AUGUST 2018

DOCUMENT

Shepperton Studios Planning Application for Growth 2018

Expanding Shepperton Studios: The Economic Impact

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Expanding Shepperton Studios: The Economic Impact

Shepperton Studios Limited August 2018

Contents

Executive Summary i

1. Introduction 1

2. Strategic Context 4

3. The Current Impact of Shepperton Studios 21

4. Reference Case 32

5. The Proposed Development 34

6. The Future Economic Impact of Shepperton Studios 36

7. Spillover Effects 43

8. Net Additional Impacts of the Proposed Development 46

9. Social Value impacts 51

10. Conclusion 54

Appendix 1: References 59

Contact

Richard Laming richard.laming@turley.co.uk

Client

Shepperton Studios Limited

Our reference

PINR3003 August 2018

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Executive Summary

Shepperton Studios is a key asset for the UK film industry 1.1 Since its foundation in 1931, over 1,000 films have been made at Shepperton Studios,

winning 126 BAFTAS and 81 Oscars. Major inward investment films produced at Shepperton in the last five years include Gravity, Guardians of the Galaxy, Into the Woods, Doctor Strange, Beauty and the Beast, The Mummy, Mary Poppins Returns, Mamma Mia: Here We Go Again and The Voyage of Doctor Dolittle. During the same period, Shepperton has also hosted films such as Mandela: Long Walk to Freedom. Lady in the Van, Florence Foster Jenkins and Christopher Robin.

The UK film industry is a success story and is growing 1. Over the last decade the UK’s film sector has grown exponentially. Total spend on film

production in the UK in the twelve months between July 2017 and June 2018 was £1,858 million. This is more than double the amount spent 2011/12 (£845.3 million)1. It is inward investment which has accounted for the vast majority of the overall increase. Inward investment on UK film production currently accounts for 82% of all spending.

2. The growth of the UK’s film sector reflects wider global market trends2. In order for the UK to be able to position itself and capture a share of this prospering sector, the UK Government has made several highly successful strategic decisions to attract further inward-investment over the past ten years which have enhanced the appeal of the UK to overseas film and high-end television (HETV) investors.

The UK Government fully supports future growth of the film industry 3. The implementation of the ‘Creative Industries Tax Relief’ was the first big step to

encourage international production firms to the UK market. The tax relief, implemented in 2007 allows film companies to claim a rebate of up to 25% of the total amount spent on production. Between 2007 and 2017, HMRC paid £2.3 billion in Film Tax Relief, representing almost £9 billion spent on making films in the UK3.

4. The Government’s Industrial Strategy published in 2017 and the Creative Industries Sector Deal (2018) unequivocally reaffirm the priority that the UK Government places on growing the film sector. The Industrial Strategy promotes five key areas to boost the productivity and earning power of people throughout the UK. The Creative Industries – a group of sectors which includes film and HETV – is one of the five chosen pillars within the Industrial Strategy.

5. More recently, in March 2018, the UK Government launched the ‘Creative Industries Sector Deal’, which notes that, dependent on investment in studio space and skills, the UK film and HETV sectors have potential for further growth: “with substantial increases in studio capacity and investment in skills, it is feasible that in the period to 2025 our

1 BFI (2018), BFI Research and Statistics Unit: Film, high end television and animation programmes production in the UK: full year 2017 2 Please see the accompanying PwC report (2018), Shepperton Studios Review of the UK film & high-end TV production facility market: Supporting Evidence, which focuses on global trends and the market demand for studio space in film and TV 3 ONS (2017), Paddington, Star Wars and the rise of the UK film industry

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revenues could nearly double to approximately £4bn a year4”. This provides critical context for understanding the need for the proposed expansion of Shepperton Studios.

6. Support for enhancing the growth of the film and HETV sectors is not just confined to national Government level. The Enterprise M3 Local Enterprise Partnership5 (LEP) has also expressed strong support for the sector. The LEP’s Strategic Economic Plan 2014-2020: Working for a Smarter Future focuses on sectors which play to the area’s strengths. ‘Entertainment technologies’, which includes film, are identified as a ‘niche specialism’ which can contribute positively to realising the area’s economic potential and which the LEP will seek to support6. At the local level, Spelthorne Borough also acknowledges the important economic contribution made by Shepperton Studios. For example, the Council’s current Local Economic Assessment 2017-22 highlights Shepperton Studios as being amongst the local area’s biggest employers7. Therefore it is clear that there is strong and consistent policy and strategy support for the development of the UK film industry at all levels and Shepperton Studios is acknowledged as a key economic asset in furthering growth.

Delivering more studio space in the “West London cluster” is critical to meeting the UK Government’s growth targets for inward investment

7. Market demand research undertaken by PwC evidences a West London cluster of film and HETV production facilities of which Shepperton Studios, together with Pinewood Studios and Warner Brothers Leavesden, is one of the only three that is large enough to accommodate major inward investment productions.

8. The West London cluster also includes other types of businesses in the film and HETV supply chain, such as post-production and marketing businesses. The cluster predominantly attracts international multi-million pound production companies to make films in the UK. These film companies locate in these studios because of the draw of several key factors:

• Infrastructure – for instance, ultra-fast fibre network; FACT accredited data centre; stages with up to 60,000 sq ft of space;

• Skills – specialist skills such as production management; set construction; special effects; lighting.

• Services – niche services including equipment hire and sale, graphic design, industry associations and organisations;

• Location – proximity to London as a world class city, and Heathrow Airport for accessibility worldwide;

• Financial incentives – tax incentives and cost support for creative industries across the political spectrum.

9. Outside the West London area, regional studio spaces serve different markets for smaller film, TV and HETV productions. The location, scale of facilities and infrastructure, supply chain, international accessibility and skills attributes that make

4 HM Government (2018), Industrial Strategy Creative Industries Sector Deal 5 Shepperton Studios is located within the Enterprise M3 LEP area 6 Ibid. p. 13 7 Ibid. p. 86

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West London the first choice for large inward investment film productions are not replicated in regional locations. Thus, large film productions that cannot find studio space in the West London cluster cannot simply transfer to a regional location outsider the cluster. In such circumstances, the UK is competing globally for investment and if the Greater London cluster cannot provide sufficient space, investment is lost to the UK.

Demand for space in the West London cluster far outstrips supply 10. Research by PwC finds that in the absence of sufficient studio space in the West

London area larger production companies choose instead to locate in comparable studio spaces on the international scale, for instance the USA or Canada, rather than choose regional studios in the UK8. This represents a significant economic opportunity cost for the UK and highlights that the provision of more studio space within the West London cluster is a pre-requisite of the Government’s £4 billion inward investment target by 2025 being met.

An expanded Shepperton Studios can make a significant contribution to growth of the UK film and HETV industry

11. Shepperton Studios has a pivotal role to play in the future growth of the film sector in the UK. However, Shepperton Studios is unable to accommodate more production activity than it already does, as the Studio has been operating at full capacity for the past ten years.

12. Shepperton Studios must expand, and it has submitted this proposed development for planning permission in order to keep pace with growing demand sustainably for the long term future.

13. This report assesses and presents the Studios’ current economic contribution and the forecast impact that the Studios would have should planning permission be granted for expansion. The assessment considers the economic impact across four economic impact areas: Spelthorne Borough, the Enterprise M3 LEP, the West London cluster, and the UK.

MEASURING ECONOMIC CONTRIBUTION

Current Impacts

Shepperton Studios is already a major employer, making a positive and substantial contribution to productivity at a national level and delivering a range of social and economic benefits

14. Shepperton Studios currently supports 1,507 FTE jobs on site.

8 PwC (2018), Shepperton Studios, Review of the UK film & high-end TV production facility market: Supporting

Evidence

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15. In addition to direct jobs, Shepperton Studios indirectly supports a further 1,507 FTE

jobs through its supply chain and the spending of wages in the economy.

16. Shepperton Studios currently contributes a total of £181.7 million Gross Value Added

to UK economy per annum.

17. Shepperton Studios creates positive “spillover” economic impacts on other sectors

including merchandise, tourism and UK brand promotion. Shepperton Studios currently supports a 633 FTE jobs across the UK economy through the “spillover” effects associated with its operations.

18. Shepperton Studios currently contributes £17.3 million per annum to the Exchequer.

19. Shepperton Studios currently contributes £41.8 million per annum to UK exports.

20. The current economic benefits that Shepperton Studios creates are significant in their own right and support local and UK economic prosperity.

21. In the event that Shepperton Studios cannot expand, it is concluded that its current economic impacts are likely to be maintained in the short term. However, as the studios are currently fully utilised, there will be minimal potential for enhanced economic impacts to be produced as a result of not expanding. This is considered to be the Reference Case.

The Impacts of the Proposed Development

Construction phase

The planned expansion of the studios will create and sustain significant economic benefits during the 4 year construction period

22. The construction sector is a highly valuable component of the UK economy, and an important contributor to national GDP.

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23. Construction of the Proposed Development at Shepperton Studios will create 3,349

person years of employment over the four year construction timeframe.

24. Construction activity will generate a total of 837 FTE gross direct jobs at a UK level, of

which 498 will be contained within the wider impact area of the West London cluster area; 440 in the Enterprise M3 LEP area and 231 in Spelthorne Borough. These will be temporary jobs that persist over the four year construction period.

25. Through spending in the construction supply chain and the respending of wages, the

project will support a further 925 FTE jobs across the UK economy, of which 249 would be within the West London area; 88 contained in the Enterprise M3 LEP area and 23 in Spelthorne Borough.

26. In total direct, indirect and induced jobs supported by the construction phase of the expansion will be 1,762 gross FTE jobs, or 1,469 FTE jobs once displacement is taken into account.

27. Construction activity will generate a total net additional £392 million GVA across the

UK economy. Of this, £227 million would be contained in the West London area; £170 million in the Enterprise M3 LEP and £74 million in Spelthorne Borough.

28. The construction phase will deliver economic benefits at a time of economic uncertainty for the UK, including: a major £500m private sector investment; jobs and associated wages and spending power as well as a productivity boost to the economy.

Impacts of the Completed Development

29. Once completed, the expanded studios will deliver an enhanced range of beneficial economic and social impacts for the UK, the M3 Enterprise LEP and Spelthorne borough.

30. The operation of the expanded Shepperton Studios will support 2,796 gross direct FTE

jobs, comprising the Studios’ direct employees, and other staff based in tenant companies and production companies.

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31. In addition to direct jobs created on site, the economic activity at the expanded studios

will support many more jobs in the film production supply chain. A total of 2,516 FTE jobs would be supported across the UK economy, of which 1,558 would be contained in the West London area, 112 in the Enterprise M3 LEP area and 28 in Spelthorne Borough.

32. In total direct, indirect and induced jobs supported by the expanded Shepperton Studios will total 5,312 gross FTE jobs or 5,032 FTE jobs once displacement is taken into account.

33. The expanded Shepperton Studios would generate a total productivity boost of £322.7

million GVA per annum comprising £273.0 million contained within the West London area, £198.0 million in Enterprise M3 LEP and £193.6 million in Spelthorne Borough.

34. Increased spillover effects in other non-film sectors would support a total of 904 FTE

jobs across the UK economy as a result of the expansion. This is 271 more jobs than supported by Shepperton Studios’ current activities.

35. Exchequer contributions would increase to a total of £61.1 million per annum.

36. UK export contributions would increase to a total of £75.5 million per annum.

Net additional Impacts

37. An expanded Shepperton Studios will deliver significantly enhanced net additional economic impacts at every level of the economy from local to national. Net additional impacts are calculated as follows:

Impacts of Proposed Development – Impacts of Reference Case = Net Additional Impact

38. The following table illustrates the net additional economic impacts generated by the expansion of Shepperton Studios, demonstrating that over 2,000 FTE jobs will be supported.

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39. These net additional impacts are beneficial and significant and will benefit a range of people and companies at many different geographic levels in the UK. It is concluded that the expansion of Shepperton Studios will generate substantially enhanced economic benefits for the UK above and beyond those which are already sustained by the studio’s current activities.

Table A: Summary of Net Additionality Assessment

Type of Impact Existing Operations (and Reference Case)

After Expansion Net Additional Impacts

Total Employment (FTE)

3,013 5,032 2,019

Productivity (GVA, £m per annum)

£181.7 £322.7 £141

Spillover employment

633 904 271

Exchequer contributions (£m per annum)

£17.3 £61.1 £39.49

Export contributions (£m per annum)

£41.8 £75.5 £30.310

Source: Turley Economics analysis, 2018

Social and cultural impacts of film and Shepperton Studios 40. Aside from economic impacts, film and HETV made in the UK play a broader societal

role by contributing to and shaping the country’s culture, as well as promoting British culture abroad; recent examples of the former are Walt Disney’s Christopher Robin, made at Shepperton Studios, and of the latter, the Netflix series The Crown.

41. As part of PGL, Shepperton Studios already plays an important role in supporting the local community as well as the advancement of the film sector. Highlights of PGL’s current investments in social value include:

• direct recruitment of young people;

• in partnership with the Open University, the development and financing of the ‘Business of Film Making’ on-line course;

• development of the standards for industry apprenticeship schemes in key aspects of the film making sector;

• donations to charities that make a positive difference to the lives of people; and

9 Net of allowance of £4.38m for displacement 10 Net of allowance of £3.37m for displacement

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• working with the BFI to deliver its BFI2022 skills strategy, a five year strategy for 2017 -2022.

Increased social impacts will result from the expansion of Shepperton Studios 42. The proposed development includes the following community facilities package which

will enhance the social value created by Shepperton Studios:

• enhancement of the River Ash corridor;

• increased number of workshops for local school children;

• increasing access to the Korda Theatre for Pinewood Cinema;

• provision of educational support in the local area, including sponsorships and an apprenticeship scheme; and

• continued support for the Spelthorne Business Plan competition.

Conclusion

43. The proposed expansion of Shepperton Studios will enable the UK to capture a greater share of the growing global film and HETV market. The Government’s ‘Creative Industries Sector Deal’, states that the film and HETV sectors have potential for further growth subject to investment: “with substantial increases in studio capacity and investment in skills, it is feasible that in the period to 2025 our revenues could nearly double to approximately £4bn a year11”. The expansion of Shepperton Studios will make a pivotal contribution in realising the target to increase inward investment in UK and HETV. The expansion will protect and safeguard the jobs and prosperity currently created by the Shepperton Studios activities. Further, it will enable almost a doubling of gross employment and productivity impacts associated with Shepperton Studios, benchmarked against current levels of impact. This will generate a significant employment and productivity effect at a UK level that will also be experienced at the local level and across the wider M3 Enterprise LEP area.

