Setting it straight

CANAL & River Trust transition trustee, John Dodwell has contradicted the account given by David Bruce, President of the Kennet & Avon Canal Trust, of British Waterways' joint pub venture.

Referring to British Waterways' Waterside Pub Partnership at the Kennet & Avon Canal Trust AGM, David Bruce famously said 'It went into administration. They cannot even organise a piss-up in a brewery. This report [British Waterways' 2010/11 annual report] says—Our venture into pub partnerships had to be put into administration by the creditors', reveals Allan Richards.

Disagreed

However, in a response to an email from Ken Keegan (boat manager for the Kennet & Avon Canal Trust trip boat Jubilee) concerning a number of issues arising from an article he had written for its house magazine (Butty), John Dodwell claimed 'I heard David Bruce speak at Bradford-on-Avon last September—not everything he said was entirely correct'.

The transition trustee gave as an example the Waterside Pub Partnership, inferring that it had made a profit of £2m for British Waterways due to selling some pubs to the joint venture and later buying pubs back from it.

Smoke and Mirrors

A moment's thought will show that John Dodwell's statement is blatantly misleading. Selling some pubs at fair market value simply means that you have swapped an asset for its money equivalent. The same is true of buying assets. Absolutely, no profit involved whatsoever!

At least he did have the courtesy to admit the joint venture had gone bust!

However, It seems that Ken Keegan was not the only one to be fed the story of how the Waterside Pub Partnership was profitable despite going into administration. A few days ago the boating public was being given this same misleading information in narrowboatworld. John Dodwell again!

Perhaps, if the transition trustee had looked objectively at the information readily available in the public domain, particularly the information provided by British Waterways under the Freedom of information Act, he would have come to the same conclusion as David Bruce.

Waterside Pub Partnership

The joint venture was formed on 25th February 2005. A press release of the same date says 'British Waterways and Scottish & Newcastle Pub Enterprises (Management) Ltd (S&NPE) have today announced the completion of their Waterside Pub Partnership which will develop a nationwide pubs business at over 100 sites across British Waterways' canals and rivers'. The stated intention was to have 50 pubs in the first three years including British Waterways' 30 existing leased pubs.

Six years later, on 18th April 2011 British Waterways issued a statement saying that Lloyds Banking Group had appointed Price Waterhouse Coopers as administrators. The statement confirmed that just 17 pubs were owned by the joint venture when it entered administration. It also confirmed that the previous month British Waterways had purchased 10 pubs for £9m in an attempt to reduce its debt.

Later in the year, British Waterways published its 2010/11 annual report which suggested the joint venture had crashed with debts of over £22m due to bank borrowings.

Profit or loss?

This is, perhaps, all rather academic when you consider that British Waterways, primary duty is not to maintain a portfolio of pubs or speculate in the property market.

British Waterways, primary duty is to maintain the waterways in satisfactory condition. So the acid test is simply did British Waterways' failed attempt to own 100 pubs via a joint venture actually provide a profit that could have been used to maintain the waterways? Or did it produce a loss which meant less maintenance could be carried out?

Bank borrowings

British Waterways' 20110/11 annual report shows that its share of bank borrowings was some £11.2m.

Thankfully, Lloyds Banking Group has no recourse to British Waterways for any part of this debt.

A request under the Freedom of Information Act shows British Waterways' investment in the joint venture. It was £0.5m in 2004/5, £1.3m in 2006/7, £0.4m in 2007/8 and again £0.4m 2008/9. A total of £2.6m.

This investment is not recoverable and has already been written off.

No profit

The same Freedom of Information Act request shows that no profit whatsoever has been returned to British Waterways from the joint venture.

The final analysis is that the Waterside Pub Partnership collapsed with crippling debts. It has never contributed to the maintenance of the waterways, and British Waterways has lost its investment of £2.6m. Put another way, this joint venture lost almost £450,000 for each of the six years that it was in operation, money that could have been spent on maintaining our waterways.

And we should not forget that British Waterways' partner in the joint venture will probably lose an equal amount. Lloyds Banking Group will also suffer loses.

Who is correct?

So which assessment do you trust? A transition trustee who tells us that British Waterways made £2m out of the Waterside Pub Partnership rather than a loss of £2.6m or David Bruce, a successful Pub Entrepreneur (and founder of the Firkin Brewery chain) who says British Waterways 'could not run a piss up in a brewery'.

The real issue

The real issue for many boaters is not the £2.6m loss. Other joint ventures, for example Gloucester Quays, have suffered losses many times higher. It is not even the fact that it went bust. The issue for many surrounds the £9m used in an attempt to reduce the Waterside Pub Partnerships' debt in March 2011.

We have to remember that British Waterways Fat Cats were awarded bonuses of £15,000 (Chief executive) and £12,500 (other directors). A statement by British Waterways justifying these bonuses was to the effect that it had made over £9m more than planned, and that this had been used to maintain the spend on waterways at a similar level to previous years.

Exposed

The lie was exposed in British Waterways' 2010/11 annual report and a Freedom of Information Act request which confirmed that its spend was about £9m less than previous years (2008/9—£101.6m, 2009/10—101.6m, 2010/11—£92.1m).

The issue is, in the crazy world of British Waterways, its Board and executive directors actually believe that £9m spent in a futile attempt to reduce debt in a failing pub joint venture is £9m spent on maintaining the waterways.

Perhaps it's because they never returned the bonuses!

[Credited with starting the 'themed pub' industry in the UK, David Bruce moved on to set up The Bruce Trust (a registered charity) which provides purpose-built, wide-beam canal boats on the Kennet and Avon Canal for use by disabled and disadvantaged. He is now president of the Kennet and Avon Trust. His successful Firkin Brewery pub chain eventually came under the ownership of drink and hospitality giant, Allied Domeq.]