Rail arch businesses add £725m to UK GDP every year

Each business in an arch contributes an estimated average of more than £160,000 to GDP every year

Guardians of the Arches call for government intervention in the sale, in the interests of small traders and the local economies which rely on them

Businesses based in the 4,455 railway arches about to be sold off by Network Rail contribute over £725m to the UK economy every year, according to fresh research [3] by the New Economics Foundation.

The finding comes as the four firms still in the running for Network Rail’s £1.2-£1.5bn commercial estate prepare to submit their final bids. The Guardians of the Arches, a campaign group led by small businesses based in arches and supported by the New Economics Foundation and East End Trades Guild, is calling on the government to intervene in the sale to ensure their interests are protected.

The New Economics Foundation’s research [3] reveals:

• The total gross-value-added (GVA) of rail arch businesses is estimated at over £725m a year
• Nearly a quarter (23%) of all businesses in railway arches operate in manufacturing, a highly productive sector of the economy
• The 30% of arches tenants in vehicle sale and repair alone contribute nearly £200m a year to the economy
• Each business in an arch contributes on average over £160,000 to GDP every year

Sarah Arnold, researcher at the New Economics Foundation who conducted the research, said:

“There are loads of enterprising small businesses based in railway arches all over the country. And when you add up all of the ways in which they contribute to the economy – not just their own activities but the local supply chains they create – it amounts to a lot.

But all of that dynamism is under threat. Every day we speak to small business owners who have had to shut down or relocate because of massive in-year rent increases, often leaving arches vacant for years. And now, with the impending sale of the estate, their future is even more uncertain. When you look at how much these arches businesses contribute to our economy, it doesn’t make any sense to put all of that at risk.”

Krissie Nicolson, Director of the East End Trades Guild said:

“Many of our members are being displaced further and further out of London due to a lack of affordable workspace. We can see this trend now in Manchester, Leeds and all major cities across the UK.

“In this difficult context, railway arches have been incubators for innovation and creativity, offering desperately needed affordable space which can be tailored to suit the needs of each business. We urgently need to preserve these spaces for local entrepreneurs and the communities around them.”

Nhi Chu, co-owner of Chu’s Garage in Hackney, London and member of Guardians of the Arches, said:

“My family has been running a garage out of the same arch for 30 years, after escaping Vietnam as refugees. In that time we have built up trust in the community and we have a large and loyal customer base. Now, thanks to a huge rent increase by Network Rail in advance of the sale of the estate, we are on the verge of going bankrupt.

“We have a simple request of the Government. Intervene in this sale and show that you really do support independent traders and entrepreneurs. Now is the time to stand up for small businesses and the people who rely on them.”

In recent weeks the sale process has hit a number of obstacles as pressure to intervene has grown. One of the five shortlisted bidders (a consortium between Goldman Sachs and the Wellcome Trust) pulled out of the sale, with some media outlets claiming this was a result of the negative publicity generated by Guardians of the Arches [3]. The mayor of Hackney, Phil Glanville, wrote to Transport Secretary Chris Grayling expressing interest in buying the arches in the borough, thereby opening up the possibility of alternatives to the sale of the whole portfolio in one job lot [4]. And after meeting traders from Guardians of the Arches, Transport Minister Jo Johnson agreed to consider any alternative to the sale posed by tenants [5].

An open letter to Transport Secretary Chris Grayling asking him to pause the sale and meet tenants has received almost 8,000 signatures, including almost 300 arches tenants.

On 12 June the Guardians of the Arches filled Committee Room 10 of Parliament with arches tenants from around the country. The campaign has received support from parliamentarians across the political spectrum including Jeremy Corbyn, Lord Bird, Zac Goldsmith, Meg Hillier, Rachel Reeves, Tom Watson and Ian Mearns.

Last year Network Rail, the largest landlord for small businesses in the country, announced the sale of 4,455 arches as one commercial business on a 150-year lease thought to be valued at around £1.5bn. This sale is due to be completed by the end of 2018. There are four remaining bidders on the shortlist – these are CK Asset Holdings; Terra Firma; Kildare Partners; and Blackstone/​Telereal.

The largest in-year rent increase demand the campaign has uncovered is around 345%: a 93-year-old in Clapham who has been running a garage out of the arches for the last 60 years who received a letter informing him of a proposal to increase his rent from £33k pa to a demand for £147k pa in a single year.

**Notes to editors 

1. The New Economics Foundation is the UK’s only people-powered think tank. The Foundation works to build a new economy where people really take control. www​.newe​co​nom​ics​.org
2. The Guardians of the Arches is a network of arches tenants formed in late April in response to growing concern among small businesses based in arches about the impending sale of the commercial estate by Network Rail. It is run by a steering group of arches tenants and with the New Economics Foundation and the East End Trades Guild as supporting members. See guardian​soft​hearch​es​.org​.uk 
3. Figures on the sectoral distribution of enterprises in the railway arches come from a survey of 165 arches tenants in three London neighbourhoods by Froy and Davis, available here:https://​www​.tand​fon​line​.com/​d​o​i​/​a​b​s​/​1​0​.​1​0​8​0​/​0​9​6​5​4​3​1​3​.​2​0​1​7​.​1​3​6​7​1​4​1​?​j​o​u​r​n​a​l​C​o​d​e​=​c​eps20. We use figures from the Annual Business Survey on approximate GVA per business in each relevant sector, (using figures from 2017 and uprating to 2018 prices) and apply this to the proportion of businesses in each sector and the total number of businesses under the arches (4,455 business spaces, as reported by Network Rail: https://​www​.net​workrail​.co​.uk/​a​r​ches/). Supply chain effects are estimated using the latest ONS multipliers derived from input-output supply and use tables. These estimates are based on averages and will be subject to a margin of error. We assume the sectoral distribution of these tenants is representative of all 4,455 arch spaces let out across the country. Given that less than 1% of businesses in the arches are large chains, and the majority are small and independently owned, we model them all as microbusinesses with 1 – 9 employees.
4. https://​www​.prop​er​ty​week​.com/​r​e​t​a​i​l​/​p​o​l​i​t​i​c​a​l​-​b​u​n​-​f​i​g​h​t​-​f​e​a​r​s​-​h​i​t​-​n​e​t​w​o​r​k​-​r​a​i​l​s​-​1​5​b​n​-​p​o​r​t​f​o​l​i​o​-​s​a​l​e​/​5​0​9​7​7​3​3​.​a​r​ticle
5. http://www.hackneygazette.co.uk/news/guardians-of-the-arches-phil-glanville-chris-grayling-council-interested-in-buying-hackney-s-network-rail-arches‑1 – 5611801
6. https://​www​.thetimes​.co​.uk/​a​r​t​i​c​l​e​/​f​i​r​m​s​-​s​t​e​p​-​u​p​-​f​i​g​h​t​-​u​n​d​e​r​n​e​a​t​h​-​t​h​e​-​a​r​c​h​e​s​-​n​8​w​d​56hgh