INFORMATION & DECISION REPORT

BWB 3440A

MEMORANDUM TO THE BOARD

SCOTLAND REPORT – MARCH 2012

Report by Director

1.0 PURPOSE

1.1 This report provides a general update to the Board on matters relating to BWS. It summarises progress towards separation, the BWS Business Plan 2012/13 and key operational issues. Board approval is also sought to change the directors of the Trust.

2.0 RECOMMENDATIONS

Board Members are recommended to approve:

2.1 The BWS Business Plan 2012/13 in compliance with the Financial Memorandum for in Scotland with Scottish Government.

2.2 The delegation of authority to scruitinise BWS performance in accordance with the Business Plan to the Scottish Sub-Committee of the Board. This plan will be recommended to the newly formed Scottish Board after vesting day.

2.3 The resignation of the two current BW nominated directors of Millennium Link Trust (MLT), Jim Stirling (Director) and Philip Ridal (Director and Secretary) with effect from 1st April 2012 and the appointment of Debs Hurst and Nicola Christie, BWS senior managers as explained more fully in 3.4 below.

3.0 PREPARATION FOR SEPARATION

3.1 Governance

The Scottish Government are in the final stages of confirming the appointment of new Members for the Board (SCB). Jon Hargreaves will provide a verbal update to the Board on the latest position.

There is a schedule of meetings for the new SCB planned. The Chairman, Tony Hales, will attend an induction session on 5th April in which will help the handover process.

Acknowledging that vesting is likely to be in early July, the inaugural meeting of the SCB is planned for 6th July to coincide with the formal celebrations of the 10th Anniversary of the opening of The Wheel.

A royal visit will be the highlight of a weekend of celebrations. The intention is to mark the separation as part of this event and it is planned to invite all current and some notable past BWB members to the event.

3.2 Scottish Parliamentary Process

Coterminous with the laying of the British Waterways Board (Transfer of Functions) Order 2012 and Explanatory Note at Westminster on 29th February 2012, the Scottish Parliamentary process seeking its consent to this Transfer Order commenced with a submission to the Cabinet Sub-Committee.The Scottish Government civil servants are confident that this process will be completed by the anticipated vesting date in early July 2012.

3.3 The Waterways Trust

The Waterways Trust will continue to operate in Scotlland following the transfer of the Waterways Trust in England & Wales to the & River Trust. Burness, solicitors, have reviewed the Transfer Agreement between The Waterways Trust and The Canal & River Trust, from a Scottish perspective and an amended version of the Transfer agreement has been forwarded to the Canal & River Trust lawyers for consideration. We are working towards this transfer being completed by the original vesting date of 1st April 2012.

3.4 Millennium Link Trust

The Millennium Link Trust structure was created in 2000 for the purpose of taking advantage of Industrial Buildings Allowance (IBA) tax allowances available on the expenditure for the Scottish Lowland Canals restorations. The principal activity of MLT is to promote, encourage and assist the restoration, development and use of the , and other canals and navigable waters in Scotland as amenity, recreational and/or commercial waterways.

In light of the separation of BW Scotland from England & Wales, the two BW nominated directors of MLT (Jim Stirling and Philip Ridal) are to be replaced by two members of the BWS senior management team, Nicola Christie and Debs Hurst.

4.0 ICT TRANSITION

Although the programme for the ICT changeover for BWS has had some unforeseen delays, which are not uncommon in this type of project, overall we remain on time and on budget to deliver all the necessary changes. This has been achieved by excellent working and collaborations across all teams involved.Training programmes on all systems are being rolled out across BWS and no major issues are being encountered. Customers and Stakeholders have been well informed.

Early adoptions and parallel running of the payroll system has been successful in identifying and resolving discrepancies in the system. An example of this has been the systematic overpayment of overtime rates. This has now been corrected.

5.0 SUMMARY BUSINESS PLAN

Due to separation and the changes that are occurring over the next few months we have prepared a ‘one year’ Business Plan to enable the new SCB to review in detail our strategy and priorities. In addition Scottish Government will be refreshing ‘Scotland’s Canals‘an asset for the future’ and this could impact on our long term aims.

