The Sage Gateshead. Economic Contribution: 10 Year Anniversary

 
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The Sage Gateshead. Economic Contribution: 10 Year Anniversary
The Sage Gateshead.
    Economic Contribution: 10 Year Anniversary

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Table of Contents
Introduction and Methodology ..................................................................................... 2

Economic Contribution ................................................................................................. 4

Conclusions ................................................................................................................ 12

The Sage Gateshead – EIA Comparison Report                                                                          11
INTRODUCTION AND METHODOLOGY
In November 2009, ERS was commissioned by the Sage Gateshead (‘the Sage’) to
undertake research outlining the economic impacts generated by the Sage since its
opening in December 2004. The output of this work was a report capturing the first five
years of the Sage’s operations (‘the five year report’).

This report represents an update of this earlier analysis, highlighting the total economic
contribution of the Sage over its ten year existence.

In order to ensure comparable figures with the five year report, the methodology used in
this report aims to be as consistent as possible with the five year figures. However, it
should be noted that there are a number of differences between the two reports.
Therefore, to facilitate comparison of the figures, this report includes a reworking of the
five year figures as well as the ten year cumulative figure, allowing for comparisons of
how the economic contribution has developed over time.

Note that when figures from the first and second time year period, changes in the data
provided by the client (see below for more information) as well and the evolving nature
of official statistics methodologies, mean there are some differences in the approach
taken to calculating figures the different contributions. This means that some of the
figures presented in this report may not be perfectly comparable. Throughout this report
we detail areas of methodological difficulty and the approach taken when addressing
these challenges.

Data:

There are two broad sets of data that these figures are based on:

   5 year dataset: This data was provided by the client at the time of the original report.
   Updated data: The activities of the Sage following the 5 year report have been
    captured by a series of data collected for a different (but similar) economic
    contribution project.

While these two datasets capture broadly the same topics, they are not identical. In
addition, the methodologies used by the two impact assessments are also different.

The Sage Gateshead – 10 Year economic contribution                                     2
Given these differences, the data was interpreted slightly differently, this is highlighted
throughout the report.

Time Series:

The analysis presented in this report is largely based on financial year data (1 April – 31
March). This presents some difficulties given that the anniversary of the Sage’s opening
falls in December. To address this issue, unless otherwise stated, figures referring to
2004/05 and 2014/15 are based on a pro-rata sum (i.e. 4 month period for 2004/05, a 8
month period for 2014/15), calculated using the average of surrounding years. This
approach ensures a full 120 months of data is included in the analysis.

The Sage Gateshead – 10 Year economic contribution                                  3
ECONOMIC CONTRIBUTION
Direct Employment

Table 1 below outlines the number of individuals employed at Sage Gateshead on a full
and part time basis, for each of the 10 years of the Sage’s operations.

    Table 1: Employment Figures – The Sage Gateshead
    Year                 Full Time         Part Time                  Total                FTE
    2004/05              168               205                      373                 271
    2005/06              171               235                      406                 289
    2006/07              182               242                      424                 303
    2007/08              182               282                      464                 323
    2008/09              195               198                      393                 294
    2009/10              195               289                      484                 340
    2010/11              148               283                      431                 290
    2011/12              172               287                      459                 316
    2012/13              179               274                      453                 316
    2013/14              165               298                      463                 314
    Source: The Sage Gateshead

Table 2 below breaks down this employment by geographic area. As can be seen, the vast
majority of this employment is in the North East.

    Table 2: Geographical Breakdown of Employment
                                Newcastle/Gateshead          North East Region         Elsewhere
    Year
                                  FTE          %               FTE          %         FTE      %
    2004/05                       157         58               98          36         16       6
    2005/06                       168         58               106         37         15       5
    2006/07                       177         58               110         36         16       5
    2007/08                       165         56               111         38         18       6
    2008/09                       202         63               110         34         11       3
    2009/10                       208         61               118         35         14       4
    2010/11                       179         57               129         41          8       3
    2011/12                       197         62               113         36          6       2
    2012/13                       192         61               118         37          6       2
    2013/14                       186         59               120         38          9       3
    Source: The Sage Gateshead

Expenditure on wages since opening the Sage equals £59.9m1, with £57.4m in the north
east region. In the last full financial year (2013/14) the spend was to £5.75m in total,
£5.6m in the region).