44. Expansion of the studios is a prerequisite of generating the significant economic and social benefits that are set out in this report. Should the studios not be able to expand, then these benefits will be foregone representing a significant opportunity cost for the economies and people of Spelthorne borough, the M3 Enterprise LEP and the UK. Over time the failure to provide sufficient studio space in the West London cluster relative to production company demand is likely to erode the ability of the UK to compete for footloose global investment.

11 HM Government (2018), Industrial Strategy Creative Industries Sector Deal

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1. Introduction

1.1 Shepperton Studios is part of Pinewood Group Ltd, the UK’s leading provider of real estate required for the production of film and television content.

1.2 Over the past nine decades since its foundation in 1931, Shepperton Studios has continuously generated major economic benefits, not only for the local economy where the studios are based in Spelthorne, Surrey, but also for the UK as a whole.

1.3 Shepperton Studios has played a key role in the growth of the UK film sector, which has seen the Gross Value Added (GVA) generated by film; video and TV companies triple since 200812. Film production in the UK in the twelve months between July 2017 and June 2018 was £1,858 million. This is more than double the amount spent 2011/12 (£845.3 million)13.

1.4 The exponential growth of the UK film sector in recent years reflects wider global trends14. In recognition of the scale of global growth, the Government is committed to ensuring that the UK is in the best possible position to capture its share of this prospering sector:

• In 2007, the UK Government implemented the Film Tax Relief, the first of a suite of fiscal incentives now within the wider ‘Creative Industries Tax Relief’, which allows film companies to claim a rebate of up to 25% of the total amount spent on production. Since 2007, HMRC has paid £2.3 billion in Film Tax Relief, representing almost £9 billion spent on making films in the UK15.

• Last year, in 2017, the UK Government chose to include a group of sectors known collectively as the Creative Industries - which includes film and HETV - as one of five key pillars of its Industrial Strategy. This strategy represents the country’s long-term plan to boost the productivity and earning power of people throughout the UK.

• More recently, in March 2018, the UK Government launched the ‘Creative Industries Sector Deal’. The Government’s position is that if more stages are provided and the crew base is sufficiently expanded, it is feasible that in the

12 ONS (2017), Paddington, Star Wars and the rise of the UK film industry 13 BFI (2018), BFI Research and Statistics Unit: Film, high end television and animation programmes production in the UK: full year 2017 14 Please see the accompanying PwC report Shepperton Studios Review of the UK film & high-end TV production facility market: Supporting Evidence, which focuses on global trends and the market demand for studio space in film and TV 15 ONS (2017), Paddington, Star Wars and the rise of the UK film industry

About Shepperton Studios

Founded in 1931.

Located in Spelthorne, close to Heathrow airport and 18 miles from central London.

Part of the larger Pinewood Group, which has film and TV studios across the UK and in other countries including the USA, Malaysia and the Dominican Republic.

Home to over 60 independent businesses all working in the sector supply chain – for example CGI, lighting, marketing, make-up, finance.

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period to 2025, revenues from inward investment in film and HETV could almost double, reaching approximately £4bn per year.

1.5 Spelthorne Borough Council (SBC) also recognises the role that Shepperton Studios plays at the national level. SBC’s ‘Spelthorne Means Business: Economic Strategy 2017-2022’ states that the creative industries and technology sectors associated with Shepperton Studios are not only critical to the local economy through generating direct and supply chain jobs, but also important to the creation of wealth to the country as a whole through its exports.

1.6 In the context of global growth and government support at all levels, demand for studio space is increasing fast. Shepperton Studios is now in the position that it is fully utilised and has operated above optimum levels of utilisation every year for the past ten years. The Studio has no additional capacity to accommodate the growing market for film.

1.7 In light of increasing demand and the paucity of studio space that is available, Shepperton Studios has put forward proposals to expand its facilities and infrastructure at its site in Spelthorne.

1.8 This report presents Shepperton Studios’ current economic impacts and demonstrates the potential increased impacts which would be generated should the Studio be able to expand in line with the proposals.

1.9 The remainder of this report is as follows:

Strategic context • Section 2 of this report outlines the strategic context, based on analysis of data

trends in the UK film sector. The policy and strategy context for the creative industries and the film industry specifically is presented. Finally, the local social and economic conditions pertaining to Spelthorne Borough are summarised as context for the assessment.

Economic impacts of Shepperton Studios and its proposed expansion • Section 3 presents the quantified impacts of the current operations of

Shepperton Studios. Section 4 summarises the “reference case” - the likely effect on economic impacts should planning permission not be granted. Section 5 presents the key elements of the proposed development; and Section 6 demonstrates the future economic impacts of the proposed development. Section 7 presents evidence of spillover effects not directly linked to but influenced by the UK film sector, for instance marketing and tourism.

Net additional economic impacts of the proposed expansion • Section 8 brings together the above elements and presents the net additional

effects – this refers to the quantified economic impacts which relate to the uplift from the proposed development, in essence the difference between the future scenario presented in sections 5 and 6 and the current economic impacts presented in Section 3.

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Shepperton Studios social value impacts • Section 9 looks at the wider social value as a result of Shepperton Studios’

charitable and community initiatives.

Conclusions • Section 10 concludes the report and summarises key findings.

1.10 Turley Economics has carried out this assessment based on analysis of data provided by PGL as well as a variety of secondary data sources, including the Office for National Statistics (ONS). In order to analyse this data, Turley has used methods informed by Government best practice and guidance, namely the HCA Additionality Guide and the ONS Input-Output tables, as well as authoritative research reports on the economic impacts of the UK film industry. Net additional economic impacts are reported, which take into account the effects of leakage, displacement and economic multiplier effects. A full explanation of the methodology used is provided in Section 3.

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2. Strategic Context

2.1 This section establishes the substantial contribution that the film sector makes to the UK economy. The policy and strategy context for supporting the further growth of the film sector is then set out. The section concludes with an analysis of local social and economic conditions, highlighting the context for the planned expansion of Shepperton Studios.

Economic Contribution

“The UK film industry is a major international success story. It is a regular and celebrated collaborator with major US studios on big budget pictures such as Harry Potter, as well as being a successful independent producer of smaller, quality films16”.

Source: UK Trade and Investments

The creative industries are growing at a faster rate than the UK economy 2.2 The film sector is just one component of a wider group called the Creative Industries –

which includes other sectors such as digital media, computer games, tourism and sport.

16 UK Trade and Investments (2014), Creative Nation: Film TV and Digital Media

There is clear and strong evidence which proves the importance of the film and HETV sectors to the UK economy.

The sectors have grown significantly in recent years, with sharp increases in turnover, employment and a proliferation in the number of new firms, with most economic activity located in a tight cluster in the West London area.

Of all the components which make up the film sector, it is production – the main activity at Shepperton Studios – which is driving overall growth.

Total spend on film production in the UK in the twelve months between July 2017 and June 2018 was £1,858 million. This is more than double the amount spent 2011/12 (£845.3 million). Between this timeframe, UK domestic spending on film production has maintained comparatively stagnant, with a growth of only 6%. It is inward investment which has accounted for the vast majority of the overall increase. Today, inward investment on UK film production accounts for 82% of all spending.

Between 2014 and 2015, the total turnover of the UK film industry increased from £7.7 billion to £10.2 billion – the highest figure in ten years. This follows ten years of growth: Gross Value Added (GVA) by film, video and television companies has tripled (313% growth) over the past decade, and between 2006 and 2015 the UK film trade surplus has increased nine fold (874% growth), from £128 million to £1,247 million.

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2.3 In November 2017, the UK Government’s Department for Digital, Media, Culture and Sports (DCMS) released data showing that the Creative Industries are worth £91.8 billion in Gross Value Added (GVA) to the UK economy17. There was a growth of 7.6% in GVA attributable to the sector between 2015 and 2016, more than double the rate of growth in the UK economy in the same period (3.5%).

The film and TV sectors make an increasingly highly valuable contribution to the UK economy

2.4 Between 2014 and 2015, the total turnover of the UK film industry increased from £7.7 billion to £10.2 billion – the highest figure in ten years18.

2.5 Data from the Office for National Statistics (ONS), which groups film, video and TV production activities together19, shows that the film and TV sector is becoming increasingly important to the UK economy: since 2008, the Gross Value Added (GVA) by film, video and television companies has increased by 313%20.

Turnover in motion picture, video and television, programme Table 2.1:production, sound recording and music publishing activities, 2008 – 2015 (£ billion)

Source: ONS (2018), Annual Business Survey

The sub-sector of production is leading overall growth in the film sector 2.6 Analysis at a sub sector level reveals that it is “production” activities – the preparation

and shooting of films – that is leading growth of the film sector overall.

2.7 In 2015 for the film industry as a whole, production accounted for 45% of the total GVA generated, with distribution accounting for 43% and exhibition accounting for 12%21.

2.8 More recent data published by the British Film Institute shows that in the twelve months between July 2017 and June 2018, the total amount spent on film production

17 UK Government, DCMS (2017), Sectors Economic Estimates 2016: GVA 18 BFI (2017), The UK Film Economy: Research and Statistics 19 ONS (2018) Annual Business Survey, Standard Industrial Classification (Revised 2007) group 59 is defined as: Motion picture, video and television programme production, sound recording and music publishing activities 20 ONS (2017), Paddington, Star Wars and the rise of the UK film industry 21 BFI (2017), The UK Film Economy: Research and Statistics

£13.8 £14.2 £14.1

£16.0 £16.9 £17.6 £18.4

£23.1

£25.7

£0.0

£5.0

£10.0

£15.0

£20.0

£25.0

£30.0

2008 2009 2010 2011 2012 2013 2014 2015 2016

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was £1,858 million22. This is more than double the amount spent 2011/12 (£845.3 million).

Reflecting the growth trend in the sector, employment is also increasing 2.9 Across Great Britain, there are approximately 61,000 jobs in the film sector23. Notably,

the production element of the film sector’s workforce grew 43.8% between 2009 and 2015.

Figure 2.1: Total employment in film, by sub-category, 2010, Great Britain

Source: ONS (2015), Business Register and Employment Survey

Figure 2.2: Total employment in film, by sub-category, 2015, Great Britain

Source: ONS (2015), Business Register and Employment Survey

22 BFI (2018), Film and other screen sector production in the UK, January – June (H1 Half Year), 2018 23 ONS (2017), BRES data, based on the following SIC codes: 59111 : Motion picture production activities; 59120 : Motion picture, video and television programme post-production activities; 59131 : Motion picture distribution activities; 59140 : Motion picture projection activities

30%

21% 9%

40%

2010 Motion pictureproduction activities

Motion picture, videoand televisionprogramme post-production activitiesMotion picturedistribution activities

Motion pictureprojection activities

38%

21% 8%

33%

2015 Motion pictureproduction activities

Motion picture, videoand televisionprogramme post-production activitiesMotion picturedistribution activities

Motion pictureprojection activities

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The number of firms in film and TV is growing 2.10 The number of firms in motion picture, video and television has grown by 50.7% since

2010, from approximately 7,800 to 11,700. In comparison, growth in the number of firms across all industries in the UK was only 29% over the same time frame24.

Growth in the number of film and TV companies, 2010 – 2017, UK wide Table 2.2:

2010 2017 Percentage change, 2010 -

2017

Film and TV sectors25 7,780 11,730 50.7%

All industries 1,797,905 2,320,895 29.1%

Source: ONS (2017), UK Business Counts

The film sector is highly clustered 2.11 ‘Clusters’ describe a group of related or mutually dependent businesses that locate

together. It is a common trend seen in cities all across the world; a well-known example is the tech cluster known as ‘Silicon Valley’ in the United States.

2.12 Substantial economic gains are produced when firms locate nearby to one another, sharing supply chains, knowledge and labour markets. As NESTA26, one of the UK’s leading research foundations, which specialises in economic growth and innovation, has explained:

"… Industrial clusters can be a source of agglomeration economies – the geographical proximity of firms produces collective benefits – contributing to local competitiveness and economic growth27."

2.13 The UK film sector follows the same pattern – with a pronounced concentration of firms in the ‘West London area’, as defined by PwC in the accompanying 2018 Market Demand report28.

2.14 Approximately 75% of all employment in the film sector is located within 65 local authorities – representing 17 % of all local authorities in the UK29.

The film sector maintains a large trade surplus 2.15 In 2015, the UK film trade surplus was £1,247 million30, and has grown from £128

million in 2006, equivalent to 874.1% growth over a nine year period.

24 ONS (2017), UK Business Counts 25 Comprising the following ONS SIC codes: 59111: Motion picture production activities; 59120: Motion picture, video and television programme post-production activities; 59131: Motion picture distribution activities; 59140: Motion picture projection activities 26 Known formally as NESTA, the National Endowment for Science, Technology and the Arts. 27 Nesta (2010), Creative clusters and innovation: Putting creativity on the map 28 PwC (2018), Shepperton Studios, Review of the UK film & high-end TV production facility market: Supporting Evidence 29 ONS (2017), Business Register and Employment Survey for SIC code 5911 : Motion picture, video and television programme production activities

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2.16 The UK film industry exported £2 billion worth of services in 201531 comprising £1.3 billion in intellectual property and £0.7 billion in audio visual and related services.

2.17 Exports from intellectual property have increased by 148% since 2014, and the export value of audio visual and related services increased by just under 4%32.

The Creative Industries Tax Relief has played an important role in attracting big-budget film productions to the UK

2.18 The Film Tax Relief introduced in 2007 allows film production companies to claim a rebate of up to 25% of the total amount spent in producing the film in the UK33, 34. Between 2007 and 2017, HMRC has paid £2.3 billion in Film Tax Relief, representing almost £9 billion spent on making films in the UK over this timeframe35. There has been a particular upswing on the amount spent on UK film production in recent years – the amount has more than doubled between 2011/12 and 2017/18. Between July 2017 and June 2018, approximately £1.9 billion was spent on UK film production compared to £845 million in 2011/1236. Of this, around 82% is from inward investment37.

2.19 The UK is currently the fourth largest film market in the world, generating revenues in excess of £4.1 billion. In 2016, cinema-going remained the most significant component of the film value chain, with gross receipts of over £1.2 billion38.

