Lynton & Railway Trust Exmoor Enterprise

Exmoor Enterprise

Lynton & Barnstaple Railway

Business Plan for the complete Railway

Lynton to Barnstaple

Overall Business Plan 201302 Page: 1 February 2013 Lynton & Barnstaple Railway Trust Exmoor Enterprise

Contents 1 Introduction ...... 3 1.1 The Original Railway ...... 3 1.2 Phase I ...... 3 1.3 Phase II ...... 4 1.4 Phase III ...... 4 1.5 The Complete railway ...... 4 2 Local Economic benefit ...... 5 3 Economic Impact Calculation ...... 7 3.1 The Construction ...... 7 3.2 Railway Operations ...... 8 3.3 Economic benefit to the region ...... 10 3.4 Net Economic benefit ...... 11 3.5 Employment Contribution ...... 12 4 Operational Plan ...... 13 4.1 Railway Operations ...... 13 4.2 Income and Expenditure ...... 15 5 Notes and References ...... 18 5.1 Sustainable Development ...... 18 5.2 North Workplace Earnings ...... 18

Version Control Other Docs to update Base version Issued 01/02/2013

Overall Business Plan 201302 Page: 2 February 2013 Lynton & Barnstaple Railway Trust Exmoor Enterprise

1 Introduction

The Lynton and Barnstaple Railway Trust (L&BR) is planning to extend the current one mile railway to nineteen miles and return the railway into Lynton and Barnstaple. The project to plan and develop this extended railway is known as Exmoor Enterprise. This document presents a business plan for the future operation of the railway. Other documents contain versions of the Business Plan for Phase II only (Lynton to Wistlandpound Reservoir).

1.1 The Original Railway

The railway was opened in 1898 and closed in 1935. Histories of the line have been regularly published since the initial definitive work of L.T. Catchpole first published in March 1936 and now in its eighth edition (2005). The railway was amalgamated into the Southern Railway in 1923. The line lost money after the spread of motorbus services in the local area during the 1920s.

Annual passenger numbers before closure were 32,000 (1934) down from 72,000 (1925) and a peak of around 100,000 during the period 1906- 1913.

The railway served the communities of Barnstaple, Chelfham, Goodleigh, , Blackmoor Gate, Parracombe, Woody Bay and Lynton providing a transport link for goods and passengers.

1.2 Phase I

The current railway operates from Woody Bay and has a one-mile length of track to a temporary station at Killington Lane near Parracombe. Woody Bay Station was acquired in 1995 and after extensive renovation the station and 400 yards of track were opened to the public in 2004. The track was extended to Killington Lane in 2006. The re-opened one-mile railway has already carried more than 250,000 passengers (2012) with recent annual totals of 33,000.

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1.3 Phase II

Phase II will re-instate a nine-mile route from Lynton to Wistlandpound reservoir near Blackmoor Gate.. It provides the opportunity for a park and ride scheme from the edge of Exmoor National Park to Lynton, thus taking up to 50,000 cars per year off the crowded A39 road and providing a solution to tourist parking problems in Lynton and Lynmouth. It will also provide easy access to Wistlandpound reservoir.

1.4 Phase III

Phase III will re-instate a further ten miles to allow the railway to return to Barnstaple at Pilton Yard near Rolle Quay. The preliminary construction estimate for Phase III is £18-20 million.

Phase III will provide commuter access to Barnstaple and terminate 100 yards from the centre of Barnstaple shopping area at Pilton Yard..

1.5 The Complete railway

The complete railway will provide a 19 mile link between Lynton and Barnstaple town centres.

The overall project cost for construction is estimated at £51 million. The railway will provide considerable economic benefit to estimated at a return to the local economy of more than £25 million per year and the creation of over 280 additional local jobs.

An Operational Plan has been prepared to assess whether the railway would be a viable business once completed. Phase I provides reliable cost information about the railway operations. Section 4. presents future operating budgets.. The budgets contain conservative assumptions about Income and Expenditure and have assumed a much reduced level of Volunteer input from that already achieved by Phase I.