1
 Note that no figures were available between April and November 2014. To fill this gap a pro-rata amount
based on the average between 2010-11 and 2013-14 was applied. Also, note that the salary expenditure

The Sage Gateshead – 10 Year economic contribution                                               4
Associated Audience Expenditure – Leisure Visitors

Visitors to the Sage bring additional impact to the local economy in recognition that their
visit to venue may well include a meal out, a night (or several nights) stay in the region
and spend on other activities within the area.

In assessing the associated impact of visitors to The Sage Gateshead it is considered that
those visitors residing locally and within the region are unlikely to have a significant
additional impact in the local area (for example, they may go for a meal as part of a night
out but are unlikely to stay over). Those that reside outside of the region are more likely
to stay over as part of their visit and in doing so, are likely to generate greater levels of
spend within the local economy and regional economy.

The impact of leisure visitors is calculated by multiplying the number of visitors from
outside the region with the spend they bring to the area.

In order to produce a combined 10 year impact, it is necessary to combine two different
data sets. Specifically:

   Tickets sold to those residing out of the region: Data for 2005/6 - 2008/09 is based on
    a postcode analysis of tickets sold. This data was produced for the five year economic
    contribution report.

   ‘Visitors, participants and attendees’ from out of the region: Data for 2009/10-
    2013/14 is based on the numbers and origins of ‘visitors, participants and attendees’.
    This data was produced for a series of multi-organisational economic impact reports.

While both datasets have been provided by the Sage, they have been collected for slightly
different projects. Therefore, given that the data measures slightly different indicators it
is important their numbers are interpreted appropriately in produce to collect broadly
comparable analysis.

As can be seen in the table below, the difference in methodologies results produces
notably different visitor numbers. Specifically, when captured via an analysis of ticket

relating to 2004-05 appears to relate to the entire financial year (i.e. including a period before opening in
Dec 2004. As this was included in the 5 year report it is included here too.

The Sage Gateshead – 10 Year economic contribution                                                   5
sales, the number of visitors is relatively stable. When analysis changes to the second
data set the number of visitors varies dramatically.

However, it should be noted that, in the analysis for which “visitors, participants and
attendees” figures are specifically collected, only 25% of the numbers are considered in
economic impact calculations. This is based on the assumption that only 25% of those
from outside the region would purposefully dedicate their day visits to the Sage. The five
year report meanwhile, includes all those from outside the region who buy tickets.
Therefore, this analysis applies a 25% weighting to “visitors, participants and attendees”
but not to the analysis of tickets sold (which as this indicator collects different
information can be interpreted differently).

Multiplying the numbers of visitors from outside the region by the average overnight stay
produces the total spend in the regional economy generated by leisure visitors. Average
overnight stay is taken from statistics published by VisitEngland2.

The resulting spending figures are shown in the table below. As can be seen, in the ten
years the Sage has been in operation £18.4m has been generated through additional
visitor spend within the region.

2
    Expenditure statistics published by VisitEngland have changed methodology over the period in question. Figures up to
and including 2009 are taken from the UK Tourism Survey. Figures from after this point use the Great Britain Tourism
Survey (2012) instead. Figures used in calculating the previous report multiplied UK and International visitors by a
visitor spend per night based exclusively on domestic visitors spending statistics. This spending statistic was calculated
using “all tourism” figures (i.e. as opposed to leisure or business tourism). In order to ensure methodological
consistency between the figures, the same approach has been adopted for this update. Given that annual figures are
not available for 2014, 2013 figures were applied using a 2.5% inflation rate.

The Sage Gateshead – 10 Year economic contribution                                                               6
Table 3: Visitor Spending Impact

                        Total        Tickets Sold /Visitors         With
                                   (elsewhere UK and Int.)        Weighting    Calculated Spend
        2004/05       77,003                 9,704                  9,704          £653,057
        2005/06      227,948                29,669                 29,669         £1,692,937
        2006/07      233,654                29,773                 29,773         £1,698,555
        2007/08      231,383                28,703                 28,703         £1,512,946
        2008/09      231,046                28,300                 28,300         £1,616,779
        2009/10      724,618               425,658                 106,415        £5,468,641
        2010/11      695,139               123,909                 30,977         £1,764,774
        2011/12      232,010               125,587                 31,397         £1,768,265
        2012/13      221,986                11,760                  2,940          £190,688
        2013/14      273,851                33,545                  8,386          £573,116
        2014/15     1,431,736               96,061                 24,015         £1,682,238
       Total         4,580,374             942,669                 204,130       £18,621,997

