Pinewood Studios: Business Case and Economic Impact Assessment

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Pinewood Studios LtdPinewood Studios: Business Case and Economic Impact AssessmentJanuary 2013size of the productions. However, PSL has estimated the number of production employeeson site on an average day;indirect and induced employment – the indirect and induced effects attributable toPinewood have been estimated through the use of composite multipliers, which have varieddepending on the area of impact. The size of multiplier has been based on researchundertaken by the Department for Business, Innovation and Skills (BIS) 47 ,Optima/Cambridge Econometrics 48 and Oxford Economics 49 . A review of ONS AnnualBusiness Survey data for the creative industries as a whole has also been carried out toprovide further evidence as to the scale of the multiplier effect;wider employment – it is difficult to quantify the scale of wider employment impacts.However, the report on the economic impact of the UK film industry undertaken by OxfordEconomics provides a useful evidence base. This report relates to the film industry as awhole, which could underplay the impact of Pinewood given the high profile nature of manyof the films produced there. Nevertheless, it enables what may be a cautious estimate to bederived. The scale of wider impacts in relation to direct impacts for the film industry as awhole, as identified within the Oxford Economics report, has been applied to the amount ofdirect employment at Pinewood Studios in order to derive an estimate for wideremployment that might currently be supported by activity at Pinewood;GVA – the level of GVA generated by direct, indirect, induced and wider activity related toPinewood has been estimated by multiplying the number of jobs created by average GVAper employee figures. Reference has been made to the Department for Culture, Media andSport’s (DCMS’s) Creative Industries Economic Estimates, which for activity taking place atPinewood suggest an average GVA per employee figure of approximately £49,800 (2012prices). 50 In relation to indirect, induced and wider effects, which will be spread across anumber of sectors, an average GVA per employee for the whole economy has been applied(£47,000, 2012 prices);Exchequer contributions – Oxford Economics in their study of the economic impact of theUK film industry estimated the contribution to the Exchequer through corporation taxpayments, income tax, national insurance and VAT. This encompassed direct as well asindirect, induced and wider economic activity. The ratios of Oxford Economics’ employmentestimates for the UK film industry as a whole to their estimates of Exchequer contributionshave been calculated and then applied to the estimates of employment currently supportedby Pinewood. This has provided an estimate of the Exchequer contribution per annum thatcan be associated with the existing operations at Pinewood. Again, this is considered to be acautious estimate given the high profile nature of the films produced at Pinewood; andcontribution to UK exports and trade – figures for the quantum of services exported thatcould be attributable to Pinewood Studios are not readily available. However, within47484950BIS (October 2009), Research to improve the assessment of additionalityOptima/Cambridge Econometrics (May 2005), Economic Impact of the UK Screen IndustriesOxford Economics (September 2012), The Economic Impact of the UK Film IndustryThis is based on GVA and employment data for the following sectors: film, video and photography; digital and entertainment media; and TVand radio.42
Pinewood Studios LtdPinewood Studios: Business Case and Economic Impact AssessmentJanuary 2013(ii)DCMS’s Creative Industries Economic Estimates, figures are provided in terms of the value ofexports attributable to creative industry sectors. From this data, an average export valueper employee estimate has been derived for creative industries 51 (£22,300, 2012 prices) andfor the UK economy as a whole (£3,100, 2012 prices). The former has been applied toestimates of direct on-site activity and the latter has been applied to the indirect, inducedand wider employment estimates.PSDF impact assessment4.3.3.2 The assessment of the economic impact attributable to the project has been informed by areview of the PSDF development proposals and the establishment of a business case to test thefinancial and commercial viability of the scheme. In relation to the business case, a 20 yearfinancial model has been developed for the PSDF based upon Pinewood’s existing 5 yearbusiness plan. Key assumptions contained within the model are based upon Pinewood’s current5 year assumptions which have been updated to reflect the development proposals asappropriate. A summary of the business case is presented in Section 3.3 above.Gross impact4.3.3.3 On the basis of the PSDF, the Economic Impact Assessment has quantified the key benefits thatare expected to be created through the implementation of the development proposals. Theanalysis has included an assessment of temporary and permanent jobs, GVA, Exchequercontributions and contribution to UK exports. The methodology used to estimate each benefitwas as follows:temporary construction employment – in order to estimate the number of temporaryconstruction jobs generated under the PSDF, the expected project capital expenditure(including professional fees and contingency costs) has been divided by an average turnoverper construction employee figure of £144,570 52 . Construction employment has beenidentified in terms of person years and ten-year full time equivalent (FTE) jobs 53 ;direct on-site employment:Pinewood staff – the proposed expansion of facilities is likely to result in the need foradditional ancillary staff on-site. The increase in Pinewood staff has been based ondiscussions with PSL and the business planning work undertaken as part of developingthe business case;tenant company employees – in order to estimate the likely quantum of employmentcreated through the provision of additional office accommodation, employmentdensity ratios have been applied based on the responses to the survey of tenants andassumptions in relation to the expected occupancy rate have been used; andproduction company employees – in relation to the number of people working onproductions at Pinewood, the increase in employment under the developmentproposals has been based on the quantum of new production floorspace that will be515253This includes the following sectors: film, video and photography; digital and entertainment media; and TV and radio.Based on Annual Business Survey 2011 data, adjusted to reflect 2012 prices and full time equivalent employment.In line with convention, ten person years of temporary employment is taken to be equivalent to one permanent full time job.43
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