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2 Local Economic benefit

In order to support funding applications L&BR has calculated the benefit expected to the local economy by implementing Exmoor Enterprise.

Various studies have attempted to quantify local economic benefit derived from tourist businesses. We have referred to the following studies and approaches: • The Cambridge Tourism Model • West Somerset Railway (WSR) Local Economic Impact Study 2004 • North Yorkshire Moors Railway (NYMR) 2008 • Yorkshire Tourist Board 2008 • British Tourist Authority (now Visit Britain) Employment Generated by Tourism in Britain (2003) • National Economics foundation & The Countryside Agency – The Money Trail: Measuring your impact on the local economy using LM3 (2002) • Economic Impact of the Ffestiniog and Welsh Highland Railways on Gwynedd (Megan Williams - Bangor University 2008)

Our definition of the Local Economy is the immediate area surrounding the L&BR operations, Devon, Somerset and Cornwall.

The L&BR already runs a heritage railway business and presently spends 88% of revenues in our local area. We have used a Keynesian economic multiplier of 2.5 to assess the impact on the local economy. Even at a relatively low rate of 65% for local spend for subsequent cycles the multiplier is greater than 2.5 after five cycles of expenditure.

For the five-year major capital expenditure programme we have estimated local spend for each category of expenditure.

Five years has been allowed for growth in passenger volumes after initial opening to reach the operating target of 180,000 per year although recent trends show that initial visitor numbers may be higher.

The local economic benefit of the construction and initial five years of operation is calculated as £203 million for an investment of £51 million.

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The same models have been applied to the current operations. Current passenger volumes (2012) are forecast to rise from 33,000 per year to a maximum of 50,000 per year. At this point operational constraints with the current one-mile railway will limit passenger growth.

Therefore the net local economic benefit, compared to continuing current operations, is calculated as an additional £196 million over ten years.

An increase in employment arising from future operations has been calculated using the Cambridge model. At present no employment contribution has been calculated for the initial five-year construction period although there will be significant local construction jobs created.

Future operations will support at least 63 full-time direct jobs (FTEs) and 10 apprentices. The effects of Indirect FTEs and Induced FTEs have been calculated and the effect of converting FTEs to Actual jobs has been added.

The local employment contribution of future operations with all jobs based in North Devon is calculated as a net increase of 284.

The following pages present summary information from the L&BR Plan. This plan contains the detail estimates and assumptions for Phase II and outline estimates for Phase III for the construction project, future railway operations and business turnover. Early versions of this document relied on estimates about future operating costs prepared in 2007. Since then the railway operating costs have stabilised and our estimates are now based on the detail information available from operating the railway since 2007 (see section 5).

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3 Economic Impact Calculation

3.1 The Construction

The construction programme allows five years for the completion of the nine-mile railway. This programme is considered generous and could be accelerated if all funding is available from the outset. The Victorians built the original 19-mile railway in three years without the benefit of modern machinery. % Total Local Construction Costs (000's) Phase II Phase III Total spend (000's) 1. Trackbed Acquisition 1,620 1,070 2,690 100 2,690 2. Civil Engineering 7,352 2,000 9,352 70 6,546 3. Building works 875 460 1,335 90 1,202 4. Trackbed - formation & tracklaying 7,260 8,320 15,580 85 13,243 5. Signalling & Communications 1,855 2,680 4,535 70 3,175 6. Locomotives 1,415 750 2,165 50 1,083 7. Rolling Stock 1,100 440 1,540 100 1,540 8. Sundry Vehicles 100 50 150 100 150 9. Staffing 54 50 104 100 104 10. Maintenance 1,730 700 2,430 90 2,187 11. Management 1,103 200 1,303 100 1,303 12. Legal 2,516 1,000 3,516 50 1,758 13. Overheads & Profit 1,214 886 2,100 75 1,575 Sub-total before Contingency 28,194 18,606 46,800 14. Contingency @ 10% 2,819 1,861 4,680 70 3,276

Total 31,013 20,467 51,480 Total Construction local spend 39,831

Cost categories have been estimated and contingency and contractor profit has been included. For each category an estimate has been made of the Local spend percentage. From a total construction cost of £51,480,000. £39,831,000 is expected to be spent locally as above.