Associated Audience Expenditure – Business / Conference Visitors:

The Sage also provides a significant economic impact through hosting conferences which
attract business visitors to the region. Again, differences in available data means slightly
different approaches were taken when capturing these impacts. Essentially, both data
sources capture the number of visitors from outside the region. These number of visitors
from outside the region (i.e. rest of UK and international) are then multiplied with
VisitEngland statistics showing the average nightly spend per domestic tourist making a
trip to attend a conference3. It was assumed that the length of overnight stay was
commensurate with the length in number of days for each conference.

3
    As with leisure tourism, these figures were taken from the GBTS and UKTS

The Sage Gateshead – 10 Year economic contribution                                           7
Table 4: Business Conference Impact
                  Year                                  Attendance Spend
                  2004-05                               £1,235,752
                  2005-06                               £1,218,224
                  2006-07                               £1,862,782
                  2007-08                               £1,387,162
                  2008-09                               £1,154,363
                  2009-10                               £1,080,552
                  2010-11                               £1,543,648
                  2011-12                               £4,682,611
                  2012-13                               £1,191,362
                  2013-14                               £3,321,080
                  2014/15                               £1,489,098
                  Total                                 £20,166,634

Indirect and Induced Impacts

Direct expenditure drawn from The Sage Gateshead supports further jobs and additional
expenditure through indirect and induced effects (essentially the local spend from the
income received by those employees within the organisations).

The report upon which this analysis is based, used multipliers of 1.9 for local effects and
1.38 for regional effects. These multipliers were based on a review of existing research
and government guidance.

When calculating these impacts the analysis also accounted for additionality factors such
as:

     Displacement (public sector investment that detracts from existing private sector
      operations) – very low due to the lack of competitors within the region;
     Leakage (benefits from the investment that accrue to non-Newcastle/Gateshead
      residents and businesses and therefore leak out of the local economy) – accounted for
      through the geographical mapping of spend and the residential location of
      employment;

In order to maximise methodological compatibility, it is assumed that the multipliers and
additionality factors are the same as that used when calculating figures from the 5 year
report.

The Sage Gateshead – 10 Year economic contribution                                   8
Table 5 below details patterns of direct, indirect and induced impact for employment
(FTE) both locally and in the region.

    Table 5: Patterns of Employment – Direct, Indirect and Induced
                                      Gross FTE Direct                                 Direct, Indirect
                   Gross FTE Direct                          Direct, Indirect &
       Year                                regional                                    & Induced (FTE)
                         Local                              Induced (FTE) local
                                       (including local)                                   regional
     2005/06              168                274                    215                      468
     2006/07              177                287                    227                      490
     2007/08              165                276                    212                      472
     2008/09              202                312                    259                      533
     2009/10              208                325                    266                      557
     2010/11              179                308                    230                      527
     2011/12              197                310                    253                      530
     2012/13              192                310                    246                      530
     2013/14              186                306                    239                      523

The employment figures can be calculated as Gross Value Added (GVA) to aid the financial
assessment of economic impact. The activities of the Sage (as with the creative industries
sector as a whole) is difficult to define using government standard industrial classification
(SIC) systems. The five year update notes that employment predominantly sits within the
Hotels and Restaurants sector and the Other Community, Personal and Social Activities
sector. A GVA per employee figure from the combination of the two sectors was
therefore used as a best estimate of GVA per employee, factoring inflation and
employment change to account for variances in GVA over the years analysed. 4

Since the five year economic contributions were calculated, there has been a change in
SIC classification, meaning it is difficult to use more up to date government statistics to
provide a directly comparable GVA per head figure. Therefore, in order to promote
consistency between years, the same GVA per employee figure as the five year report is
used (again with a 2.5% inflation rate applied).

The local and regional GVA impact is shown in the table below.

4
  Headline GVA per employee for the Hotels sector equates to £15,687 per employee in 2006 and for the
community service sector equates to £29,912 for the same year. The combined figure for that year equates
to £21,711 GVA per employee. Subsequent years have been calculated on the basis of 2.5% annual
inflation. Indirect and induced employment has been assessed against cross-sector GVA per employee in
recognition that this investment is unlikely to be sector specific.

