Pubs £22 millions in debt

Published: Monday, 08 November 2010

THE pub partnership between British Waterways and Scottish & Newcastle, formed to 'provide cash for the waterways' has shown no profit for the past four years, in fact it has clocked up a massive debt of £22 millions!

Equity and profit

The Waterside Pub Partnership was formed in 2004/5 with BW providing an equity investment of £0.5m. Further equity was provided in 2006/7 (£1.3m), 2007/8 (£0.4m) and 2008/9 (£0.4m) making a total of £2.6m, writes Allan Richards.

In its first full year year of operation (2005/6), the Waterside Pup Partnership returned a profit to BW of just £15,995 before tax. In its second year (2006/7), it returned no profit. In 2007/8, again, it was no profit.

Not profitable enough

It was two months ago that we published an article. BW selling off its pubs, in which it was suggested that the reason that BW and its partner Scottish & Newcastle were selling off the majority of pubs in the Waterside Pub Partnership was that they were not profitable enough. Since then the above details of profits have emerged which confirm the suspicion.

Yet surprisingly, in view of its disastrous performance, BW forecast a profit of £213,000 from the partnership in 2008/9. Indeed, it set a bonus target for its Operations Director, Vince Moran, to improve on this figure. The target reads 'Increase contribution from Waterside Pub Partnership from £213k in plan. One point for every £10k over plan up to a maximum of 5 points.'

Target not achieved

Suffice to say, Vince Moran did not achieve all or even part of his target relating to the pub partnership. Perhaps he was too busy fighting a losing battle trying to maintain our canals. Once again the partnership delivered zero profit!

In 2009/10, BW did not even bother setting Mr Moran a target. Little wonder! For the fourth year in a row the pub partnership did not provide any profit.

Why did BW use public money, some £2.6m in this case, to continue funding a business that was demonstrably unprofitable? Will our new charity be providing more equity for this business when it is found that selling off the pubs does not cover the £22m debt that the partnership has incurred?

Small beer

In terms of the total investment in joint ventures the pub partnership is small beer. Unfortunately, its situation is not unique. The same story is repeated, with almost monotonous regularity, throughout the Joint Venture portfolio, often with significantly larger investments.

Millions and millions of pounds of public money have been invested for little or no return.  The reason BW gave for entering these 'innovative joint ventures', was that they would generate a return of 15% per year on the money invested so the pub partnership alone should should be contributing almost £400,000 (gross) a year towards our waterways.

It has contributed nothing!

There is worse to come—BW is again forecasting large losses on joint ventures.