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3.2 Railway Operations

Future railway operations have been forecast in terms of employment and passenger spend on tickets, shop and tea room sales. Direct employment will be:

Staffing for entire Railway # Stations/ Halts/ Title Weeks Salary Salary Shops No Total Salary (weekly) (annual) Paid/full time staff costs Managing Director 52 800 41600 1 41600 General manager 52 580 30160 1 30160 Commercial manager 52 450 23400 1 23400 Tea-room Supervisor 52 400 20800 1 20800 Volunteer Co-ordinator 52 400 20800 1 20800 Station staff ( 2 per Station) 52 400 20800 6 12 249600 Halt Staff (1 per Halt) 52 400 20800 4 4 83200 Shop Staff (2 per shop at Stations*) 52 300 15600 3 6 93600 Sundry staff (clerical etc) 52 340 17680 5 88400 Train crew - guards 52 520 27040 6 162240 Loco crew 52 550 28600 12 343200 Engineering 52 450 23400 5 117000 Maintenance 52 450 23400 8 187200 Apprentices 52 10 73 1,461,200

For North Devon District these salaries are regarded as good. Median annual income is approximately £19,700 (ASHE 2012).

Current Phase I operations use volunteer staff (Train Crew 70%; Shop 60%; Tea-rooms 50%). Although volunteer staff will still be encouraged the financial forecast has assumed that all key staff will be paid as shown above except for a percentage (25%) of the potential volunteer staff.

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From a total operating income of £3,308,143; £2,792,638 is expected to be local spend as follows:

Railway Income % Local Total spend Net local Assumptions: Operating Surplus 958,608 80 766,886 Railway surpluses spent on rolling stock & other development Cost of Sales (Suppliers) 380,935 90 342,842 Shop cost of sales (45%) Staff salaries 1,461,200 100 1,461,200 Staffing Costs (includes NI) [less Volunteers ] -184,210 100 -184,210 Volunteer displacement at 25% of potential Other operating costs 507,400 80 405,920 All operating costs except Staff

Total Railway local spend: 2,792,638

Tourists attracted to the area by the railway are expected to spend other amounts locally on entertainment, food, accommodation etc. A percentage of total passengers (180,000) has been assumed as follows:

Other tourist spend in the area % of Passengers Amount Total Entertainment, food etc. 80 40 5,760,000 Accommodation 40 25 1,800,000

Total other Tourist spend: 7,560,000

The ongoing direct annual contribution to the local economy therefore totals £10,352,638.

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3.3 Economic benefit to the region

The overall economic benefit to the region has been calculated over a ten-year period. Construction costs have been spread according to a five year construction schedule. Five years has been allowed for passenger numbers to rise to the target of 180,000 and hence the total benefit reaches £25,882,000 per year in year 10. The economic multiplier effect of those businesses and local residents spending money received from the railway has been considered. A multiplier factor of 2.5 has been assumed. Total Local Economic Benefit of £203.million is calculated as follows:

Total Economic benefit to the region (£000's) Year: 1 2 3 4 5 6 7 8 9 10 Total

Construction 6,391 10,797 9,471 9,110 4,061 39,831 Railway operations 6,212 7,247 8,282 9,317 10,353 41,411 81,241

Multiplier effect: +150% 9,586 16,196 14,207 13,665 6,092 9,317 10,870 12,423 13,976 15,529 121,863

Total Local Economic Benefit 15,977 26,993 23,678 22,776 10,153 15,529 18,117 20,705 23,293 25,882 203,104 Cumulative benefit 42,970 66,648 89,424 99,577 115,106 133,223 153,928 177,221 203,103

Assumptions Construction according to schedule 16% 27% 24% 23% 10% Railway takes 5 years to reach full passenger numbers 60% 70% 80% 90% 100%