The Sage Gateshead – 10 Year economic contribution                                               9
Table 6: GVA Impacts - Net Direct, Indirect and Induced
                                                        Local            Regional
           2004-05                                    2,918,993         6,961,236
           2005-06                                    7,233,648         10,668,126
           2006-07                                    8,230,116         12,066,719
           2007-08                                    7,547,883         11,381,384
           2008-09                                   10,152,073         14,163,500
           2009-10                                   10,621,169         15,036,072
           2010-11                                    9,721,261         14,847,311
           2011-12                                   10,742,950         15,354,678
           2012-13                                   10,673,068         15,529,163
           2013-14                                   10,981,308         16,167,778
           2014-15                                    7,019,765         17,015,558
           Total                                     95,842,235        230,488,680

Indirect Visitor Spend

Visitor spend (both leisure and business) attracted to the region by The Sage Gateshead
equated to £38.8m (leisure = £18.6m and business = £20.2m).

As with the employment listed above, there is a supply-side multiplier associated with
this expenditure in recognition of the fact that one person’s expenditure is another
person’s income resulting in further reinvestment in the region. Figures for the five year
report use a multiplier of 1.37. This was based on research undertaken regionally5. Again,
in order to ensure compatibility between figures, the same multiplier was selected for
this update.

Applying this multiplier to the expenditure figure results in a direct and indirect
expenditure relating to tourism (both business and leisure) of £53.1m in the regional
economy over a ten year period.

The five year report used Annual Business Inquiry (2007) information (namely, turnover
per head in the Hotels and Restaurants sector) to convert direct and indirect spend into
jobs supported in the region. This report does the same albeit with a slightly different

5
 Modelling the North East Economy: The impact of tourism on economic activity in the North East of
England, Durham University (2007)

The Sage Gateshead – 10 Year economic contribution                                        10
mtethodology6. The results of this analysis find that in 2008/09 (the last full financial year
of the five year report), a spend of £3.8million equated to an estimated 78.0 FTE jobs, in
2013/14 (the last full financial year of the ten year report), a spend of £5.3million equated
to an estimated 107.9 FTE jobs.

6
  Given the difficulties in accessing this archive information, a new turnover per head for the
‘Accommodation and Food Services’ sector is used. This was obtained using ONS BRES and ABS data for
2008 and 2012.

The Sage Gateshead – 10 Year economic contribution                                         11
CONCLUSIONS
The analysis presented within the earlier sections provides details on direct, indirect and
induced impacts associated with organisational employment and direct and indirect
visitor spend within the region.

These impacts are summarised below at a North East Regional level.

Total Economic Contribution:

The total (direct, indirect and induced) economic contribution of The Sage Gateshead to
the North East Region equates to around £283.6m7since opening with 632 FTE jobs
supported in the region during the most recent complete financial year.

The table below presents these figures in more depth as well as comparing how impacts
have changed between the first five years of operation and the second five years of
operation.

Table 7. Summary of Economic Contribution8
                                                             Comparing economic contributions
Indicator                                 Cumulative                                        %
                                                            2004-09        2009-14
                                                                                        increase
Total Economic Contribution                 £283.6m         £128.3m       £155.3m        21.0%
Jobs supported (FTE)                          N/A             635            632          -0.5%
Employment
Direct, Indirect, Induced FTE
equivalent employment (Local)                 N/A              267               239          -10.4%
Direct, Indirect, Induced FTE
employment (Regional)                         N/A              557               523           -6.1%
Direct, Indirect and Induced GVA
(Local)                                     £95.9m           £43.2m            £52.7m           22%
Direct, Indirect and Induced GVA
(Regional)                                  £230.5m         £103.1m           £127.4m          23.6%
Visitor Spend (all figures regional)
Leisure Spend                               £18.6m           £10.8m            £7.8m          -27.9%
Business Spend                              £20.2m           £7.6m             £12.6m          66.1%
Total Leisure and Business spend            £38.8m           £18.4m            £20.4m          10.8%
Direct and Indirect spending                £53.1m           £25.2m            £27.9m          10.8%
Jobs Supported by spending (FTE)             N/A               78                108           38.4%

7
  Made up of direct, indirect and induced GVA associated with employment and direct and indirect visitor
spend
8
  Note all employee data shown is for financial years 2008/09 and 2013/14

The Sage Gateshead – 10 Year economic contribution                                             12
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