The Chichester Festival Theatre Economic Impact Study 2000 Main Report

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The Chichester Festival Theatre economic impact study 2000 – Main Report

Taking account of the assumptions above it is estimated that £3.181million of net household income is potentially available to be spent as a result of payments to individuals living within or outside Chichester District. Out of this total £1.225m (39%) went to permanent residents of the district and £0.828m (26%) to temporary residents giving a potential expenditure in the district of £2.063m. A further £1.128m (35%) went to individuals resident outside the district (see Figure 3).

Figure 3

Festival Theatre generated household income and expenditure patterns 1998 - 99

Source: CLREA 2000

To estimate the amount actually spent in the local economy it is necessary to take account of consumer expenditure patterns[1]. In a typical economy 25% of all potential expenditure is lost to national imports and expenditure taxes. Further, some sectors do not exist in the local economy and it is assumed that this portion of consumer expenditure leaks out into surrounding areas. Applying estimates consumer expenditure patterns from the household expenditure survey, and taking account of the structure of the local economy, it is estimated that out of the £2.063m potentially available to be spent in the district an estimated £0.836m leaks out. This means that an estimated total of £1.217m is actually spent by households in the district as a result of the direct presence of the Festival Theatre.

The distribution of this expenditure is relatively uneven. Our estimates suggest that 27% is spent in retail and wholesale (the majority in retail, for more detail see Appendix 1). Whilst all manufacturing sectors combined account for 17%. Transport and telecom, hotel and catering and business and financial services account for between 10% and 11% each. All other sectors receive less than 10% of total expenditure (see Table 5).

Table 5 - Estimated distribution of direct household expenditure

into the Chichester district economy

Source: Chichester Festival Theatre management accounts 1999 unpublished

Note* Sectors receiving < £100,000

@ Estimated expenditure has been rounded to the nearest £1000

5. Expenditure by theatregoers and out of district staff

In addition to the direct expenditures by the Festival Theatre and household expenditures by people dependant on the theatre for their employment/income, there is a further stream of spending generated as a result of the theatre’s presence in the local economy. This element of expenditure is generated from two sources; first it is recognised that theatregoers do not just spend their money at the theatre itself, they spend other amounts in the wider economy. Second, permanent staff employed at the theatre will tend to spend a proportion of their income in the city by nature of the fact that their place of employment is there.

There are two ways in which the expenditure patterns of theatregoers might be estimated. The first is to directly survey people attending the theatre to derive an estimate of their expenditure. Once a reliable sample has been obtained it is a simple matter to use the findings from the survey to estimate the expenditure of all theatregoers. Whilst this is often the preferred method of obtaining the estimation, we were unable to sample theatregoers from both the Festival Season and the Touring Season due to the timing of the project, and it is highly likely that the two cohorts have significantly different expenditure patterns.

However, a small sample survey of theatregoers was conducted in 1997 by Sussex Arts Marketing covering both the main Festival and Minerva theatres. Whilst there are a number of questions surrounding the appropriateness of using the results from this survey to estimate theatregoers expenditure, it would be remiss to ignore them completely. Appendix 2 sets out an analysis of the results of the Sussex Arts Marketing survey (based on certain assumptions) and their likely impact throughout the economy.

The second method is to survey local firms in sectors where it is most likely that theatregoers will spend money whilst in the city primarily to attend the theatre. It was this method that was employed. In addition, a survey of Festival Theatre employees, who live outside the district, was also conducted to establish their expenditure patterns within the district economy in a typical week.

A postal survey of 475 businesses within the Chichester District was conducted between early December and early January (see Appendix 3 for copy of the survey form and Table 6 for distribution of sample by sector). The survey guaranteed anonymity and asked respondents to identify only their industry sector and higher level postcode. Each was asked;

• whether or not theatregoers used their business,
• to estimate of the value to their business of theatregoers expenditure (by bands) over the last 12 months,
• whether this was increasing, decreasing or about the same in relation to the previous 12 months,
• how many people they employed and the number of jobs dependant on theatregoers.