Big budget films in the UK that qualified for Film Tax Relief, 2008 to 2017 Table 2.3:

Rank Film Year UK and Ireland box office (£ million)

1 Star Wars: The Force Awakens 2015 123.2

2 Skyfall 2012 103.2

3 Spectre 2015 95.2

4 Harry Potter and the Deathly Hallows Part 2 2011 73.1

5 Beauty and the Beast 2017 72.4

6 Mamma Mia! 2008 68.6

7 Rogue One: A Star Wars Story 2016 66.0

8 The Dark Knight Rises 2012 59.4

9 Quantum of Solace 2008 57.9

10 Harry Potter and the Deathly Hallows Part 1 2010 57.6

Source: ONS (2017), Paddington, Star Wars and the rise of the UK film industry 30 BFI (2017), The UK Film Economy: Research and Statistics 31 This is the latest year for which data is available 32 BFI (2017), The UK Film Economy: Research and Statistics 33 Up to a maximum of 80% of the film’s core expenditure 34 For a film to qualify as “British” for tax purposes, it either has to pass a “cultural test” based on how much of the story, setting, production and crew are British (or from the European Economic Area), or be an official co-production from a country which has a reciprocal agreement with the UK or through the European Convention on Cinematographic Co-production. 35 ONS (2017), Paddington, Star Wars and the rise of the UK film industry 36 BFI (2018), Film and other screen sector production in the UK, January – June (H1 – Half Year). 37 Ibid 38 Ibid

9

The growing popularity of the UK as a hub for film production is leading to significant pressure on the availability on studio space

2.20 The UK is increasingly a popular choice for production companies when looking for studio space. The specific requirements of larger production companies – those located at Shepperton Studios and other facilities such as Pinewood and Leavesden – mean that they prefer to locate in the West London area due availability of a highly skilled talent pool within the West London cluster and location near to Heathrow Airport, among other factors39.

2.21 Studios located outside the West London cluster in the regions are unable to replicate these unique attributes for film production companies and therefore tend to be more suited to smaller productions, largely because these productions do not require large stage sets or large volumes of highly skilled crew members which larger film productions require. PwC’s Market Demand report finds that in the absence of sufficient studio space in the West London area, large films are internationally footloose. Thus, when studio space is not available in the West London cluster, production companies will actively seek available studio space and presence of skilled crews in other established global locations, for instance in the USA, Canada or in Europe rather than choose smaller regional studios in the UK which are not able to offer the requisite production crew, international access and scale attributes.

The film sector supports many other industries through its wide-reaching supply chains

2.22 The production of film content involves companies across a broad range of sectors in the UK economy – from tech firms carrying out specialised CGI (Computer-generated imagery), to make-up artists, catering, finance and advertising companies.

2.23 Because the film sector has such broad supply chains, the growth of the sector will also drive growth in other related sectors across the UK economy. This is known as the indirect economic impact.

2.24 A recent study in 2017 analysed the supply chain effects of the film sector, finding:

• 37% of expenditure impacted individuals and companies that worked exclusively in the film industry;

• a further 38% of expenditure impacted individuals and companies that worked in other creative industries; and

• 25% of expenditure impacted other sectors that are outside the creative industries40.

2.25 This is shown in Figure 2.3.

39 PwC (2018), Shepperton Studios, Review of the UK film & high-end TV production facility market: Supporting

Evidence 40 Olsberg SPI (2017), Film and the Creative Economy: How Film and Television Drama Productions Grow the Creative Industries

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Figure 2.3: Film production supply chain effects

Source: Olsberg SPI (2017), Film and the Creative Economy: How Film and Television Drama Productions Grow the Creative Industries, p.25

Summary

2.26 The UK film and HETV sectors make an important contribution to the UK economy as a high value sector. These sectors’ growth over the past five years is positive and pronounced when benchmarked to the growth of the UK economy over the same period.

2.27 This sector growth is reflected in increased number of jobs and firms, and the increasing contribution the sector makes to the UK trade balance. There are wide supply chain links associated with the film sector and this means that the economic effects of activity and investment in the sector are amplified through the economy with many people and businesses benefiting.

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Policy and Strategy Review

National Policy and Strategy

National Planning Policy Framework 2.28 The revised National Planning Policy Framework (NPPF)41 and accompanying Planning

Practice Guidance (PPG)42 set out the Government’s planning policies for England. The recent update to the NPPF places an even greater emphasis on the economy:

“Significant weight should be placed on the need to support economic growth and productivity, taking into account both local business needs and wider opportunities for development43.”

2.29 The NPPF states that sustainable development is secured through sustainable economic growth which creates jobs and prosperity, this being built on the country’s ‘strengths’ and meeting the challenges of the future. It is acknowledged that creative sectors should be supported, by:

“Making provision for clusters or networks of knowledge and data-driven, creative or high technology industries”44.

41 Ministry of Housing, Communities and Local Government (2018) National Planning Policy Framework 42 DCLG (2018) Planning Practice Guidance (PPG) 43 Ministry of Housing, Communities and Local Government (2018) National Planning Policy Framework, p. 23 44 Ibid. (para 82)

There is strong, clear and consistent support for the growth and development of the UK’s film industry from national to local levels of policy and strategy.

The ‘Creative Industries’ – a group of sectors which includes film– has been selected as part of the national Government’s Industrial Strategy as one of five highly productive pillars of the UK’s economy. As such, the UK Government intends to support future growth of the Creative Industries, and thus the film sector.

The UK Government is committed to growing inward investment in film and TV production to £4bn a year by 2025, enabled by the growth of production facilities to attract and accommodate inward investment.

At the local level, Spelthorne Borough Council (SBC) has long recognised that the area’s business economy is significantly boosted by the presence of ‘businesses of national and international renown’ including Shepperton Studios, as stated in the SBC’s Local Economic Assessment (2017-22).

SBC’s ‘Spelthorne Means Business: Economic Strategy 2017-2022’ states that the creative industries and technology sectors associated with the Studios are not only critical to the local economy through generating direct and supply chain jobs, but also important to the generation of national wealth through export activity.

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Industrial Strategy: Building a Britain Fit for the Future 2.30 In November 2017, the Government published its Industrial Strategy White Paper45,

with the aim of boosting productivity and earning power throughout the UK by focusing on highly productive sectors in which the UK has, or can develop, specialisms.

2.31 Creative Industries are highlighted as one such key sector in the Industrial Strategy, demonstrating the Government’s recognition of its growth potential and the strategic importance of the industry to the UK and its current and future economy. The Strategy states that the Creative Industries sector makes up over 5% of the UK economy and employs more than two million people (and a further one million in supply chain sectors), contributing £87bn of GVA46. Amongst the country’s fastest-growing sectors, the Industrial Strategy states that the Government is committed to supporting Creative Industries to meet their ambitions and maximise their economic contribution.

“The Industrial Strategy is all about building on our existing strengths and seizing the opportunities of the future. Our creative industries have been, for centuries, world renowned and at the forefront of innovation. That’s why I was determined to place the creative industries at the heart of our Industrial Strategy.”

Source: Greg Clark, Secretary of State for Business, Energy and Industrial Strategy, March 2018

Creative Industries Sector Deal 2.32 ‘Sector Deals’ are presented by the Industrial Strategy as partnerships between the

Government and industry on sector-specific issues, which it states can play a significant role creating opportunities to boost productivity, employment, innovation and skills.

2.33 In March 2018, the Government published their Creative Industries Sector Deal47, an agreement between the Government and the Creative Industries Council, which seeks to unlock growth for creative businesses. The Sector Deal states that a successful partnership could contribute to the creation of 600,000 new jobs and attain GVA of £150bn within the Creative Industries by 202348.

2.34 Film and HETV alone attracted over £2bn of inward investment to the UK in 2017. The Government, through the Sector Deal, aims to double inward investment to £4bn a year by 2025, providing that there are increases in studio capacity49.

2.35 In order to fulfil the target to double inward investment, the sector deal includes the following key policies:

• The commitment to investing £20 million over the next two years to roll out a Cultural Development Fund so that local partnerships can bid for investments in culture and creative industries.;

45 HM Government (2017) Industrial Strategy: Building a Britain Fit for the Future 46 Ibid. p. 203 47 HM Government (2018) Industrial Strategy: Creative Industries Sector Deal 48 Ibid. p. 10 49 Ibid. p. 54

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• Investment of £58 million in research and development initiatives to harness the power of immersive technologies50 and double the UK’s share of the global creative immersive content market by 2025; and

• Investment of up to £2 million to support an industry-led creative careers programme aiming to reach at least 2,000 schools and 600,000 pupils in two years and industry development of apprenticeship standards.

The Cultural White Paper 2.36 The Cultural White Paper51 was published in March 2016 by the Government’s

Department for Digital, Culture, Media & Sport (DCMS). The White Paper outlines the Government’s strategies to support the cultural and creative sectors and the way in which culture can play an active role in enhancing equality and prosperity nationally, enabling the country to take an international lead.

2.37 The White Paper highlights the Government’s support for skills programmes which provide specialist training in the skills needed by the film industry, stating that there are plans to reform technical and professional education in order to support more young people to gain the skills and knowledge needed for technical occupations in the cultural sectors52.

2.38 In economic development terms, a key aim targeted by the White Paper is to increase the GVA of the cultural sector, in order to create successful communities across the country53.

Department for Digital, Culture, Media & Sport – Culture is Digital 2.39 In March 2018, the DCMS published a report into the integration of new technology

into the creative industries54, highlighting that both sectors are those which have undergone strong growth – for example, the GVA of Creative Industries grew by 45% between 2010 and 2016 – and in which the UK has competitive advantages55.

2.40 The UK’s film industry is cited in the report as making the significant contribution of £5.2 billion to national GDP in 2015 – this owing to the level of talent both in front of and behind the camera and the high quality of production – with it also being highlighted that the top three films released at the UK box office in 2017 being UK qualifying productions.56

2.41 The report further states that culture-focused economic development can contribute positively to creating thriving and prosperous communities, emphasising that creative clusters are central to achieving the objectives of the Industrial Strategy57.

50 Immersive technology refers to technology that blurs the line between the physical world and digital or simulated world, thereby creating a sense of immersion. Immersive technology enables mixed reality; in some uses, the term "immersive computing" is effectively synonymous with mixed reality as a user interface. 51 Department for Digital, Culture, Media & Sport (2016) The Cultural White Paper 52 Ibid. p. 23 53 Ibid. p. 60 54 Department for Digital, Culture, Media & Sport (2018) Culture is Digital 55 Ibid. p. 7 56 Ibid. p. 8 57 Ibid. p. 26

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Sub-Regional Policy and Strategy

Enterprise M3 Strategic Economic Plan 2014-2020: Working for a Smarter Future 2.42 Enterprise M3 is the Local Enterprise Partnership (LEP) covering the 14 local authorities

along the M3 motorway corridor stretching out from the western edge of London (including Spelthorne borough).

2.43 Enterprise M3 published its Strategic Economic Plan (SEP) in 201458, providing a framework for economic development that will support the LEP’s vision for the area as:

“The premier location in the country for enterprise and economic growth, balanced with an excellent environment and quality of life”59

2.44 The SEP states that the LEP’s investment priorities will focus on sectors which represent the area’s strengths and which display high growth potential, and in doing so aims to support the creation of 8,000 new jobs and £2 billion of new export markets from businesses in the Enterprise M3 area. ‘Entertainment technologies’ is identified as a ‘niche specialism’ which can contribute positively to realising the area’s economic potential and which the LEP will seek to support60. T

Local Policy and Strategy

2.45 Shepperton Studios is well recognised by Spelthorne Borough Council as playing an important economic and competitiveness role at the local level.

Spelthorne Local Plan 2.46 Spelthorne Core Strategy61 was adopted in 2009, and sets the following vision:

“By 2026 Spelthorne will have become a more sustainable place to live and work, the economic and social needs of all residents will be met and the environment will have been successfully protected and where possible enhanced…

The economy will be strong with the overall amount of business space maintained and renewed as required to meet business needs. Businesses will be more accessibly located and the Borough’s residents will be better trained”

2.47 ‘Policy EM1: Economic Development’ of the Core Strategy, states that the Council will maintain employment development by retaining “designated Employment Areas and supporting in principle proposals in these areas for employment development”62 .

2.48 Shepperton Studios is listed as one such ‘designated Employment Area’.

58 Enterprise M3 (2014) Enterprise M3 Strategic Economic Plan 2014-2020: Working for a Smarter Future 59 Ibid. p 4 60 Ibid. p. 13 61 Spelthorne Borough Council (2009) Core Strategy and Policies Development Plan Document 62 Ibid. p. 38

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2.49 The Core Strategy also states that employment development will also be supported through “encouraging proposals for redevelopment and extensions that enable business needs to be met”63.

Spelthorne Borough Council Local Economic Assessment 2.50 To inform the borough’s Economic Strategy 2017-22, Spelthorne Borough Council

undertook and published a Local Economic Assessment in November 201664. The Assessment profiles the characteristics of the local economy, identifying local strengths and potential priorities for improvement.

2.51 The Economic Assessment highlights that a key strength of the area is its large and broad business base, which is significantly boosted by the presence of “businesses of national and international renown”, including Shepperton Studios65. Shepperton Studios is further identified as a major employer which bolsters the Borough’s significant high technology presence66, and is recognised as being amongst the local area’s biggest employers, alongside BP and Heathrow Airport67. The Studios are also highlighted as providing a significant quantity of industrial and warehouse land, representing more than 25% of all such floorspace in the borough68.

Spelthorne Means Business: Economic Strategy 2017-2022 2.52 Spelthorne Borough Council published its updated Economic Strategy in 201769,

covering the five years to 2022. The Strategy aims to prioritise the creation of an environment where businesses can “settle, grow and thrive”70, and help realise the area’s potential as a leading economy within the wider sub-region.

2.53 Shepperton Studios is highlighted as a major employer with the Strategy highlighting that the creative industries and technology sectors associated with the Studios are not only critical to the local economy through generating direct and supply chain jobs, but also nationally through export activity71. The Strategy emphasises the strong, long-standing links that are in place between the Council and the Studios, emphasising that there is scope for this support to be widened in the interest of economic development72.

Spelthorne Borough Council Corporate Plan 2.54 Spelthorne Borough Council published their Corporate Plan in July 201673, covering the

period to 2019. The Economic Development strand of the Corporate Plan states that its key aim is to “stimulate more investment, jobs and visitors to Spelthorne to further the overall economic wellbeing and prosperity of the Borough and its residents”74. It is recognised that economic development is essential in order to boost local

63 Ibid. 64 Spelthorne Borough Council (2016) Economic Assessment 65 Ibid. p. 1 66 Ibid. p. 7 67 Ibid. p. 86 68 Spelthorne Borough Council (2016), Spelthorne Local Economic Assessment, p.18 69 Spelthorne Borough Council (2016) Spelthorne Means Business: Economic Strategy 2017-2022 70 Ibid. p. 1 71 Ibid. p. 7 72 Ibid. p. 29 73 Spelthorne Borough Council (2016) Spelthorne Borough Council – Corporate Plan 2016-2019 74 Ibid. p. 6

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employment, expenditure and local government revenue generated through business rates, and to attract and retain skilled workers. A further key action which is stated will advance local economic development is developing local skills and employability, in conjunction with the Council’s partners.