The current plan shows a break even position as we are required to do with our Financial Memorandum with Scottish Government. This plan also includes;-

 An efficiency target of £0.3m for the following projects that are already in progress  Changes to working practices such as & bridge opening times  Review of Terms & Conditions 2  Plant and Equipment rationalisation  Additional income from utilities of £0.3m.  We are in discussions with Scottish Water regarding surface water discharges and one off surface water charges for new developments.

Figures in £k

Income Statement Full Year 2011/12 Business Forecast for plan the year 2012/13 ending 31st March 2012 Income Commercial Income BW Managed Property 546 1,103 Leisure 2,577 2,687 Utilities 1,411 1,449 Total Commercial Income 4,569 5,240

Management Costs Waterway Unit Management Costs 1,550 - Headquarters - - Central Services - - Management Costs 1,550 -

Commercial Performance 6,119 5,240 Funds for Public Benefit Delivery Core Waterway 217 243 Major Works - - Regeneration 972 1,015 Funds for Public Benefit Delivery 1,189 1,258

Total Income 7,308 6,498

We have not been able to create contingency this year as our income is £1.2m lower than last year due to a reduction in grant of £0.5m and the removal of the £0.7m fixed dividend from BW. This dividend will be replaced by assets based in Scotland (The Union Inn, The Boat House and assets at Edinburgh Quay) as well as a cash endowment which will be paid by the Canal & River Trust to BWS over the next 3 years in accordance with the Memorandum of Understanding.

We will manage the risk of not having a contingency by constantly reviewing by exception the critical income targets and pull back expenditure until income is collected. In addition Scottish Government will be the funder of last resort in the event of a major failure on the canal infrastructure.

3 Full Year 2011/12 Business Forecast for plan the year 2012/13 ending 31st March 2012 CONTRIBUTION BEFORE INTEREST & TAX Commercial Income BW Managed Property (226) 58 Leisure 1,027 1,325 Utilities 1,356 1,599 BW Share of Joint Ventures CBT 735 - Net Commercial Income 2,892 2,982 Management Costs Waterway Unit Management Costs (1,960) (2,290) Headquarters - - Central Services (1,200) - Management Costs (3,160) (2,290) Contingency - - Net Commercial Performance (268) 692 Grant 10,523 10,023 Total Net Income 10,254 10,715 Funds for Public Benefit Delivery Core Waterway (7,171) (7,271) Major Works (1,428) (1,285) Regeneration (1,655) (1,629) Funds for Public Benefit Delivery (10,254) (10,715) Surplus/(Deficit) - -

Income Full Year F10 Forecast 2012/13

Operational Property, Wayleaves etc. 687 1,158 Utilities 1,138 1,253 Water Sales 203 196 Recharges 1,704 90 Third Party Contributions 998 1,023 Maintenance Income - - Freight 94 92 Other 13,007 12,710 Total Income 17,831 16,521

Operating Costs Full Year F10 Forecast 2012/13 Payroll 6,345 6,755 Internal Time Recharges 583 - Staff Related Costs 359 518 Materials and Contract 6,869 5,822 Plant and Machinery 672 633 Premises and Office Costs 975 917 Professional Fees 790 673 Marketing 127 189 Other Costs 587 528 17,307 16,036 Depreciation 524 4 485 Total Operating Costs 17,831 16,521

6.0 HELIX

6.1 Capital works

Helix South has completed, Helix North is work in progress currently utilising Intermediate Labour Market, The access road is currently being built by Raynesway and all current utility impediments have been overcome. The Canal package has been tendered and the winning contractor is in the process of being formally appointed. The Kelpie tender has been returned and is under review pending contractor appointment, the Public Realm contract is out to tender and is due back in March.

The RIAS have held an international design competition for the Visitor phases 1, 2 and the internal fit-out of , the returns were very strong and the winning designer is Nichol Russell Studios.