A multiplier of 65% (proportion of money received that is subsequently spent) has been used which produces a factor of 2.5 after 5 cycles. Multiplier calculation % Spend locally 65% 1.00 0.65 0.42 0.27 0.18 0.12 0.08 0.05 Cumulative 1.65 2.07 2.35 2.53 2.64 2.72 2.77

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3.4 Net Economic benefit

If current railway operations continue until capacity limits are reached a maximum of 50,000 passengers per year could be carried on the existing one-mile railway. If the railway extension was not undertaken the current operations could grow with the introduction of a ‘Heritage Train’ as follows:

Current Railway operations 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Passengers # 33000 35000 40000 45000 50000 50000 50000 50000 50000 50000 Turnover (£000's) 220 233 267 300 333 333 333 333 333 333

Contribution to Economy 194 205 235 264 293 293 293 293 293 293 [88% of Turnover] Multiplier effect: +150% 290 308 352 396 440 440 440 440 440 440

Total Contribution 484 513 587 660 733 733 733 733 733 733

Cumulative total contribution 484 997 1584 2244 2977 3711 4444 5177 5911 6644

The impact of continuing existing operations (Phase I) should therefore be set against the benefits of reinstating the complete railway.

The net Local Economic Benefit of the £31 million investment would therefore be £196.5 million (£203.1 minus £6.6).

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3.5 Employment Contribution

The nine-mile railway would employ 63 staff directly and provide training for 10 apprentices. Using the Cambridge Tourism Model a total of 304 jobs would be supported by the investment which is 284 more than the current operations evaluated on the same basis.

Employment Contribution [Based on Cambridge Model assumptions] Future Current Operations operations Net Direct employees (FTEs) 63 4 59

Total Railway local spend 2,792,638 190,000

Indirect equivalent full time employment Turnover per job: £50,000 56 4 52

Total Direct and Indirect jobs: 119 8 111

Induced equivalent full time employment Rural multiplier ratio 1:1.05 1.05 125 8 117

Estimated Total FTE jobs 244 16 228

Estimated additional actual jobs Business survey data ratio (direct jobs) 1.5 32 2 30 Census of Employment ratio (Indirect and Induced jobs) 1.16 29 3 26

Grand total job creation 304 21 284

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4 Operational Plan

4.1 Railway Operations

The railway has enough operating experience (2004-2012) to give a reliable estimate of future operations costs and income projections. This section describes these estimates and the basis for calculation. Further detail information is held in spreadsheets.

The method of operating the railway will be as follows: • The complete distance (19 miles) would be constructed with termini near Lynton and Barnstaple town centres. • Rolling stock would be provided for 180,000 annual passengers. • The service would be operated using 3 Heritage trains with steam locomotives Lyn, Yeo, Exe and Taw. • Additional diesel locomotives and Railcars would be available.

The rolling stock capacity needed for 180,000 passengers is calculated by using the current seasonal demand with a 250 day operating schedule. A sample timetable shows that 8 return trips per day would be operated by three trains commencing at 9am (Barnstaple) and 9.45 am (Lynton). Maximum usage of coaches is only necessary in the peak months (August and September).

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Three Train Operations

RETURN TRIP CAPACITY OPERATING PERIOD

Coaches % of Per Total average Total Days peak per train Passengers Total operating Per per coaches Month per (+50%) at peak year day month journey required month (50/coach) March 3 281 4500 28 42 1 3 March 16 April 11 550 16500 55 83 2 6 April 30 May 11 532 16500 53 80 2 6 May 31 June 11 550 16500 55 83 2 6 June 30 July 11 532 16500 53 80 2 6 July 31 August 20 968 30000 97 145 3 9 August 31 September 15 750 22500 75 113 3 9 September 30 October 11 532 16500 53 80 2 6 October 31 November 3 563 4500 56 84 2 6 November 8 December 4 500 6000 50 75 2 6 December 12 Total days 250 Total passenger numbers 150,000 150000

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4.2 Income and Expenditure

Basis for calculation A summary of current financial information is given in this section. Future fares income is calculated from a ‘base’ fare price with the current proportion of actual fares paid per passenger applied. This allows for the mix of fares charges e.g. Adult, Senior etc. and concessions such as the ‘under fives travel free’ and group coach booking prices. For example 2011 Adult fare was £7.00 but the average fare paid was £3.89 per passenger. In a similar way the proportional amount of other sales (Shop and Tea-rooms) per passenger and the Gross Margin for these sales is known. Non-fares sales have been assumed as 50% above current levels.