2.55 The plan states that the Council will actively look for opportunities to use the area’s assets to stimulate economic development75. Another priority of the Corporate Plan is ensuring financial sustainability for the local area. To achieve this, the Corporate Plan states that attracting investment into new and existing commercial properties and assets will obtain ongoing, sustainable revenue streams76.

Summary 2.56 It is clear that there is strong policy and strategy support for development of the UK

film industry. At a national level, the National Planning Policy Framework recognises the importance of enabling clusters of industries to grow and flourish. The Government’s Industrial Strategy priorities Creative Industries as one of just five sector foci, with the more recent Creative Industries Sector Deal reinforcing Government commitment to investment and development of the sector.

2.57 The M3 Enterprise LEP’s Strategic Economic Plan (SEP) provides further sub regional strategy support for the development of Shepperton Studios. At a local level, Spelthorne borough’s published evidence and Economic Development Strategy both acknowledge and provide a high level of support for the continuing development of Shepperton Studios as a major contributor to the economic wellbeing of the borough.

75 Ibid. 76 Ibid. p. 8

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A Profile of Local Socio-Economic Characteristics

Shepperton Studios is an important employer in Spelthorne 2.58 Due to the presence of Shepperton Studios in Shepperton, a clustering of firms in the

film sector77 has built up over time. Today, there are approximately 550 jobs in the ward in this sector78, accounting for a far higher proportion (13.5%) compared to wider geographies including across Spelthorne (1.5%) and England (0.2%).

Figure 2.4: Proportion of total employment in the film sector, 2015

Source: ONS (2015) Business Register and Employment Survey

2.59 Employment in film, video and television has increased by over 200% since 2009, placing this sector in second place in terms of proportional growth in the Laleham and Shepperton Green ward.

77 Based on total employment in following SIC Codes: 59111 : Motion picture production activities; 59120 : Motion picture, video and television programme post-production activities; 59131 : Motion picture distribution activities; 59140 : Motion picture projection activities 78 ONS (2015) Business Register and Employment Survey

13.5%

1.5%

0.2%

0.2%

0.0% 2.0% 4.0% 6.0% 8.0% 10.0%12.0%14.0%16.0%

Laleham and Shepperton Green ward

Spelthorne Borough

Enterprise M3 LEP

England

Shepperton Studios plays an important economic and social role in the Laleham and Shepperton ward, where the film sector comprises 13.5% of all employment – significantly higher than the national average of 0.2%.

Local employment in this sector grew by over 200% between 2009 and 2015, making it the second fastest growing sector.

The local population living nearby to Shepperton Studios is relatively affluent; salaries are above the national average, in line with broader trends in the Enterprise M3 LEP area. Deprivation is notably low, particularly in comparison to nearby areas in London.

The presence of Shepperton and the film sector more generally plays an important role in creating these conditions of local prosperity and economic wellbeing.

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Figure 2.5: Percentage change in employment, Spelthorne Local Authority, 2009 -2015

Source: ONS (2015) Business Register and Employment Survey

2.60 Heathrow Airport is the other key employer in Spelthorne; the development of the third runway is supported by the Council and is regarded as “fundamental to Spelthorne’s future economic prosperity79”. The close proximity between the airport and Shepperton Studios has been highlighted as a key attractor for inward investment production companies.80

A higher proportion of the local population in Shepperton are economically active 2.61 According to the 2011 Census, the ward had a total residential population of 7,962

people, of which 5,207 – equivalent to 64.5% - are considered to be working age (aged 16 – 64)81.

2.62 Of the working age population living in Laleham and Shepperton Green ward, approximately 84.1% are economically active. This is slightly higher than the rate for Spelthorne, which is recorded at 83.1%82. Both geographies have significantly higher rate of economic activity in comparison with England and Wales, which is 76.8%.

2.63 Of those economically active, 74.4% in Laleham and Shepperton Green ward are in full-time employment, broadly in line with the rate for Spelthorne (74.8%), and higher than the rate for England and Wales (70.7%)83.

2.64 The latest available data from 2018 shows that unemployment is lower in Spelthorne (2.9%) than across England (4.3%)84.

79 Spelthorne Borough Council (2016), Corporate Plan 2016-2019 80 PwC (2018), Shepperton Studios: Review of the UK film & high-end TV production facility market 81 ONS (2011), KS102EW – All usual residents 82 ONS, 2011 Census, Table DC6107EW via Nomis 83 ONS (2011), 2011 Census, Table DC6107EW 84 ONS (2018), Model-based estimates of unemployment, Apr 2017-Mar 2018

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Those who live and work in Spelthorne earn more than the national average 2.65 The annual gross salaries of both the residential and the workplace populations in

Spelthorne85 (£35,623 and £35,404 respectively) are higher than the averages for the Enterprise M3 LEP (£32,115 and £35,153 respectively) and England (£29,079 and £29,085 respectively)86. These trends are shown in the following figure. Although wages are relatively high in comparison with national average, the wages in Spelthorne are only 75% of the Surrey average, contributing to housing affordability issues.

Figure 2.6: Comparison of annual gross salaries

Source: ONS (2017), Annual Survey of Hours and Earnings, Annual Gross Salary, Residential and Workplace analysis

The local population living in the Laleham and Shepperton Green ward is more highly skilled than Spelthorne and the national average

2.66 A higher proportion (38.3%) of those living in the ward in which Shepperton Studios is located have skills at the highest level - Level 3 and 4 – as compared to Spelthorne (36.1%) and the national average (32.1%).

Figure 2.7: Comparison of skills profile

Source: ONS (2011), QS501EW - Highest level of qualification

Deprivation is lower than average in the Laleham and Shepperton Green ward 2.67 In terms of deprivation, the Laleham and Shepperton Green ward performs well, and is

amongst the 50% least deprived neighbourhoods in the country. There are deprivation

85 This dataset is not available for the Laleham and Shepperton Green ward. 86 ONS (2017), Annual Survey of Hours and Earnings, Annual Gross Salary, Residential and Workplace analysis

£0 £10,000 £20,000 £30,000 £40,000

Annual gross salary of workplacepopulation

Annual gross salary of residentialpopulation

England

EnterpriseM3 LEP

SpelthorneLocalAuthority

19.4%

20.4%

16.7%

22.5%

33.7%

32.2%

28.2%

28.5%

38.3%

36.1%

31.8%

32.1%

0% 20% 40% 60% 80% 100%

Laleham and Shepperton Greenward

Spelthorne Local Authority

Enterprise M3 Local EnterprisePartnership

England No qualifications

Apprenticeship

Level 1 or Level 2QualificationsLevel 3 or Level 4QualificationsOtherqualifications

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domains in which the ward performs better – notably the Health Deprivation and Disability Domain, where the ward is performing particularly well, and is amongst the 30% least deprived neighbourhoods in the country. Similarly, the ward is performing well in Employment Deprivation Domain, in which it is ranked as amongst the 40% least deprived in the country. However, in the Education, Skills and Training Domain, the ward is ranked as amongst the 40% most deprived in the country87. A spatial illustration of the pattern of multiple deprivation in the Laleham and Shepperton Green Ward, and surrounding areas is provided in the following figure88.

Figure 2.8: Laleham and Shepperton Green ward, Indices of Multiple Deprivation

Source: ONS (2015), Indices of Multiple Deprivation

Summary

2.68 Overall, the Laleham and Shepperton Green ward in which Shepperton Studios is located is relatively affluent in comparison with national benchmarks – as are the wider Spelthorne local authority and Enterprise M3 LEP area.

2.69 The ward, local authority and LEP area all have significantly higher rates of economic activity and employment than the national average, as well as high levels of qualifications. This is reflected in the relatively high wages recorded at these geographies and the subsequent low rates of overall deprivation relative to England as a whole.

2.70 Employment in the motion picture, video and television sector accounts for a far higher proportion in the Laleham and Shepperton Green ward compared to the regional and national averages. This serves as evidence of the important role that Shepperton Studios plays in the local area and in creating the conditions for prosperity and economic wellbeing locally. Key to the continuation of such favourable conditions is the continued operation and success of Shepperton Studios.

87 ONS (2015), Indices of Multiple Deprivation 88 Note: the census output area corresponding to the Laleham and Shepperton Green ward is highlighted by a blue outline and flag symbol in Figure 2.8.

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3. The Current Impact of Shepperton Studios

3.1 Analysis in this section is based on a point-in-time. It uses the most recently-available data, which includes that which is both publically available and that which is supplied by PGL, and Shepperton Studios Limited (SSL) and the consultant team instructed by PGL to progress the planning application for the proposed development.

Impact Areas

3.2 This assessment considers Shepperton Studios’ economic impact across four geographies. Spelthorne Borough, the Enterprise M3 Local Enterprise Partnership (LEP) and a wider impact area of the West London cluster capture the majority of the Studios’ direct economic impacts. The UK economy is included as the fourth geography, which captures all economic impacts across the country. It is noted that the Studios’ economic impact will be felt across other regional areas too, particularly in nearby LEPs, including Thames Valley LEP and the Thames Valley Berkshire LEP.

3.3 A summary of the four geographies used in the assessment is below:

• Local Impact Area – the local authority area of Spelthorne Borough Council in which Shepperton Studios is located;

• Enterprise M3 LEP – the Enterprise M3 LEP, which includes Spelthorne borough;

• Wider Impact Area – a geographical area surrounding the site, which includes the West London cluster of film and high end TV89, and which captures the large

89 Authorities making up the Wider Impact Area include: Spelthorne, Bracknell Forest, Chiltern, Elmbridge, Epsom & Ewell, Guildford, Hertsmere, Runnymede, Rushmoor, Slough, South Bucks, Surrey Heath, Three Rivers, Watford, Windsor & Maidenhead, Woking, Wokingham, Wycombe, and all Greater London borough’s (inclusive of the City of London).

This section illustrates that Shepperton Studios currently makes a substantial contribution to the local, sub-regional, regional and national economies of the UK.

Shepperton Studios currently:

• Provides 1,507 FTE jobs directly on site at the Studios;

• Supports a further 1,507 FTE jobs at a UK level and including those in the supply chain and supported by onward expenditure of wages; and

• Makes a total annual productivity contribution of £181 million GVA to the UK economy.

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majority of Shepperton Studios’ current employment and supply chain expenditure90;

• The United Kingdom – capturing the economic impact that Shepperton Studios makes to the national economy.

3.4 The four geographical impact areas are illustrated in Figure 3.1.

Figure 3.1: Assessment Impact Areas

Source: Turley Economics, 2018

Current Economic Impacts

3.5 The current economic impact of Shepperton Studios has been assessed using information provided by PGL including floorspace currently on-site; employee and tenant numbers, business activities and expenditure levels with Shepperton Studios suppliers.

Floorspace Supply 3.6 Shepperton Studios currently comprises a Gross External Area (GEA) of circa 83,560

sqm, inclusive of stages, workshops, offices and other types of floorspace. The distribution of this space by type is shown in the below table.

90 ONS via Nomis (2011) 2011 Census – WU01UK - Location of usual residence and place of work by sex; PGL (2018) – data supplied relating to aggregated local authority “origin” points for employees; PGL (2018) – data supplied on Shepperton Studios supply chain (by annual expenditure and location of supplier)

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Table 3.1: Existing Shepperton Studios Floorspace (GEA)

Type of Floorspace Floorspace (sqm)

Stage 20,837

Workshop 25,053

Office 24,218

Other 13,452

Total 83,560

Source: FaulknerBrowns, August 2018

3.7 For context, the following table provides a description about how each type of floorspace is used, including the outdoor area which can be used for outdoor filming and storage – known as backlot.

Description of types of floorspace within Shepperton Studios Table 3.2:

Type Description

Stages Stages are large soundproofed buildings which have additional structural characteristics and electrical infrastructure designed for filming and recording dialogue.

Workshops Workshops are used for the construction of film sets and film props. These activities increasingly require higher head rooms and larger floor areas. A number of recent productions have begun using workshops as linear production lines where teams specialise in a certain process and the set props move down the line in a production process.

Tenants of the Mediahub also occupy workshop space.

Offices Offices are used by staff employed by an individual production company for the creative, managerial, financial and administrative functions of a production.

They are also occupied by companies providing a range of media-based support services to the production companies using Shepperton Studios and a small amount of floorspace will be occupied by SSL itself.

Tenants of the Mediahub also occupy office space.

Backlot Open brownfield land close to the Studio’s stages and workshops used for the construction of exterior sets and filming outdoor special effects. It also provides the flexibility for temporary storage and for the parking of vehicles associated with film and television production.

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Employment Impacts 3.8 There are three distinct groups of employees currently at Shepperton Studios:

1. PGL employees 3.9 PGL as a whole directly employs over 280 people. Data supplied by PGL indicates that

80 of these employees are permanently based at Shepperton Studios – equating to approximately 27% of the organisation’s total employees. However, it should be noted that, in practice, many staff work between Shepperton and Pinewood Studios and, as such, Shepperton can at times support a higher amount of employment than is represented by the permanent on site presence.

3.10 Just over 75% of these employees live within 20 local authority areas, many of which neighbour or are close to Spelthorne91. Approximately 10% of PGL employees live in Spelthorne borough.

3.11 A geographical illustration of the concentrated nature of Pinewood Group’s employees around the area surrounding Spelthorne borough is provided at Figure 3.2. This clustering of employees also highlights a concentration within Greater London and proximate boroughs to the west of the conurbation.

Figure 3.2: Home locations of Pinewood Group employees, 2018

Source: Turley analysis based on data provided by Pinewood Group, June 2018

91 PGL (2018) –aggregated local authority “point of origin” data for employees

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2. Tenant’s employees working in the Film and TV supply chain 3.12 Shepperton Studios is also home to 60 independent companies located at the site’s

Media Hub facility which comprises office and workshop accommodation. Tenant company business activities support the production of film and TV programmes – from CGI specialists to catering companies, lighting technicians to finance and make-up. Their combined technical skills support the functioning of Shepperton Studios and act as a key attractor to productions looking to access a range of complementary services on site. Data supplied by PGL indicates that in total there are currently approximately 714 jobs associated with tenant companies.

3.13 The following table shows the spread of tenants by category of business activity, demonstrating the diverse range of business activities supporting productions at the studios.

Types of Businesses Based at Shepperton Studios Table 3.3:

Category of Tenant Number of Tenants Equipment Hire and Sales 11 Production Companies 5 Agents 3 Courier and Freight Services 3 Design Services 3 Financial Services 3 IT Support 3 Marketing Services 3 Music 3 Special Effects 3

Construction 2 Drapes 2 Event Services 2 Model Makers 2 Office Support 2 Rigging 2 Consumables 1 Crewing Services 1 Hair and Makeup 1 Health and Safety 1 Merchandise 1 Motion Control 1 Travel Services 1 Visual Effects 1 Total 60

Source: PGL, 2018

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3. Production company employment 3.14 The third category of employment supported by Shepperton Studios relates to

production employees. Internationally renowned production companies, including Lucas Film, Marvel, Walt Disney, Universal, Working Title and Paramount Pictures, choose to hire stage space at Shepperton Studios to film their films and TV programmes.