As the project moves into a major construction phase is in parallel ensuring a programme of PR to support the positive and negative aspects such construction work brings, in addition a major revamp of the website is in process along with Helix re-branding as the project moves towards greater public use via a series of progressive soft openings as each module completes.

6.2 The day to day running of the project has been taken over by Mike King, the current Programme Manager, allowing David Lamont’s interim role as Chief Executive to conclude. Mike will work with the Project Executive and the Helix Trust board, to build on the current momentum.

7.0 OPERATIONS

7.1 General update

The upskilling programme culminated in the close season with a major piece of repair work at locks, all of the work was completed in-house and was managed on site by our in-house engineering team.This work completes a series of specialist works which our operations team has been actively pursuing over the past 18 months.The close season works also included fender replacement, towpath repairs and lock repairs.

At the works were carried out to replace corroded springs at the gondola seals and a substantial piece of repair work to rectify cracking on the Wheel rails is currently underway. Atkins Bennets have designed the repair solutions.

7.2 Health & Safety

A safety conference took place in January at the Falkirk Wheel to highlight the recent spike in lost time accidents and is now being rolled out across BWS, taking the key messages to all of the workforce. It is intended that this conference will take place twice per year.

In addition we are using route/cause analysis on all incidents involving all members of staff involved to highlight where certain decisions could have avoided incidents.

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8.0 COMMERCIAL ACTIVITY

8.1 Scottish Canals Waterspace Strategy

The consultation document for the new residential and commercial mooring strategy has been finalised following Scottish Government approval. The draft consultation document has been issued to all our stakeholders and is available for download on the Scottish Canals Website. There will be three public consultation events – in , Edinburgh and Inverness. In Edinburgh and Glasgow, the events will be informal, ‘drop in’ sessions, in Inverness the consultation event will be held as part of the annual customer forum. The consultation concludes on 11th May.

We anticipate the pilot schemes will be ready for marketing July/August following a review of the consultation in June. A monitoring system will be put in place during the following 12 months to analyse the pilots before any action is taken to roll out across the network. Existing residential occupiers will not be affected and we will formalise contracts with those customers who are currently ‘living aboard’ without a designated residential mooring.

8.2 Scottish Water

A series of meetings with Scottish Water and GCC are on going to discuss the best way of taking forward the potential opportunity the canal provides for both surface water and flood alleviation. We hope to agree a programme of projects with agreed timescales and the appropriate resources. This will include future projects which will either help to release currently undevelopable sites or retrofit old systems so the canal can take existing developments’ surface water. In addition, we hope to agree a way forward with Scottish Water for legacy issues such as illegal discharges into the canal or discharges into the canal for which Scottish Water currently receive the revenue.

We have completed the second stage modelling of the Glasgow branch of the Forth & Clyde canal which has shown that the canal has potential to deal with surface water from up to 400 ha of development land without the need for major investment. We have presented these findings to the MGSDP and they are now focused on producing a commercial solution.

Scotland The Hydro Nation

We have submitted a response to Scotland The Hydro Nation Prospectus and Proposals for Legislation consultation which concluded on 12th March. In summary, in discussion with our civil servants and the SG Bill team, it was agreed that it would be a positive step to encourage collaborative working if Scottish Canals became a designated body in the planned Water Resources Bill. This request has been included on our consultation response.

The main objective of our response is to highlight the efficiency gains available to Scottish Water by involving the canals water resources initiatives by referring to a number of examples and that a funding model is required to share the commercial benefits flowing from our involvement. Whilst this has been flagged in our consultation response, more detailed discussion is anticipated with the Bill team regarding the funding model going forward.

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BWS are currently pursuing three small scale hydro schemes: at Dunardry Burn (Crinan Hydro); at Neptune’s Staircase (Banavie Hydro) and Forth and Clyde Canal at the Falkirk Wheel (Falkirk Wheel Hydro). Further options will be pursued which will include Oich Weir, Ft. Augustus and Torvein on the Caledonian Canal and other small lock flights on the Forth and Clyde Canal.

