narrowboatworld

IT IS a common misconception that government rules under which BW operate prevent it from borrowing money, writes Allan Richards. This misconception is actively promoted by British Waterway who give the financial freedom of being able to borrow money as a major benefit of moving to the third sector. However, BW already has borrowings of over £90 million!

Joint ventures

Figures recently published show that BW's share of bank borrowings in various joint ventures is very significant. With Wood Wharf, BW's debt is £2.9m. Its share of debt for its Pub Partnerships is considerable higher at £11.2m and ISIS higher still at £14.7m. Gloucester Quays tops the lot with BW's share of bank borrowing being an eye watering £47.2 million.

It gets worse!

However, BW's debts do not end with its joint ventures. It has also borrowed £12.9m from Port of London Properties (POLP). As of April 2010, BW total debts stood at £91.5m.

The problem with borrowing money is twofold. Firstly it has to be repaid at some stage and secondly the loans incur interest charges.

A year ago BW were scrabbling around attempting to refinance its ISIS debt after the company ran into difficulties. More recently, when the POLP loan fell due for repayment, BW reached agreement with Port of London Properties to extend it, thus avoiding £13m being added to its property losses for 2009/2010.

Debts

BW is incapable of learning the lessons of its financial failures. Its property business again lost money last financial year despite the deferment of the POLP repayment.

Explaining about financial freedoms in its recently published document document 'British Waterways in the third Sector—the proposition', it writes: 'The most material of these would be the freedom for BW to borrow. Used with care and prudence this should be able to generate a higher return on the Trusts capital reserves than BW achieves in its current status.' It illustrates this by suggesting borrowing £200m as a trust would produce extra income of £4m a year.

Misleading

Why are BW attempting to mislead the public by saying that a move to the third sector would give them the freedom to borrow? The £90m debt already accrued proves that they are able to borrow substantial amounts already! Its losses also show, that in the case of BW, borrowing money loses money rather than generates extra income.

Will the government give the new trust £90m to pay off BW's debts? Sadly, that is as probable as the government giving the new trust £290m to eradicate the BW's maintenance backlog and a further £130m per year to keep them up to scratch.