants. On top of this, we also have around 10,000 sq ft of rail track land.
The arches make excellent premises option for us, as they have also been for small businesses. But it looks like all that could change as a result of a stroke-of-a-pen decision at Network Rail, which will have seismic ramifications for small firms based in arches.
While Pimlico Plumbers will be okay, I’m really worried that the increasingly expensive rail track arches will put the little guys over the edge.
As a result of Network Rail announcing its plans to sell off its commercial property business as part of a billion-pound asset sale, businesses operating out of the arches have been pushed to the verge of extinction.
Rents are already high enough, with many honest and hardworking traditional arches tenants being priced out of the market leaving only high mark-up operations like bars and clubs left to fill the spaces. However, a few small firm bosses have held on by their fingertips.
Unfortunately it appears they are about to have their hands well and truly stamped on. Network Rail has been accused of trying to strong-arm them out of their arches with threats of eviction if eye-watering rent increases of between 300-500% are not met.
That’s even before the sale of the £1.2 billion property business goes through with fears about what will happen to the remaining businesses as a number of private equity firms circling ready to take their chunks of the real estate asset.
That in itself should send a shiver down the back as we all know the role the cash-driven private equity industry has had on the UK’s retail sector.
Though, even before the ink is dry on any deal to sell the rail property estate, there is a real danger that the arches will be devoid of any entrepreneurial endeavour, through these exorbitant rent rises.
This will be a sad loss to the many communities they serve and another example of how soulless big business can decimate pride and passion-driven small enterprise.
But, perhaps Network Rail hasn’t expected the plucky resolve of the small business “Davids”, which have combined to take on the railway “Goliath”.
Having formed a group, Guardians of the Arches, which is backed by Big Issue founder Lord John Bird, the businesses have targeted transport secretary Chris Grayling and are presenting him with a letter from them all plus thousands of supporting signatures to make their case.
I wish them the best of British, because what they offer their customers and their local communities are the kind of businesses that the foundations of this country’s economy are built upon.
The government claims to be a champion of small business, but flattening entrepreneurs with a Network Rail express train loaded with private equity cash, makes you wonder where their priorities lie.