Crinan hydro is ready for submission for planning permission subject to concluding landowner agreements. Banavie Hydro will also be ready for submission for planning permission shortly. Pre application discussions with Falkirk Council, have been very positive. Research into water management on the Union Canal is nearing conclusion and this will inform the progress of a scheme at the Falkirk Wheel.

It is envisaged that BWS could be generating electricity early in 2013.

8.4 VIVAT Heritage Lettings

The first phase of this partnership will be completed imminently with seven canalside properties being available to let as holiday accommodation from April 2012. The anticipated income from the first year of trading is projected at £48k.

The three original properties identified to be let to the Vivat Trust continue to progress. Works on Bona Lighthouse are due to commence this year with a view to being available to let in the summer 2013. It is envisaged that the works for Telford House Gairlochy will commence in 2013 with the completion anticipated for the start of the 2014 holiday season. As the works required to Dunolly House were primarily internal redecoration works, this property will be available to let from August 2012.

We will continue to develop this partnership and expand our offering of larger properties within the portfolio to include Muirtown Cottage in Inverness and Seaview Cottage in Crinan.

8.5 Building at risk property strategy update

Bridge House Hotel, Ardrishaig - We propose to convert the former hotel into two attached holiday homes.

Pier Square, Ardrishaig - Forbes Boat Care, an established Scottish company have made proposals to lease the former ferry terminus building as part of their business expansion plans. The company plans to develop a new arm of their business called “The Yot Spot” the first being proposed at Pier Square with a number of others to follow across the west coast. The business will provide a range of services to our customers and include a small café.

Rockvilla House - Our proposal is to renovate the building creating small studios which would suit a wide range of user types including local artists and start-up businesses. The building will require extensive works externally and internally.

Rosebank Distillery - The distillery building in particular is not suitable for alternative uses without major upgrading or rebuilding. Our focus has now shifted towards promoting employment generating uses which might involve distillery or micro- brewery initiatives.

Laggan Bothy - Our preferred option is to convert the building into a two bedroom holiday cottage. The property is located close to Laggan Locks which forms part of the Great Glen Way a well-known and established tourist route between Banavie and Inverness.

7 Clachnaharry Workshops - Our med/long term aspirations for these buildings is to create a vibrant mix of user type to include a licenced restaurant and a number of smaller retail outlets which might consist of a range of local craft shops or working studios. This will create a destination attracting visitors to the Sealock and Marina.

8.6 Acquisitions update

There are a number of opportunities in the pipeline including investments properties at which, if successful, will yield income of £0.5m per annum and development opportunities at Firhill and Fountainbridge.

9.0 ISIS

The Whisky Bond is located at the northern edge of the ‘Speirs Locks’ area of the Glasgow Branch of the Forth & Clyde Canal and is one of the Key Project Priorities for the Glasgow Canal Partnership.

The transformation of the former Highland Distilleries Whisky Bond into a creative & cultural ‘Hub’ for Glasgow, providing a home to artists and a place for creative entrepreneurs to run a business is progressing well with an anticipated completion date in June 2012 based on a construction cost of £2.4m. The original contract for the 100,000sqft shell and core works included, enlarged windows, fabric upgrade, new stair core and toilets, replacement services and car parking has recently been extended to include a tenant fit-out of the bottom 3 floors for Glasgow Sculpture Studios and the third floor fit-out for BE Capital our BPRA funding partner.

Although only 75% complete the first exhibition from Glasgow Sculpture Studios will take place from 20th April to 7th May. This will be the first solo show in the UK from Teresa Margolles, a Mexican artisit, as part of Glasgow International Festival of Visual Art. http://www.glasgowinternational.org/. Over 300 VIP’s will be invited to the opening, and the show will feature heavily in the promotion of the wider Festival, which attracts an audience of over 15,000. More than 2,500 are expected to visit The Whisky Bond during the 2 week run.

Steve Dunlop Director Scotland March 2012

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