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How to rescue a heritage business

Author: ICAEW Insights

Published: 08 Jun 2021

When a historic building crumbles, statutory conservation bodies rush to the rescue. When a heritage business – operated within an historic building – declines, who steps into the void? Stephen Clarke FCA does.

It is easy to understand why people are inspired to engage in the preservation of historic buildings. The patina, the ambience, the historical importance – these are all tied up in bricks and mortar or other construction materials.

But heritage and culture go way beyond buildings to human endeavour, including business. We have seen that it is so much harder to inspire the same level of commitment to the businesses that were once carried on in those buildings, than in the buildings themselves.

It is in this heritage business space that Stephen Clarke operates, and where he brings to bear his decades of experience as a chartered accountant and, since 2010, the attention of his strategic financial property consultancy, Earth Regeneration Ltd.

Clarke is also a Trustee and Chair of the Audit Committee of Re-Form Heritage. Before Re-Form Heritage became an independent charity in 2016, it was a sister charity to The Prince’s Regeneration Trust of which he was also a Trustee. Further back, around 1990 after qualifying, he was an auditor with Deloitte Haskins & Sells (now PwC), but as a sideline, with Business in the Community, he worked on a pro bono basis with the arts, theatre and heritage organisations.

“Because I gained experience in helping theatres create their business plans and manage their activities, I was invited in the early 1990s to participate in a project which became Salford Quays. I think Salford Quays is arguably one of the best regeneration projects in the country,” says Clarke. “Salford Council was determined to regenerate the old Manchester Docks, and the project enabled us to use a cultural flagship asset, The Lowry Centre – probably for the first time – as a honeypot for fresh investment.”

This project helped to migrate Clarke into a specialised area of chartered accountancy: financial master planning for regeneration schemes and cultural capital. At this point he joined a large property advisory company and, in effect, ran an accounting firm within a real estate firm, helping developers working on projects like the Greenwich Peninsula to masterplan and account for very complicated areas of regeneration. He and his firm have also become involved in a number of football stadium sites, like Arsenal.

“We’ve tended to advise landowners, and those landowners have, by and large, been in the public sector,” he explains. “But along this journey, HRH the Prince of Wales wanted to set up the Regeneration Trust to sit alongside the Prince's Trust, the argument being that the Regeneration Trust would address physical regeneration and the Prince's Trust would address social regeneration,” says Clarke. “Getting involved with this initiative enabled me to blend what we do professionally with what we do on a charitable basis, and I have continued to work in this way ever since.”

Since around 2000, Clarke has undertaken significant charitable work, advising on protecting the UK’s cultural heritage. In 2011, Clarke and the Regeneration Trust worked with English Heritage on what he describes as the “exemplar scheme”. This comprised rescuing Middleport Potteries, the oldest working Victorian pottery in England. What was rescued was not just the building but also the business.

“I set up a structure – a classic operating company/property company deal (opco propco) – but the propco was a charity while the opco was a standalone commercial entity,” explains Clarke. The charity looked after the buildings but the opco ran the operation as a commercial entity with fresh investment in modern technology. It is now also the location for the filming of TV shows such as The Great Pottery Throw Down and an episode of gritty drama Peaky Blinders.

“Since then, we have been looking for a London project,” he says. “In late 2016, we saw that the bell foundry in London was being closed. In 2017, I thought to myself: this is Britain's oldest business so why can't we do something similar to Middleport in Whitechapel at the foundry. The challenge in London has always been the high value of real estate for an alternative use, in this case a hotel.

A boutique hotel (the developer’s preferred outcome) made sense for the location and arguably the building, but failed to take into account the intangible value of cultural heritage – it just took into account the tangible asset, that is the land and buildings. “It's been an interesting challenge and it's highlighted the importance local communities place on their cultural heritage,” he says.

“At present, we're not valuing that cultural asset as part of the equation. For a football club like Arsenal, I would argue the activity – and business – of playing football is an intangible cultural heritage asset because it's part of the area’s culture,” he says.

“The demise of the bell foundry into a hotel has really heightened the issue in London. We've got to think about how we conserve, maintain and manage those assets that people deem to be culturally important,” he says. “A lot of people think that means creating museums, but we've got plenty of museums. But when the business is viable, albeit with new management and investment, this is where you can structure a mechanism whereby the operator can continue to operate the business activity that was carried out in that location for generations.”

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