3.15 Due to the nature of filming movies, the precise number of production employees is variable according to the scale of production.

3.16 Based on site admissions data provided by PGL for a representative week of operations in 2018, an average of 713 production staff were on site at Shepperton Studios. Published evidence of employment trends in the film and high-end TV market in the UK shows that production employment for single features can regularly be in the hundreds and for blockbuster scale movies can exceed 1,000 employees92. The observed figure of 713 production employees is therefore considered to be a reasonable estimate of total employment for the purposes of this assessment, with peak on-site production employment likely to be higher.

Shepperton Studios total employment 3.17 Shepperton Studios currently provides employment for a total of 1,507 people. The

breakdown of different categories of employment is shown in the following table.

Table 3.4: Employment at Shepperton Studios93

Type of Employee Number of Employees % of Total Employees

PGL Employees 80 5%

Production Staff 713 47%

Media Hub Tenants 714 47%

Total 1,507 100%

Source: Turley Economics, 2018, Annual PGL Investment in Shepperton Studios

Capital Expenditure 3.18 Data provided by PGL shows that, over the four financial years 2015-18, Shepperton

Studios has had a total capital expenditure of circa £9 million, equating to an average of £2.25 million per annum. It should be noted that the Studio’s budgeted capital expenditure for financial year 2019 is significantly higher, at circa £4.65 million.

3.19 Capital expenditure will in turn support employment and prosperity in the economy as contracts are placed with companies in a diverse range of sectors.

92 Data provided by Pinewood Group, June and July 2018 93 Totals do not sum due to rounding

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Employment supported through Shepperton Studios’ supply chain 3.20 Supply chain expenditure totalled circa £23.49 million94 over the five years 2013/14 –

2017/18. Information provided by PGL indicates that a substantial proportion of this expenditure is concentrated in the geographical area of the West London cluster.

3.21 Expenditure on products and suppliers of services helps to support employment in a wide range of supplier businesses demonstrating the amplification effect of Shepperton Studios’ activities across a wider geographic area.

3.22 Figure 3.3 not only illustrates the concentration of Shepperton Studios’ supply chain in the West London cluster area, but also the geographical reach of the supply chain with suppliers being located across a wider area of England, Scotland and Wales. Aside from those suppliers shown in Figure 3.3, Shepperton Studios also contributes to the local and UK economy via business rates and spending on energy costs.

Figure 3.3: Locations of Shepperton Studios’ suppliers

Source: Turley analysis based on data provided by Pinewood Group, June 2018

94 This total discounts expenditure on energy bills and taxes such as business rates

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The Economic Impact of Shepperton Studios’ Activities

3.23 This remainder of this section presents the quantified economic impacts of Shepperton Studios’ current operations. Impacts reported cover full time equivalent (FTE) jobs and Gross Value Added (GVA) measuring workforce productivity.

Assessment Methodology 3.24 The methodology used is based on available guidance95 published by the Homes and

Communities Agency (HCA), which provides a framework for the assessment of net economic impacts of development.

3.25 This starts with the gross impacts of development (for example jobs created) and makes adjustments for a number of factors. The factors that are taken into consideration include:

• Leakage – a measure of the extent to which impact is felt by persons residing outside of the area in question (for example, local, LEP, wider impact area and UK);

• Displacement – the extent to which operations lead to existing companies or employees within the target area relocating activities to the site, as opposed to the attraction of new investment and employment arising from businesses located outside of the target area; and

• Multiplier effects – further economic activity (jobs, expenditure or income) associated with additional local income (from employment), supplier purchases and longer-term expenditure effects.

3.26 The way in which these factors impact upon the current operations of Shepperton Studios is outlined below.

Leakage 3.27 Data supplied by PGL highlights that Shepperton Studios currently provides

employment opportunities for local residents of Spelthorne, the LEP and the wider impact area as well as the UK. It also has supply chain linkages with businesses that span these geographic areas.

3.28 No adjustment for leakage is applied at the UK level, as the current economic impact of Shepperton Studios is fully contained at this level.

3.29 The majority of current economic impacts are concentrated and contained within the Wider Impact Area. This is the area which contains the West London cluster, including many people and businesses that are associated with film and HETV production. This is the largest film and TV cluster in the UK and therefore it is unsurprising that Shepperton Studios’ current economic impacts are well contained at this geographical level. Only a low level of leakage occurs beyond this area with a 20% allowance for leakage applied in the calculation of current impacts.

95 HCA (2014) Additionality Guide 4th Edition

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3.30 There is evidence to suggest that Shepperton Studios currently has an economic impact on the area of the Enterprise M3 LEP. The impact is not as significant as the Wider Impact Area, albeit it is still important in employment and supply chain terms. Taking into account the available evidence, a leakage rate of 80% has been applied at the LEP level.

3.31 At a local level, Shepperton Studios makes an important contribution to providing jobs for residents and sustaining businesses through expenditure. The borough of Spelthorne, however, does not contain all of the economic impacts of the studios due to the exchange of goods and services as well as skilled labour with a wider geographical area, most notably the West London cluster. A leakage rate of 90% has been applied at the local level.

Displacement 3.32 Displacement has not been applied to the current operations at Shepperton Studios.

Multiplier Effects and Indirect / Induced Employment 3.33 The positive economic impacts of Shepperton Studios extend beyond its direct

employment. Expenditure on materials, goods and other services has far-ranging benefits both locally and further afield as it filters through the business supply chain. As a result the impact is amplified in an economic ‘multiplier’ effect both locally and across wider impact areas, creating indirect and induced employment and enhanced productivity. Economic multipliers of 1.1 and 1.2 have been applied at the local and LEP impact area levels respectively. This reflects evidence of employment containment and supply chain activity at these spatial levels, benchmarked to guidance on the assessment of economic additionality. A higher multiplier of 1.7 has been used at the wider impact area level, reflecting assessed evidence that the majority of employment and business supply chain activity will be contained within this wider area, which includes the West London cluster of businesses supporting film and high end TV production.

3.34 A multiplier of 2.0 has been applied at UK level, reflecting the latest published evidence of economic multipliers that specifically relate to the film sector at a national level96.

Current Gross Employment Impacts

3.35 1,507 direct FTE97 jobs are currently supported on site through the activities of PGL, tenants and production companies.

3.36 It is estimated that Shepperton Studios supports total of 3,013 FTE employment opportunities at a UK level when economic multipliers are added to on site total employment. A breakdown of employment impacts by impact area is provided in Table 3.5.

96 Optima/Cambridge Economics (2005) – Economic Impact of the UK Screen Industries 97 1 FTE is equivalent to 1 employee working full time for 1 year. A person-year of employment is defined as the amount of work done by an individual during a working year.

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Table 3.5: Current Employment Generation (workplace)98

Local Impact Area

M3 LEP Wider Impact Area

UK

Direct FTE Employment 1,507 1,507 1,507 1,507

Indirect / Induced FTE Employment

15 60 844 1,507

Gross FTE Employment (Total)

1,522 1,567 2,350 3,013

Source: Turley Economics, 2018

Current Gross Productivity Impacts

3.37 Shepperton Studios generates substantial Gross Value Added (GVA) across all spatial scales. GVA measures the value of output created (i.e. turnover) net of inputs purchased and used to produce a good or service.

3.38 Data from the Department of Digital, Culture, Media and Sport’s (DCMS) economic estimates for the creative industries indicates that the average FTE worker employed within the combined film, TV, video, radio and photography sectors generates £68,745 annually in GVA99. This figure has been used to calculate the GVA impacts associated with direct employment. Indirect and induced employment will occur within a wide range of sectors, some of which will be related to film and television production, but with a wider breadth of activities likely. In order to account for greater diversity in the sector makeup of indirect/ induced employment an average GVA figure for the UK has been applied.

3.39 Gross employment currently supported on site and through indirect and induced roles produces an annual contribution of £181.7 million GVA to the UK, inclusive of a £104.4 million contribution to the local impact area of Spelthorne and £147.3 million within the wider impact area. Shepperton Studios’ current annual GVA contribution across each of the four impact areas is shown in Table 3.6.

Table 3.6: Current Annual GVA Generation (workplace)

Local Impact Area

M3 LEP Wider Impact Area

UK

Direct GVA £103,600,000 £103,600,000 £103,600,000 £103,600,000

Indirect / Induced GVA

£800,000 £3,100,000 £43,700,000 £78,100,000

Gross GVA (Total) £104,400,000 £106,700,000 £147,300,000 £181,700,000

Source: Turley Economics, 2018

98 Some totals do not sum due to rounding 99 DCMS (2016) Creative Industries Economic Estimates - April 2016

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Summary

3.40 Shepperton Studios currently generates the following economic impacts:

• 1,507 FTE gross jobs on site;

• A total of 3,013 FTE employment opportunities generated for workers UK-wide, taking into account economic multiplier effects; and

• A total annual productivity contribution of circa £181 million in GVA to the UK economy.

3.41 In addition to these quantifiable impacts, PGL invests significantly in CSR activities within the borough which have a positive impact on the social and economic wellbeing of residents. These impacts are fully detailed within Section 9 of this report.

3.42 The current economic impacts of Shepperton Studios are significant in their own right and benefit many people and businesses.

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4. Reference Case

Short Term Impact Maintained 4.1 In the event that planning permission for the proposed expansion is not granted, PGL

has confirmed that Shepperton Studios will, in the short term, continue to operate at current levels of high utilisation. The drive to maintain Shepperton Studios as a world leading supplier of studio space will be supported by ongoing investments by PGL.

4.2 PGL has already committed approximately £2.25 million per annum between the financial years 2015 and 2018 for the essential maintenance and upkeep of its studios100. This comprises the day-to-day maintenance of buildings as well as strategic investment into the latest industry advances such as state-of-the-art lighting equipment. In such a scenario Shepperton Studios will continue to make an important economic contribution at both the local and national level, as illustrated in the assessment of its current economic impacts (Section 3 of this report).

Minimal Potential for Enhanced Economic Performance 4.3 Consideration has been given as part of the assessment of the reference case to the

potential for the economic impact of Shepperton Studios to be enhanced on its current “footprint” and floorspace.

4.4 This is, however, considered to be a highly unlikely outcome because Shepperton Studios has already been operating at and above optimum capacity for an extended period. Due to the nature of producing film, a large amount of space is needed even for smaller productions; therefore the capacity of Shepperton Studios is effectively reached when operating at around 85%, since there is a limited market for very small amounts of studio space.

4.5 To put this into context, a major film production, for instance the production of a film like Star Wars or James Bond typically requires approximately 150,000 – 250,000 sq ft of stage space plus an additional 120,000 to 180,000 sq ft of workshop and office

100 Data provided by Pinewood Group Limited, June 2018

The reference case refers to a scenario in which the proposed expansion at Shepperton Studios does not proceed and what is likely to occur as a result.

In the event that Shepperton Studios cannot expand, it is concluded that its current economic impacts are likely to be maintained in the short term.

However, as the studios are currently fully utilised there will be minimal potential for enhanced economic impacts to be produced as a result of not expanding.

In the long term, failure to provide sufficient space to meet film inward investment demand will lead to an erosion of the UK’s ability to compete for and secure such investment on a global stage.

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space101. At the other end of the spectrum, a smaller independent production typically requires between 30,000 sq ft of stage space and a further 30,000 sq ft of workshop and office space102.

4.6 Table 4.1 demonstrates that Shepperton Studios has been operating at over its optimum, stabilised level of 80% space utilisation for the past ten years and has effectively fully utilised capacity.

Current capacity at Shepperton Studios, 10 year average Table 4.1:

Occupancy levels Stabilised level Operating above target

89% 80% 9%

Source: Data provided by Pinewood Group Limited, June 2018

4.7 Given this operating context, there is no potential to accommodate any additional production activity of scale. Therefore any economic gains on current performance will only be marginal.

Weakened Long Term Market Position 4.8 In the long term, the UK’s position in the global film production market is likely to be

weakened as a result of not investing in additional film production space to meet investor demands.

4.9 As demand for studio space continues to outstrip the UK’s supply, it is reasonable to expect that over time, other international competitors will strengthen their own clusters, which would compete more effectively with the West London cluster. For example in recent years Hungary has taken on film productions which cannot be accommodated in the UK103.

4.10 In summary, the reference case is that Shepperton maintains its current level of economic impact in the short term, with minimal scope for improved or enhanced performance if it is unable to expand. In the long term, it is expected that the UK’s competitive advantage in attracting film inward investment would be diminished by the failure to provide sufficient floorspace.

101 Data provided by Pinewood Group Limited, June 2018 102 Ibid 103 See the accompanying report: PwC (2018), Shepperton Studios, Review of the UK film & high-end TV production

facility market: Supporting Evidence

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5. The Proposed Development

Location of the Proposed Development 5.1 The following figure shows the location of the application site.

Figure 5.1: Application Site Location Plan

Source: Turley, 2018

5.2 The economic impact assessment of the proposed development is informed by three key elements of data as follows:

• A schedule of development – which details the demolition of existing floorspace and the development of new floorspace by type. Using this schedule it has been possible to calculate the net change in floorspace which is an input to subsequent calculations of employment and economic impact more generally;

• A construction cost – which is used to inform the economic impact assessment of the construction phase – notably the calculation of construction employment and associated productivity; and

The proposals to expand Shepperton Studios are presented in this section. This data has been used as a basis to assess the potential future economic impacts of the Studios, following expansion. The future impacts are then set out in Section 6.

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• Development timescale – the construction period to completion of the Proposed Development, which forms an input to the assessment of construction employment.

Schedule of Development 5.3 The formal description of the proposed development is:

“Outline planning permission with all matters reserved (except for principal points of access) for the redevelopment and expansion of Shepperton Studios, comprising the partial demolition and replacement of existing accommodation; construction of new sound stages, workshops, office accommodation, entrance structures and reception, security offices and backlots; creation of a new vehicular and pedestrian access from Shepperton Road and the relocation of existing access off Studios Road; with associated car parking; landscaping and ecological enhancements.”

5.4 Approval is sought for a total of 196,409 sqm (GEA) new and existing floorspace (112,849 sqm net additional GEA).

5.5 Table 5.1 provides an indicative building types mix that has informed the economic impact assessment. It should be noted that these are indicative only.