Benchmarks (2011): January-September 2011 ticket Adult return fare (£) 7.00 sales proportions: 64% Adult Fares per passenger (£) 3.89 3% Child Shop/Tea-room sales per passenger (£) 2.62 32% Senior Shop Sales proportion 59% 1% Family Tea-Rooms sales proportion 41% Cost of Goods Sold Shop 60% Cost of Goods Sold Tea-Rooms 45%

Future operating costs are based on current experience. The cost base has ‘stabilised’ over the last few years and all the activities needed for the future railway are reflected in the current operations. For each cost a future multiplier has been assumed as shown in the table below. Some current costs (Chelfham, Loco Hire, Exmoor Enterprise) would not be relevant to future operations. Employment costs (as now) will be a major part of the future cost base. The railway (as with other Heritage Steam railways) currently uses many part time volunteers and an assumption about future volunteer usage is made for each Version.

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Current costs (2011 Budget - Total £147,700) Employment Costs 52000 Advertising & Promotion 10000 Professional fees 2000 Chelfham 1200 AGM Costs 1500 R&M Equipment 4800 Loco Hire 2400 Bank interest 7000 R&M Land & Buildings 4000 Exmoor Enterprise 1100 Bank charges 500 Special Events 11500 Equipment HP 12000 Staff travelling 1500 Fuel & Oil 7000 Telephone 1200 Insurance 8000 Trackwork 3500 Office Expense 2000 Utilities 4000 Premises Costs 6000 Volunteer expenses 4500

Complete Railway (Lynton to Barnstaple)

The Income calculations are:

Income Adult return price 26.00 Annual passengers 180,000

Fares 2,600,743 Adult rate discounted by current fares take Shop/Tea room sales 707,400 Using current levels of spend plus 50% Total Sales 3,308,143

Cost of Goods Sold 380,935 Gross Margin 2,927,208

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The Expenditure calculations are:

Expenditure Employment Costs 1,461,200 See Ph III Staff sheet

Advertising & Promotion 40,000 4.0 AGM Costs 1,500 1.0 Bank interest 0 Trading from a credit balance Bank charges 2,000 4.0 Equipment HP 0 All equipment owned Fuel & Oil 84,000 12.0 Insurance 48,000 6.0 Office Expense 8,000 4.0 Premises Costs 42,000 7.0 Professional fees 6,000 3.0 R&M Equipment 38,400 8.0 R&M Land & Buildings 40,000 10.0 Special Events 57,500 5.0 Staff travelling 15,000 10.0 Telephone 6,000 5.0 Trackwork 42,000 12.0 Utilities 32,000 8.0 Volunteer expenses 45,000 10.0

Total expense 1,968,600

Operating Profit/(Loss) 958,608 29%

Volunteer premium 736,840 25% Use Volunteers as per Staffing sheet

Potential Profit/(Loss) 1,695,448 51%

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5 Notes and References

5.1 Sustainable Development

The Exmoor Enterprise project is viewed as ‘sustainable’ in Commercial and Environmental terms. We use the following definitions to judge our sustainability:

Sustainable “Capable of being maintained at a steady level without exhausting natural resources or causing severe ecological damage”

Ecological “tending to benefit or cause minimal damage to the environment”

5.2 North Devon Workplace Earnings

North Devon District has relatively low earnings levels. Mean weekly full time workplace earnings are £379.40, 77% of the UK mean of £490.30. Measured by Parliamentary Constituency or District Council (including Unitary Authorities), North Devon ranks in the 88 th percentile i.e. in the lowest 12%. Source: ASHE April 2012.

Overall Business Plan 201302 Page: 18 February 2013