Pinewood Studios: Business Case and Economic Impact Assessment

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Pinewood Studios LtdPinewood Studios: Business Case and Economic Impact AssessmentJanuary 2013provided and an assumption that there will be the same level of efficiency of use. Thisis considered to be a cautious assumption.Indirect, induced and wider employment – the composite multipliers and ratios of direct towider employment derived as part of the baseline assessment have also been applied to thedirect employment estimates for the PSDF in order to quantify the indirect, induced andwider employment impact under the proposed project; andGVA, Exchequer contributions and contribution to UK exports and trade – again, the GVAand export value per employee estimates and ratios of employment to Exchequercontributions established under the baseline assessment have been applied to thedevelopment proposals so as to assess the gross impact attributable to the PSDF.Net additional impact4.3.3.4 In determining the net additional impact generated through an intervention, the key issue to beaddressed is the additionality of the proposals – the extent to which activity takes place at all,on a larger scale, earlier or within a specific designated area or target group as a result of theintervention. In order to assess the additionality of the PSDF, the following factors willtherefore need to be considered:leakage – the proportion of outputs that benefit those outside of the project’s target area orgroup;displacement – the proportion of project outputs accounted for by reduced outputselsewhere in the target area. Displacement may occur in both the factor and productmarkets 54 ;multiplier effects – further economic activity associated with additional local income andlocal supplier purchases (in the case of the PSDF, this has already been accounted for in thegross impact estimates in order to be consistent with the baseline assessment of currenteconomic impact); anddeadweight – outputs which would have occurred without the project.4.3.3.5 The approach to assessing the net additional impact of a project, taking into account the aboveadjustments, is shown diagrammatically in Figure 4.3.4.3.3.6 The rate of leakage to be applied at each area of analysis has been based on postcode dataprovided by PSL in relation to their own employees and the results of on-site surveys carried outon behalf of AMION, which gathered information relating to the residence of productioncompany employees. The surveys also provided information in terms of the location of tenantand production company suppliers.4.3.3.7 To determine the appropriate displacement rate, discussions have been undertaken with keystakeholders, including representatives of major international production studios, such asUniversal, 20th Century Fox and Marvel. In addition, reference has been made to the54Product market displacement arises where the output of a supported activity takes market share from local firms producing the same goodor service. In the case of factor market displacement a support activity uses locally scarce factors of production (e.g. skilled labour or land)or bids up factor prices.44
Pinewood Studios LtdPinewood Studios: Business Case and Economic Impact AssessmentJanuary 2013independent market review and demand projections undertaken by PwC and the surveys oftenants and on-site production companies. A significant real terms increase in demand isprojected and, without studio and ancillary space and services, this will be lost to the UK.Therefore, in the absence of any meaningful alternatives as described in the Planning Statement(Document No 2), a low displacement rate is anticipated.4.3.3.8 Deadweight has been estimated through the construction of a reference case – this is not thesame as the baseline (i.e. the current situation), rather it reflects what would happen in thefuture if the proposed project were not to go ahead. The reference case has been producedbased upon 20 year financial projections for Pinewood should planning permission not begranted for PSDF.Figure 4.3: Net additional impactIntervention options Reference case Net additional impactGross direct effectsGross direct effectsLess leakage from targetarea / groupLess leakage from targetarea / groupGross local direct effectsGross local direct effectsLess displacement (factorand product market) /substitutionLess displacement (factorand product market) /substitutionLESS =Total net local additionaleffectsNet local direct effectsNet local direct effectsPlus multiplier effectsPlus multiplier effectsTotal gross local effectsTotal gross local effectsSource: HCA (2008): Additionality Guide: A standard approach to assessing the additional impact of interventions.4.4 Current economic importance4.4.1. An assessment has been undertaken of Pinewood’s current economic importance, specifically inrelation to the level of direct, indirect, induced and wider employment it supports and itscontribution to the UK economy in terms of GVA, Exchequer contributions, and exports andtrade:direct on-site employment:45
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