Shepperton Studios indicative building types mix (GEA) Table 5.1:

Type Existing (A) Demolitions (B)

Proposed new (C)

Total (A-B+C) Net addition (D)

Stages 20,837 10,006 67,902 78,733 57,896

Workshops 25,053 14,666 61,090 71,477 46,424

Offices 24,218 14,123 32,715 42,810 18,592

Other 13,452 13,064 3,001 3,389 -10,063

Source: FaulknerBrowns, August 2018

Construction 5.6 In total, construction of the expansion at Shepperton Studios is estimated to cost £500

million inclusive of professional fees in current day (2018) prices.

Construction timescale 5.7 Construction is expected to begin in 2019 and take place over a period of four years

with completion in 2022.

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6. The Future Economic Impact of Shepperton Studios

6.1 Economic impacts attributable to the expanded Shepperton Studios will accrue over two distinct phases of activity:

• A Construction Phase; and

• An Operational Phase.

6.2 This Section outlines both the gross and net additional economic impacts generated during the construction phase of the proposed development, before moving on to address the gross economic impacts that will be generated annually during its operational phase.

Assessment Methodology

6.3 The methodology is consistent with that presented in Section 3 of the report which details the assessment of current economic impacts. For calculation of the future impacts of Shepperton Studios, however, an adjustment is made for potential displacement effects. The operation of the proposed development could potentially lead to some competition for skilled labour within the local, LEP and wider impact areas due to the increased scale of activities. This, however, is likely to be countered by investment in skills and training activities, as supported directly by SSL, PGL and DCMS. The UK Government is committed to enhancing skills in the Creative Industries as the policy and strategy review earlier in this section references. Nominal levels of displacement (0.25%, 0.5% and 0.5%) have therefore respectively been applied at local,

The construction phase will generate temporary construction jobs and boost economic productivity for a period of four years and at a time when the UK faces considerable economic uncertainty.

Approximately 1,469 construction phase jobs will be generated. Of these, approximately 747 would be contained in wider impact area, 527 in the Enterprise M3 LEP and 255 in Spelthorne Borough. The construction phase would generate a GVA uplift of £392 million, of which £74.4 million would directly impact Spelthorne Borough.

The long-term operation of the expanded Shepperton Studios would result in there being in total 2,796 FTE jobs located on site, comprising 160 directly employed by Pinewood Group, 714 employed in independent tenant businesses, and a further 1,922 by production companies. After accounting for supply chain impacts, the total number of jobs supported in the UK economy would be 5,312 FTEs. The forecast operation of an expanded Shepperton Studios would generate a total of £322.7 million in GVA across the UK economy.

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LEP and wider impact area levels. Potential for displacement of investment activity is considered to be negligible as the proposed development will contribute to the supply of floorspace that is required to attract additional film inward investment to the UK. Accordingly a low a displacement rate of 10% has been applied to the expanded Shepperton Studios at a UK level.

Construction Phase Impacts

6.4 The construction industry makes a valuable contribution to the UK’s economy, with data from Experian104 indicating that the sector in 2017 supported employment equating to 1.48 million FTE jobs, and generating £111.4 billion GVA. The proposed investment in the expansion of Shepperton Studios represents a significant private sector investment project which can further support this sector, generating growth in both employment and productivity.

6.5 The construction phase impacts within the assessment – all of which are temporary – include construction expenditure, FTE construction jobs and GVA impacts.

Construction Phase Employment

Gross Direct Construction Employment 6.6 It is estimated that the value of the construction investment in the proposed expansion

of Shepperton Studios will equate to £500 million.

6.7 Investment of this scale will support approximately 3,349 person-years of direct employment within the construction sector, based on the average turnover per employee in the construction industry in the South East region105. This equates to an average of 837 gross direct FTE construction-related jobs on site annually over the 4-year construction period.

Net Additional Construction Employment 6.8 Using this gross figure, net additional annual construction employment has been

estimated, making adjustments for the following additionality factors:

• Leakage – The creation of construction jobs will provide new employment opportunities both for local residents of Spelthorne borough and those residing in wider impact areas. Leakage rates of 65%, 30% and 15% have been applied respectively to the local impact area, the LEP area and the wider impact area, reflecting the relatively localised nature of labour market catchments in the construction sector. These rates of leakage have been informed by local authority travel to work containment data from the 2011 Census106. It is assumed within the assessment that construction employment is fully contained at UK level.

• Displacement – The UK construction sector has been performing strongly in the years post the last recession however, the economic outlook for the UK is

104 Experian (2018) Local Market Forecasts Quarterly, June 2018 105 Department of Business, Energy and Industrial Strategy (2017) Business population estimates – South East 106 ONS via Nomis (2011) 2011 Census – WU01UK - Location of usual residence and place of work by sex

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relatively uncertain in the forthcoming years. The proposed development will also be delivered over a period of four years, over which the prospects for the construction sector could change significantly. Therefore consideration has been given to the future outlook for UK construction by sector. Evidence published by the Construction Industrial Training Board (CITB) highlights that commercial property construction is particularly susceptible to the UK leaving the EU, suggesting that in future years there may be an easing of competition for construction labour107. Displacement has been applied at 20% at the local impact area of Spelthorne, at 25% at the LEP level, at 30% at the wider impact area and at 35% at the UK level, reflecting the potential for some level of employment displacement from other commercial construction projects in the short term. This is considered to be a conservative assumption, with potential for displacement to be lessened if Brexit subdues demand for commercial property and hence creates improved capacity in the construction labour force;

• Multiplier Effects – Economic multipliers of 1.1, 1.2 and 1.5 have again been assigned respectively at the local, LEP and wider impact areas, reflecting published Government guidance on the application of multiplier effects at these spatial scales108. It should be noted that this guidance also states that the economic multiplier for construction projects is 2.7 at the national level. This sector-specific adjustment has therefore been reflected in the analysis.

6.9 Construction of the proposed development will generate 837 gross FTE jobs. Once the above additionality factors are taken into account, it is estimated that 231 of these jobs could be local to Spelthorne, with approximately 440 and 498 roles respectively contained within the LEP area and the wider impact area.

6.10 In addition to the jobs provided on site, a further 925 indirect and induced FTE jobs could be annually supported across the UK, of which 23 could be local to Spelthorne.

6.11 Construction of the proposed development can therefore be expected to annually create 1,469 net additional FTE employment opportunities, inclusive of 255 jobs locally. This is summarised below at Table 6.1.

107 Construction Industrial Training Board (CITB) 2018 – “Construction Skills Network Forecasts, 2018” – the latest CITB forecasts illustrate that commercial construction activity is most susceptible to the effects of Brexit. Construction recruits required in the South East are relatively low compared to other regions of England according to the forecast. 108 Ibid.

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Table 6.1: Construction Phase – Net Additional FTE Employment Generation109

Local Impact Area

M3 LEP Wider Impact Area

UK

Person-years of Employment 3,349 3,349 3,349 3,349

Construction Period (Years) 4 4 4 4

Annual On-Site Gross Direct FTE Employment

837 837 837 837

Annual Net Additional Direct FTE Employment

231 440 498 544

Annual Net Additional Indirect / Induced FTE Employment

23 88 249 925

Annual Net Additional FTE Employment (Total)

255 527 747 1,469

Source: Turley Economics, 2018

Construction Phase Productivity

6.12 The construction phase of the proposed development will also generate a significant increase in economic productivity. Applying the appropriate GVA measures110 to the above net additional employment impacts indicate that an additional £98.0 million in GVA could be generated in the UK each year during the construction period. This sums to a total of £392.0 million GVA over the 4-year construction period, inclusive of £74.4 million accruing in the local impact area. This is summarised below at Table 6.2.

Table 6.2: Construction Phase – Net Additional GVA Generation111

Local Impact Area

M3 LEP Wider Impact Area

UK

Annual Direct GVA £16,800,000 £31,900,000 £36,100,000 £39,400,000

Annual Indirect / Induced GVA

£1,800,000 £10,700,000 £20,800,000 £58,500,000

Annual Net Additional GVA

£18,600,000 £42,600,000 £56,900,000 £98,000,000

Net Additional GVA (Total)

£74,400,000 £170,400,000 £227,600,000 £392,000,000

Source: Turley Economics, 2018

109 Figures do not sum due to rounding 110 Experian (2018) Local Market Forecasts Quarterly, June 2018 – Average GVA per FTE in the Construction sector, 2013-17 111 Some figures do not sum due to rounding

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Operational Phase Impacts

6.13 Upon completion and full operation, the proposed development will deliver a range of economic impacts which will persist over the long term. This will support achievement of local, adjoining LE and national economic objectives and strategy, particularly with respect to the growth of the Creative Industries and the ability of the UK to compete for and secure inward investment opportunities related to film and high end TV production.

Operational Phase Employment Assumptions 6.14 Direct employment associated with the completed development has been assessed

having regard to the development schedule which enables the volume of floorspace to be profiled by type. The way in which floorspace will be occupied and utilised by PGL, tenants and production companies has been assessed in dialogue with PGL as well as having recourse to data on current operations at Shepperton Studios. The following assumptions have informed the assessment:

• The Media Hub facility will continue to operate at its existing level with the tenants and current employee numbers being maintained;

• PGL will increase its employment on site in line with the scale of growth and the commercial opportunity afforded by an expanded studio. PGL estimate that they will increase on site employment by 80 FTEs to account for the increased scale of operations; and

• Production companies will occupy floorspace at the same employment intensity as is currently evidenced by site admissions data for a representative sample week in 2018.

Gross Operational Employment Impacts 6.15 Based on the above assumptions, it is estimated that direct employment on site will

increase to 2,796 FTE jobs upon completion and operation of the expanded studios. Estimated employment impacts, disaggregated by occupier type are set out in Table 6.3.

Gross Operational Employment at Shepperton Studios by Type of Table 6.3:Employee112

Type of Employee Number of Employees

Current Operations Proposed Expansion

PGL Employees 80 160

Production Staff 713 1,922

Media Hub Tenants 714 714

Total 1,507 2,796

Source: Turley Economics, 2018

112 Totals do not sum due to rounding

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6.16 Once the economic multipliers outlined above have been applied to estimate indirect and induced employment, the operational phase could sustain a total of 5,312 gross FTE positions at UK level, inclusive of 2,823 workplace jobs located in the local impact area of Spelthorne borough and 4,353 jobs located within the wider impact area. A summary of estimated gross employment generated by the operations of the expanded site is presented in Table 6.4.

Table 6.4: Operational Phase – Employment Generation (workplace)113

Local Impact Area

M3 LEP Wider Impact Area

UK

Direct FTE Employment 2,796 2,796 2,796 2,796

Indirect / Induced FTE Employment 28 112 1,558 2,516

Gross FTE Employment (Total) 2,823 2,907 4,353 5,312

Source: Turley Economics, 2018

Gross Operational Productivity Impacts 6.17 The operational phase of the proposed development will also contribute to a growth in

productivity at all spatial scales of impact.

6.18 Average GVA per FTE figures114 have been applied to the gross employment impacts outlined above in order to calculate the productivity impacts. It is estimated that £322.7 million of GVA will be generated annually across the UK economy as a result of the operation of the expanded Shepperton Studios. This is inclusive of £193.6 million GVA per year within the local Spelthorne economy. The geographical breakdown of gross direct GVA by impact area is set out in Table 6.5.

Table 6.5: Operational Phase – Annual GVA Generation (workplace)

Local Impact Area

M3 LEP Wider Impact Area

UK

Direct GVA £192,200,000 £192,200,000 £192,200,000 £192,200,000

Indirect / Induced GVA

£1,400,000 £5,800,000 £80,800,000 £130,500,000

Gross GVA (Total) £193,600,000 £198,000,000 £273,000,000 £322,700,000

Source: Turley Economics, 2018

113 Some figures do not sum due to rounding. 114 Average GVA per FTE employee in the Film, TV, video, radio and photography sector derived from DCMS creative industries economic estimates data - See Section 3.

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Summary

6.19 The construction phase of the proposed development has the potential to generate significant positive economic impacts throughout the four-year construction period, including:

• Provision of 1,469 net additional FTE employment opportunities at a UK level, inclusive of 255 in Spelthorne; and

• Contribution of circa £322.7 million in gross GVA annually to the UK economy, inclusive of £193.6 million in Spelthorne;

6.20 The operational phase of the proposed development has the potential to generate significant positive economic impacts on an ongoing basis, including:

• Provision of 5,312 gross FTE employment opportunities at a UK level, inclusive of 2,823 jobs located in Spelthorne borough; and

• Contribution of £322.7 million in gross GVA annually to the UK economy, inclusive of £193.6 million GVA associated with workplace jobs in Spelthorne.

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7. Spillover Effects

7.1 There will be a number of ‘spillover’ impacts associated with the proposed expansion of Shepperton Studios. These impacts are those which are generated in other sectors as a result of economic activity in the film industry. Recently published research highlights that the three most notable effects occur in relation to tourism, merchandise sales and UK brand promotion115. Each of these categories of spillover effect is considered in turn.

Tourism effects – contextual analysis 7.2 Research published by VisitBritain in February 2018 found that 7% of all tourists to the

UK cited visiting a film or TV set location as their main reason to choose the UK as a destination. This ranks the UK in joint 3rd place in a survey of 20 countries116.

7.3 The total amount spent by international tourists in the UK in 2017 was estimated by VisitBritain to be £25.1 billion, with the proportion directly accountable to film and TV tourism estimated to be £1.8 billion117.

Merchandise sales – contextual analysis 7.4 UK-made films led to an estimated £226 million in merchandise sales in the UK in

2013118.

7.5 Films are very much part of British culture. Around 84% of Britons are reportedly “interested” or “very interested in film”, and 86% watch a film every month. Research indicates that the British would be willing to pay £63 million more for British films than

115 Olsberg SPI with Nordcity (2015) – “Economic Contribution of the UK’s Film, High End TV, Video Game and Animation Programming Sectors 116 VisitBritain (2018), Film and TV locations as a driver of tourism, Foresight – issue 160 117 VisitBritain (2017), 2018 Inbound Tourism Forecast 118 Olsberg SPI (2015), Economic Contribution of the UK’s Film, High-End TV, Video Game, and Animation Programming Sectors

Spillover effects relate to the positive externalities associated with Shepperton Studios expansion on other industries that are not captured by the film industry supply chain (indirect multipliers) or the effects of onward spending of wages in the economy (induced effects).

Consideration is given in this section to three significant spillover effects, notably those relating to tourism, merchandise sales and UK brand promotion.

The spillover effects associated with Shepperton Studios current activities support to a total of 633 FTE jobs at a UK level. The proposed expansion of Shepperton Studios would lead to enhanced spillover effects for other industries supporting a further 271 FTE jobs within the national economy. In total, 904 gross FTE jobs could be supported by the expanded Shepperton Studios.

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they actually pay to view these films; similarly the British public have paid an additional £12.25, on average, to access faster internet so they can watch films at home119.

