(Title Image: BBC Wales)

Public Accounts Committee

The Welsh Government’s Relationship with Pinewood Studios (pdf)

Published: 14th February 2019

“We were surprised that the Welsh Government entered into a contract that lacked clarity in terms of operating arrangements, and a collaboration agreement that did not explicitly make clear the roles and responsibilities of each partner. We were equally surprised that the Welsh Government chose to purchase a site that consisted of three very different and unusual assets, costing £6 million and failed to commission a full structural survey beforehand.”

– Committee Chair, Nick Ramsay AM (Con, Monmouth)

This inquiry was triggered by a Wales Audit Office report, which you can read here (pdf).

1. The £30million Media Investment Fund has underperformed

When Pinewood expressed interest in opening studios in Wales, the Welsh Government established the £30million investment fund during 2013-14 in order to support film and television production. A similar £25million Isle of Man fund resulted in £100million being spent in the local economy; it was hoped the Welsh fund would result in a £90million local spend (a 1:3 ratio).

However, the ratio was closer to 1:1 – every pound spent by the fund was matched by a pound from the private sector. Welsh Government officials recognised early on the 1:3 ratio would be difficult to achieve and while the ratio is expected to rise to around 1:1.9 (£57million return), it’s still far short of the goal.

Excluding productions that are still yet to be released, of the £15million spent by the fund, only £18million has returned in Welsh spend – 20% of the target. Despite this, the Committee – while disappointed with the underperformance – were reluctant to write off the fund just yet due to the speculative nature of the investments.

2. There was a clear conflict of interest which wasn’t taken into account

The Auditor General said there was a lack of transparency over the advantage Pinewood might’ve had over other production companies through the agreement with the Welsh Government, particularly when Pinewood started to promote their own post-production services.

Civil servants came to suspect that this might put off other production companies from working in Wales – negatively impacting performance – but this wasn’t considered when the agreement was finalised in 2014. In evidence to the Culture Committee, the Welsh Government insisted it was taken into consideration.

3. Studio space has been underused and income targets have been missed

While the Economy Minister, Ken Skates (Lab, Clwyd South), maintained that Pinewood has been operating “at capacity”, Pinewood said occupancy levels were as low as 44% and they had based operating revenues – around £715,000 – on an occupancy level of 70-75%. To date, the studios are making around £427,000 a year.

Pinewood said competition from nearby Bad Wolf Studios in the Wentloog area of Cardiff had impacted demand for their own facilities.

While the Committee accepts the studios are unlikely to ever be at 100% capacity, income generation is another area of underperformance.

4. Civil servants forgot to add VAT to a sponsorship agreement and didn’t carry out a full survey of the studios

The Welsh Government agreed to provide £483,000 a year for five years to sponsor, market and promote Pinewood Wales. Shortly after the agreement was signed, officials realised VAT had been omitted, adding an additional £87,600 to the package. This was blamed on Welsh Government policy of using figures exclusive of VAT (which is a common practice).

Also, because the Welsh Government failed to undertake a full structural survey of the studio building (only a valuation), they had to undertake emergency repairs to the roof as leaks rendered the studios unusable. While this has extended the life of the building by 20 years, the Committee wasn’t satisfied with the government’s excuse that as they bought the building from “an institutional investor” it was a sign it was fully up to scratch.