UK brand promotion – contextual analysis 7.6 The UK film and TV sector is of critical importance as both an economic driver, but also

has a significant role to play in shaping cultural values. This influence is not just felt in the UK, but also across the world, including nations that shape the global agenda such as the US and China.

7.7 Films and HETV produced in the UK have an important role in terms of encouraging discussion of around the state of society, by addressing both the concerns, and appealing to the interests, of audiences. A recent report published by Olsberg SPI highlights that the vast majority of films certified for UK Film Tax Relief during 2013 address contemporary issues – even if some are set in historical settings. Films can help stimulate shared conversations and contribute to cultural change.

7.8 The placement of the UK on screens around the globe has been estimated to have generated an additional £717 million in turnover for UK companies in 2013120.

7.9 There is widespread interest overseas in British films, with UK produced films generating significant export revenues, particularly in the US, France and Italy; and increasingly China, where film is reported to be the second most important source of information about the UK121.

7.10 In 2013 HETV dramas attracted the highest audience ratings of any category except live events (principally sport). Increasingly, TV programmes attract audiences from around the world. This extends the cultural impact of British-made HETV around the world.

7.11 At the national level, investment in the film industry such as that proposed at Shepperton Studios will reinforce the West London cluster, and hence contribute to the UK competitiveness in this industry, to exports, to UK tourism and reinforcing the influence of Britain on the world stage. Investment in the UK film and HETV industry will also encourage public engagement with the political, social and cultural issues facing the UK. This is a significant positive benefit, though one which is not readily expressed in monetary values.

7.12 Consideration is given next to the current spillover impacts of Shepperton Studios before then examining the scale of future spillover impacts that are likely to occur.

Shepperton Studios’ Current Spillover Effects 7.13 Published evidence on the economic contribution of the UK’s film industry122 highlights

that for every direct job in the industry an additional 0.42 jobs are supported in other industries (the spillover effect).

119 Olsberg (2015) Economic Contribution of the UK’s Screen Sectors 120 Olsberg SPI (2015), Economic Contribution of the UK’s Film, High-End TV, Video Game, and Animation Programming Sectors 121 Olsberg SPI and Nordicity (2015), Cultural and Audience Contributions of the UK’s Film, High-End TV, Video Games and Animation Programming Sectors 122 Olsberg (2015) Economic Contribution of the UK’s Screen Sectors

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7.14 Applying this ratio to the gross direct employment currently at Shepperton Studios, spillover employment effects have been estimated to be 633 FTE jobs at a UK level.

Spillover Effects Associated with Shepperton Studios Expansion 7.15 In terms of future activities, it is not known whether the productions that an expanded

Shepperton Studios would accommodate would depict the UK or otherwise use film locations in the UK.

7.16 To account for this uncertainty the proportion of spillover employment attributable to the tourism sector (approximately 0.21 jobs supported for every 1 gross direct FTE in the film industry123) has been deducted from the overall ratio. Discounting tourism effects, produces a multiplier of 0.21 which has then been applied the number of total gross jobs which the proposed expansion of the Studios is estimated to support.

7.17 This indicates a total of 904 FTE jobs will be supported in other sectors as a result of the operation of the expanded Studios.

123 Ibid

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8. Net Additional Impacts of the Proposed Development

8.1 The figures presented in this section are difference between the current economic impacts and the economic impacts which would occur as a result of the proposed expansion (with the reference case being a continuation of current impacts). Five types of economic impacts are profiled:

• Employment impacts, measured in full time equivalent (FTE) jobs;

• Economic productivity impacts, measured in Gross Added Value (GVA);

• Spillover effects in non-film sectors;

• Annual contributions to UK exports; and

• Annual exchequer contributions.

8.2 Each type of impact is presented in turn.

Net additional employment impacts 8.3 The results of the additionality calculation are set out in Table 8.1.

8.4 Gross direct employment creation is calculated by subtracting current direct employment from that of the proposed development (2,796 - 1,507=1,289 FTEs). Adjustments for net additionality are made in line with the assumptions for leakage, displacement and economic multipliers set out in Section 3 of the report.

This section summarises the net additional impacts of the proposed expansion of Shepperton Studios.

Net additional impacts are calculated by subtracting the reference case from the economic impacts generated by the completed project.

The net additional economic impacts are considered to be substantial at all areas of impact and include:

Creation of 2,019 net additional FTE jobs and over £141.0 million GVA per annum at a UK level

A further 271 net additional FTE jobs supported in other industries through spillover effects

Net additional Exchequer contributions of £39.4 million per annum and

Net additional export contributions of £30.3 million per annum

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Net Additional Employment Impacts (resident based) Table 8.1:

Net FTE Employment Generation

Local Impact Area

LEP Wider Impact Area

UK

Gross Direct Employment (FTE)

1,289 1,289 1,289 1,289

Leakage 1,160 1,031 258 0

Displacement 1 1 11 280

Direct Net Additional Employment (FTE)

128 256 1,020 1,009

Indirect / Induced Employment in Impact Area

13 51 714 1,009

Net Additional Employment (Total)

141 308 1,734 2,019

Source: Turley Economics (2018)

8.5 After taking account of leakage, displacement and indirect / induced impacts, Shepperton Studios’ expansion will lead to the creation of 2,019 net additional FTE jobs at a UK level. The majority of employment impacts will be experienced within the wider impact area (some 1,734 FTE jobs) and within the Enterprise M3 LEP area (308 FTE jobs). A further 141 net additional FTE jobs could be taken up by residents of Spelthorne as a result of the expansion.

Net additional productivity impacts 8.6 Table 8.2 sets out the net additional productivity impacts of Shepperton Studios’

expansion.

8.7 GVA accruing from direct employment is calculated by subtracting the current GVA contribution of Shepperton Studios from the total GVA impact of the proposed development (£322.7m - £181.7m = £141.0m GVA). Economic multipliers that are bespoke to each impact area have been applied in line with the assumptions set out in Section 3. The same approach of deducting current impacts from those of the proposed development is applied at each different spatial scale. Adjustments are made for displacement at each impact area level and in line with the assumptions set out in Section 3.

Net Additional Productivity Impact (Workplace based) Table 8.2:

GVA Local Impact Area

LEP Wider Impact Area

UK

Gross GVA £88,600,000 £88,600,000 £88,600,000 £88,600,000

Indirect / Induced GVA £600,000 £2,700,000 £37,100,000 £52,400,000

Total GVA £89,200,000 £91,300,000 £125,700,000 £141,000,000

Source: Turley Economics (2018)

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8.8 This highlights not only a total net additional productivity impact of £141.0 million GVA per annum at UK level, but also significant levels of GVA enhancement across all impact areas. This includes £125.7 million GVA within the wider impact area, £91.3 million GVA within the Enterprise M3 LEP area and £89.2 million GVA attributable to the borough of Spelthorne.

Net additional spillover effects 8.9 Shepperton Studios currently supports 633 FTE jobs in other industries through

spillover effects relating to tourism, merchandise sales and promotion of UK brands.

8.10 After expansion of Shepperton Studios it is estimated that spillover effects will lead to a total of 904 FTE jobs being supported in other industries. This represents a net additional 271 FTE jobs associated with Shepperton Studios’ expansion.

Net additional annual exchequer contributions 8.11 Additional Exchequer contributions will be generated as a result of the expanded

operations.

8.12 Research undertaken by Oxford Economics124 indicates that the average Exchequer contribution per job in the film industry totals approximately £11,500 per annum. Estimates of additional exchequer contributions that will be generated by the expansion of operations at Shepperton Studios are shown in Table 8.3. These are calculated by applying the per job contribution of £11,500 to gross direct employment associated with the expansion. Net additionality is calculated by deducting the current impacts of Shepperton Studios from this total and adjusting for displacement in line with the assumptions set out in Section 3 of the report.

124 Oxford Economics (September 2012), The Economic Impact of the UK Film Industry

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Annual Exchequer Contributions – UK Impact (per annum) Table 8.3:

Exchequer Contributions UK

Exchequer Contribution per FTE £11,500

Existing Operations £17,300,000

Total after Expansion £61,100,000

Gross Impact £43,800,000

Displacement £4,380,000

Net Impact £39,400,000

Source: Turley Economics, 2018

8.13 Expansion of Shepperton Studios will generate a total potential Exchequer contribution of £61.1 million per annum, with a net additional impact of £39.4 million once the scale of current operations are deducted from the total and an allowance is made for displacement125.

Net additional contributions to UK exports 8.14 The expansion of Shepperton Studios will also contribute to and increase the value of

the UK’s exports on an annual basis.

8.15 DCMS data126 indicates that the average employee in the Film, TV, video, radio and photography sector generates approximately £20,718 export value for the UK – this is significantly higher than the £6,996 that is estimated for the average UK worker across all sectors.

8.16 The estimated contribution to UK exports is set out in Table 8.4 by applying the average export value per employee in the Film, TV, video, radio and photography sector to the gross direct jobs that will be created at the expanded Shepperton. The gross impact is calculated by subtracting the export impact of current operations from the expansion impact. Net additional impact is calculated by making an adjustment for a low level of displacement at UK level (10%) in line with the assumptions set out in Section 3.

8.17 Expansion of Shepperton Studios will create a total export contribution of £75.5 million per annum which, deducting for the scale of existing operations, creates a gross impact of £33.7 million per annum. The net additional export contribution, allowing for displacement, is £30.3 million per annum.

125 An allowance has been made for a low level of displacement (10%) at UK level in consideration that the planned expansion is targeted at capturing inward investment 126 Data derived from Annual Population Survey (April 2014 – March 2014)

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Annual Contribution to Exports – UK Impact Table 8.4:

Annual Value of Exports

Existing Operations £41,800,000

Total After Expansion £75,500,000

Gross Impact £33,700,000

Net Additional Impact £30,330,000

Source: Turley Economics, 2018

Conclusion

8.18 The net additional impacts of the expansion at Shepperton Studios are considered to be substantial. They include the creation of approximately 2,019 net additional FTE jobs and £141 million net additional GVA per annum at a UK level.

8.19 Beyond these positive impacts, the planned expansion will generate:

• Spillover employment effects in non-film industry sectors of the economy which are estimated to total 904 FTE jobs (gross) inclusive of 271 net additional FTE jobs;

• Exchequer contributions totalling £61.1 million per annum and including a net additional £39.4 million per annum; and

• An export contribution totalling £75.5 million per annum inclusive of a net additional export contribution of £30.3 million.

8.20 In the event that Shepperton cannot expand these net additional benefits to the economy will not arise. A summary of the net additionality assessment is provided in Table 8.5.

Summary of Net Additionality Assessment Table 8.5:

Type of Impact Existing Operations (Reference Case)

After Expansion

Net Additional Impacts

Total Employment (FTE) 3,013 5,032 2,019

Productivity (GVA, £m per annum) £181.7 £322.7 £141

Spillover employment 633 904 271

Exchequer contributions (£m per annum)

£17.3 £61.1 £39.4127

Export contributions (£m per annum) £41.8 £75.5 £30.3128

127 Net of allowance of £4.38m for displacement 128 Net of allowance of £3.37m for displacement

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9. Social Value impacts

9.1 This section provides an overview of Shepperton Studio’s social value impact, based on information provided by PGL combined with the Social Value Portal’s Themes Outcomes and Measures (TOMs) Framework. The TOMs Framework measures the monetary impact of social activities, to help understand the scale and breadth of impact that different activities can make on people’s lives. Developed in direct response to one of the key challenges arising from Lord Young’s 2015 review of the Social Value Act, the TOMs framework is one of the UK’s leading social value methodologies, and has been recognised by the UK Government as a reliable source of measuring social value.

9.2 Shepperton Studios, through support and funding by PGL, has run a successful Corporate Social Responsibility (CSR) Programme for many years. The current CSR Programme comprises four themes:

Training, Skills and Apprenticeships;

Community Outreach;

Supporting Charity;

Promoting Diversity.

9.3 Each of these themes is profiled below.

Training, Skills and Apprenticeships 9.4 PGL has a long history of supporting young people who wish to enter the film industry.

For example PGL works in partnership with other key organisations in the UK Film industry such as the British Film Institute (BFI) to ensure that film productions financed by Pinewood and the BFI take on trainees across several departments.

9.5 Other examples of PGL’s commitment to skills development for those working in the creative industries sector include:

• Direct recruitment of young people – for example the PGL currently has 12 apprentices on ‘in-work’ apprenticeships. This level of apprenticeships is equivalent to a social value of approximately £105,000 per annum, as measured

PGL makes a positive contribution to society. The current Corporate Social Responsibility (CSR) programme that is implemented by Pinewood Group has a particular focus on training and improving skills for the next generation to benefit from the activities of the film sector.

The expansion at Shepperton Studios will result in an enhanced CSR programme and a community facilities package, thereby helping to ensure that the expanded operations can lead to even greater social benefits being achieved.

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by the TOMs Framework129, and supports the UK Government’s targets for creating apprenticeships130.

• In partnership with the Open University, the development and financing of the ‘Business of Film Making’ on-line course; around 30,700 students have completed the course to date;

• Development of the Pinewood Studio Management Diploma, in partnership with Creative Skillset, the Sector Skills Council for the Creative Industries. The Diploma is the international standard in studio management. In July 2017, 23 Pinewood Staff received their diplomas from the previous Secretary of State for Digital, Culture, Media and Sport, Karen Bradley;

• Development of the standards for industry apprenticeship schemes in key aspects of the film making sector, such as prop making, drapes and post production technical operation;

• As of December 2017, 80 candidates had completed work experience at both Pinewood and Shepperton Studios. This is equivalent to a social value of just over £23,000, as measured by the TOMs Framework; and

Community Outreach 9.6 PGL has an active programme of community outreach. Examples of activities

undertaken include:

• Welcoming 50 students to the BFI Academy scheme at Pinewood and Shepperton Studios in 2017;

• Providing bursaries for local residents wanting to study for a Master’s Degree to attend the National Film and Television School (NFTS);

• Hosting Careers Fairs organised by local schools at Shepperton Studios, attended by over 400 people; and

• Welcoming primary and secondary school visits to Pinewood and Shepperton Studios; and similarly welcoming visits from the NFTS and London Film School.

Supporting Charity 9.7 The PGL is extensively involved in supporting local and national organisations, both

financially and providing venues for charitable organisations wanting to run fund-raising events, including charity film nights. In 2017, a total of approximately £112,000 was donated to charities including Macmillan Cancer Support, Help for Heroes and Save the Children.

Promoting diversity 9.8 PGL promotes increasing diversity in the UK film and TV workforce, and has played a

leading role in key initiatives. These include:

129 Social Value Portal (2018), The National TOMs 2018: Social Value Calculator 130 HM Government (2015), English Apprenticeships: Our 2020 Vision

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• Working with the BFI to deliver its BFI2022 skills strategy, a five year strategy for 2017 -2022 which involves investing almost £500 million to support film education and skills development.

• In partnership with the BFI and the Welsh Government, PGL sponsors the Best British Short Award as part of the international Iris Prize LGBTQ Festival; and

• PGL has supported a mental health help line for industry practitioners with the Production Guild and the CTBF, known as the ‘Michael Line’, which was launched in November 2017.

Enhanced social value impacts as a result of the Proposed Development 9.9 As a result of the proposed development, PGL propose to implement the following

community facilities package in addition to its’ current programme of activity:

• Enhancement of the River Ash corridor;

• Increased number of workshops for local school children;

• Increasing access to Korda Theatre cinema;

• Provision of educational support in the local area, including sponsorships and an apprenticeship scheme;

• Continued support for the Spelthorne Business Plan competition.

Conclusions

9.10 PGL is a socially responsible organisation which places particular emphasis on ensuring that it creates and sustains social value through its activities.

9.11 Shepperton Studios currently makes a very positive contribution to the life of local communities by supporting local events and engaging with local schools and residents. PGL also have a substantive commitment to creating work opportunities for young people living locally and contributing to workforce development initiatives that are designed to ensure that the industry has the talent it needs in the future.

9.12 The expansion of Shepperton Studios will enable PGL to continue and to enhance its positive impacts on society leading to a lasting benefit for people.

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10. Conclusion

The Creative Industries are growing at a fast rate and creating significant economic benefits for the UK

10.1 The UK Government has identified the Creative Industries as a key sector that can boost productivity, earnings and create additional jobs. The Government’s Industrial Strategy published in November 2017, states that the Creative Industries Sector accounts for over 5% of the UK economy, employs over 2 million people (and another 1 million people in the industry supply chain). The sector is valued at £92 billion in terms of Gross Value Added (GVA)131.

10.2 The Creative Industries sector is also growing rapidly. The sector grew by around 8% between 2015 and 2016 in terms of GVA, more than double the rate of GVA growth in the UK as a whole.

10.3 Within the Creative Industries sector, productivity in the Film, TV, and Video sector tripled (+313%) over the period 2008-2016. Within the Film and TV sub-sector, the most significant source of growth has been in the production of films and TV programming.

10.4 Growth in the film sector has been actively supported by the UK Government through the Creative Industries Tax Relief scheme. This has contributed significantly to the increase in the number and scale of UK-based film productions. In 2015 the value of exports generated by UK Film Industry was around £2 billion. The UK now has a trade surplus (exports less imports) in this sector amounting to around £1.247 billion compared to just £128 million in 2006, close to a 10 fold increase in just 9 years.

There is clear policy and strategy support for continued investment in Creative Industries from the national to the local level

10.5 Policies at the national, regional and local level support the growth of the Creative Industries sector. The Creative Industries are one of just 5 sectors singled out in the Government’s Industrial Strategy as priorities for support and investment. The Government has stated its intent to increase inward investment in film and TV production by £4 billion a year by 2025, to be achieved by growth in production facilities and new floorspace capable of attracting more inward investment.

10.6 At the local level, Spelthorne Council recognises in its Economic Strategy 2017-2022 that the creative industries and the technology sector are critical to the local economy as well as to the national economy. Shepperton Studios is one the borough’s largest employers, alongside BP and Heathrow Airport.

There is an economically important and unique film cluster in the West London area 10.7 UK Film production and related services are concentrated in the western area of

London, linked particularly to the major studios, such as Shepperton, Pinewood, Elstree and Leavesden. These four studios are located just outside of Greater London, but play

131 Gross value added (GVA) measures the contribution to an economy of an individual producer, industry, sector or region. It is used in the calculation of gross domestic product (GDP). GDP is commonly estimated using one of three theoretical approaches: production, income or expenditure. When using production or income approaches, the contribution to an economy of a particular industry or sector is measured using GVA.

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an important role in the London economy, being located respectively on the South West, West and Northern borders of Greater London. Proximity to London and to Heathrow airport are critical factors in the success of these studios and the UK film sector associated with the studios.

10.8 Collectively the area encompassing all of these studios (and others), and related businesses, is referred to in the PwC report ‘Shepperton Studios: Review of the UK film and high-end production facility market’ as the West London cluster. The majority of the people who work at these studios live within commuting distance of their places of work, either in London or those parts of the South East which have good access to these studios.

10.9 The West London cluster of creative industries, particularly the UK film sector is of national significance, as well as making a significant contribution to the Spelthorne and Local Enterprise Partnership economies. The UK competes for business on a global basis to produce films. Currently, London is ranked second in the world in terms of available soundstage space for film and TV production, second only to Los Angeles.

10.10 However, there is intense international competition between studios to secure the filming and production of large films. Analysis by PwC shows that, on the basis of industry forecasts, London faces a deficit of studio floorspace, and by implication, film production business is being lost to by UK, to other global locations.

10.11 The shortage of studio space will have wide-ranging implications, not just in terms of business forgone by studios, which implies a lower level of UK exports, but also in relation to jobs and Corporation Tax contributions than could have otherwise been achieved. There is a significant economic opportunity cost to the UK associated with not addressing the need for more floorspace to satisfy international film investor demand.

Shepperton Studios currently generates substantial economic benefits for Spelthorne borough, the M3 Enterprise LEP area and the UK

10.12 Shepperton Studios are a major employer locally. Approximately 1,500 people are currently employed on site of Shepperton Studios. There are currently 60 independent tenant businesses located at Shepperton in the Media Hub complex and employing staff, as well as employees of PGL who are based at the site and production staff.

10.13 The largest group of employees at Shepperton (approximately 714 employees, 73% of all employment on site) are those who work for the 60 businesses located at the Shepperton Media Hub. These comprise a wide range of businesses linked to the film industry that occupy space in offices and workshop accommodation. In addition there are 80 PGL staff based at the site.

10.14 There are also 713 production staff located at Shepperton. However, when major film or high-end TV productions are being filmed, the numbers of people working on site can increase. For example the production staff required for a blockbuster scale film can exceed 1,000 people.

10.15 Shepperton Studios’ spends money with its supply chain of companies, many of which are located in the local area, the LEP or the wider impact area. This expenditure helps

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to sustain businesses and creates a range of associated economic benefits such as jobs and expenditure of wages in the economy.

10.16 It is estimated that Shepperton Studios current operations support a total of approximately 3,000 FTE jobs in the UK including around 1,500 direct jobs on site.

10.17 In addition Shepperton’s current operations are estimated to generate a positive productivity impact of £181 million GVA per annum.

Shepperton Studios also creates and sustains social value for communities locally and across the UK

10.18 The film sector and the creative industries more generally are recognised as having a wider positive societal impact that goes beyond the benefits associated with jobs, productivity and exports.

10.19 Shepperton Studios currently makes a substantial contribution to the wellbeing of people in the local area and to the film industry more generally. In 2017 Shepperton Studios made Charitable Donations to local charities of around £112,000. In addition, Shepperton regularly makes available its facilities to local groups and charities to host fund raising events.

10.20 Alongside charitable giving, PGL is extensively involved in other Corporate Social Responsibility Programmes including training, skills and apprenticeships linked to the film industry. These include hosting both students for Higher Education Institutions at Shepperton, providing bursaries and engaging with pupils and local schools. The proposals for the expansion at Shepperton Studios would result in further socially beneficial activities, including increased engagement with local school children.

The proposed expansion of Shepperton Studios will be a major construction project that will in turn generate significant economic benefits for the construction sector locally, within the LEP area and in the UK

10.21 Shepperton Studios is proposing to develop an additional 112,849 sqm GEA of floorspace at Shepperton comprising new stages, workshops and offices. This represents a major £500 million private sector investment. Expansion of Shepperton Studios will create a significant boost to investment in the construction industry which is a major UK employer. Construction is expected to commence in 2019 and to be completed by 2022 – meaning that the expansion can create job opportunities and other economic benefits at a time when the UK faces considerable economic uncertainty.

10.22 During the construction phase of four years 837 direct FTE jobs will be created per annum in connection with the construction of the new buildings, providing an important source of employment for those in the construction sector and related supply chain businesses.

10.23 In addition to construction employment, the proposed development is expected to generate £392 million net additional GVA during construction.

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Upon completion the expanded Shepperton Studios will generate substantially enhanced economic impacts that will provide employment, boost productivity and create prosperity at a range of different geographic scales.

10.24 In total 2,796 FTE gross jobs will be supported directly on site. This represents almost a doubling of Shepperton Studios’ current direct employment impacts.

10.25 Allowing for leakage, displacement and economic multiplier effects, the impacts of the expansion at Shepperton Studios are considered to be substantial and include the creation and sustaining of a total of 5,032 total FTE jobs. A total productivity effect of £322.7 million GVA per annum will be generated as a result of the proposed development, inclusive of productivity associated with direct, indirect and induced employment.

Enhanced spillover benefits will also be created for other industries of the economy 10.26 Expansion of Shepperton Studios will create spillover benefits in non-film related

sectors, as well as contributing to exchequer and export contributions. It is concluded that the planned expansion will generate:

• Spillover employment effects in non-film industry sectors of the economy which are estimated to support a total of 904 FTE jobs. These jobs relate to tourism, merchandising sales and product promotion activities;

• Exchequer contributions totalling £61.1 million per annum; and

• An export contribution totalling £75.5 million per annum.

An expanded Shepperton Studios will deliver significantly enhanced net additional economic impacts at every level of the economy from local to national

10.27 The net additional impacts refer to the total impacts of the proposed development minus the reference case. They include the following at UK level:

• 2,019 net additional FTE jobs over and above those that are currently supported by Shepperton Studios;

• £141m net additional GVA per annum;

• A further 271 net additional jobs in non-film industries linked to spillover employment effects;

• A boost of £39.4m per annum to Exchequer contributions; and

• A enhanced contribution to UK exports of over £30m per annum.

10.28 These net additional impacts are beneficial and significant and will benefit a range of people and companies at many different geographic levels in the UK, including Spelthorne borough and the Enterprise M3 LEP. It is concluded that the expansion of Shepperton Studios will generate substantially enhanced economic benefits for the UK above and beyond those which are already sustained by the studio’s current activities.

These benefits will only be realised if Shepperton Studios can expand 10.29 As demonstrated within this report, Shepperton Studios is already operating at

capacity and has been doing so for an extended period of time. The studios currently support a significant level of economic activity and create a large number of jobs, as

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well as productivity and social value benefits for local communities. However, the capacity constraints that currently exist mean that it is not possible for the studios to generate any significant additional economic or social benefits by operating from its current constrained accommodation.

10.30 The proposed expansion of Shepperton Studios will enable the UK to capture a greater share of the growing film sector, enhancing the UK’s inward investment performance and contributing to the Government’s target of increasing inward investment in the UK film sector to £4 billion by 2025. It will enable almost a doubling of gross employment and productivity impacts associated with Shepperton Studios, benchmarked against current levels of impact.

10.31 Expansion and the provision of additional floorspace is a prerequisite of generating the significant economic and social benefits that are set out in this report.

10.32 Should the studios not be able to expand, then these benefits will be foregone representing a significant opportunity cost for the economies and people of Spelthorne borough, the M3 Enterprise LEP and the UK.

10.33 Failure to provide sufficient studio space in the West London cluster relative to production company demand is likely to erode the ability of the UK to compete for footloose global investment over time. The expansion of Shepperton Studios provides a timely and significant opportunity to ensure that the competitive position of the UK for film inward investment is maintained and enhanced.

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Appendix 1: References

The following datasets, policy, Government guidance and secondary research have been used to inform the Economic Impact Assessment, and are quoted throughout this report where relevant. Primary data sources:

Department of Business, Energy and Industrial Strategy (2017), Business population estimates – South East

Department for Digital, Culture, Media & Sport (2016), Creative Industries Economic Estimates - April 2016

Department for Digital, Culture, Media & Sport (2017), Sectors Economic Estimates 2016: GVA

Experian (2018), Local Market Forecasts Quarterly, June 2018

ONS (2011,) Census

ONS (2015), Business Register and Employment Survey

ONS (2017), UK Business Counts

ONS (2017), Annual Survey of Hours and Earnings, Annual Gross Salary, Residential and Workplace analysis

ONS (2018), Annual Business Survey

ONS (2018), Model-based estimates of unemployment, Apr 2017-Mar 2018

Policy and Government guidance:

Department for Digital, Culture, Media & Sport (2016), The Cultural White Paper

Department for Digital, Culture, Media & Sport (2018), Culture is Digital

Enterprise M3 (2014), Enterprise M3 Strategic Economic Plan 2014-2020: Working for a Smarter Future

HCA (2014), Additionality Guide 4th Edition

HM Government (2015), English Apprenticeships: Our 2020 Vision

HM Government (2017), Industrial Strategy: Building a Britain Fit for the Future

HM Government (2018), Industrial Strategy Creative Industries Sector Deal

Ministry of Housing, Communities and Local Government (2018) National Planning Policy Framework

Spelthorne Borough Council (2009), Core Strategy and Policies Development Plan Document

Spelthorne Borough Council (2016), Spelthorne Local Economic Assessment

Spelthorne Borough Council (2016), Spelthorne Means Business: Economic Strategy 2017-2022

Spelthorne Borough Council (2016), Spelthorne Borough Council – Corporate Plan 2016-2019

Secondary research:

BFI (2017), The UK Film Economy: Research and Statistics

BFI (2018), BFI Research and Statistics Unit: Film, high end television and animation programmes production in the UK: full year 2017

BFI (2018), Film and other screen sector production in the UK, January –June (H1 Half Year)

Construction Industrial Training Board (2018), Construction Skills Network Forecasts, 2018

Nesta (2010), Creative clusters and innovation: Putting creativity on the map

Olsberg SPI with Nordcity (2015), Economic Contribution of the UK’s Film, High End TV, Video Game and Animation Programming Sectors

Olsberg SPI and Nordicity (2015), Cultural and Audience Contributions of the UK’s Film, High-End TV, Video Games and Animation Programming Sectors

Olsberg SPI (2017), Film and the Creative Economy: How Film and Television Drama Productions Grow the Creative Industries

ONS (2017), Paddington, Star Wars and the rise of the UK film industry

Optima/Cambridge Economics (2005) – Economic Impact of the UK Screen Industries

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PwC (2018), Shepperton Studios, Review of the UK film & high-end TV production facility market: Supporting Evidence

Social Value Portal (2018), The National TOMs 2018: Social Value Calculator

UK Trade and Investments (2014), Creative Nation: Film TV and Digital Media

VisitBritain (2017), 2018 Inbound Tourism Forecast

VisitBritain (2018), Film and TV locations as a driver of tourism, Foresight – issue 160

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Turley Office 1 New York Street Manchester M1 4HD T 0161 233 7676