A total of 132 replies were received and a further 30 returned as “not at the stated address”, this gave a usable rate of return of 30%. Further analysis shows that the distribution of the survey returns were not significantly spatially different to the original sample but that the distribution by sector was skewed. Rates of return were relatively low in hotel and catering but significantly higher in retail and social welfare and recreation (Table 6 shows the results).

The survey results revealed that:

• 63% of respondents said that theatregoers used their business, 23% that they did not and the remainder were unsure.
• The majority of respondents whose business was used by theatregoers claimed they made between £100 and £1,000 from them in the last 12 months. A further significant minority claimed that theatregoers spent between £1,000 to £5,000 and 13% claimed that theatregoers spent more than £5,000. Finally, 10% of these respondents claimed that theatregoers spent more than £20,000 in their establishment.
• Almost three-quarters (73%) of those whose business was used by theatregoers claimed that the amount spent this year was similar to that in the previous year.

To obtain an estimate of the total expenditure generated by theatregoers the sample was weighted to reflect the variability of the sectoral replies and these were then grossed up to provide estimates of actual expenditure. In the case of hotel and catering this was a single self-contained sector and the weighting was carried out by postcode to account for the slight variations in response rates. To take account of the fact that some patrons of the theatre are also residents of the district it was necessary to deflate the total expenditure by theatregoers by 25% (this is the proportion of theatregoers who are resident in the district). The estimates suggest that “out of district” theatregoers spent in excess of £2.62m in the district last year. The most significant proportion of this was into the hotel and catering sector (£1.87m) with a further £0.62m spent in the retail sector (see Table 6).

In addition to the expenditure by theatregoers, a survey of “out of district” permanent staff (see Appendix 4) suggested that they spent just over £100,000 in the local economy in the last year. The survey results gave an average weekly spend into five designated categories this was then grossed up by a factor of 46 to give an estimated annual spend. Cross tabulating these results with the net wage income of this cohort revealed that they spent an estimated 34% of their net income in Chichester. This was spent primarily in the retail, hotel and catering and transport sectors, with retail receiving more than 50% of expenditure.

The distribution of this expenditure is extremely uneven throughout the economy. Our estimates suggest that almost 95% was spent in just two sectors, hotel and catering, and retail. The levels are relatively insignificant in other areas although there is evidence that theatregoers are inclined to spend a proportion of their time, and money at other cultural and leisure attractions in the City and its environs.

Table 6 - Estimated expenditure@ by out of district (OOD) theatregoers and Chichester Festival Theatre staff in the Chichester local economy 1998 - 99

Source:Survey of theatre staff and local businesses CLREA 1999

Notes: * Sectors receiving < £100,000

@ Estimated expenditure has been rounded to the nearest £1000

OOD = out of district

CFT = Chichester Festival Theatre

6. Cumulative first round expenditures into the local economy

The preceding sections of this report have shown that from a turnover of £7.5m the Chichester Festival Theatre generates almost £9.5m of expenditure into the national economy. It is estimated that the value of the first round expenditures (direct and indirect) into the Chichester District economy as a result of the presence of the Chichester Festival Theatre is almost £5m. A further £2.53m of direct expenditure leaks out to the national economy and surrounding districts. In addition, £1.96m of potential household expenditure and first round household leakages leaves the district; thus making a total of £4.49m spent outside the district (see Figure 4 for details).

Figure 4 - Direct and indirect income and expenditure attributed to the activities of Chichester Festival Theatre 1998 – 99

Source: CLREA 2000

The distribution of the cumulative expenditure in the district is shown in aggregated tabular form below. This shows that the sectors of the local economy that benefit most from the presence of the Festival Theatre are Hotel and Catering and Retail with a total income of £2.4m and £1.1m respectively (see Table 7). Locally, manufacturing, financial and business services and social welfare and recreation cumulatively receive just under £1m whereas construction and primary products each received less than £100,000 in 1998/99. However these figures will increase once the effect of the multiplier is taken into account and it is to this that we turn next.

Table 7 - Estimated cumulative first round expenditure@ within the Chichester local economy resultant from the activities of the Chichester Festival theatre 1998 - 99

Source: CLREA 2000

Notes: £ - Indicates no expenditure

* Sectors receiving < £100,000

@ Estimated expenditure has been rounded to the nearest £1,000

These figures clearly show that the Festival Theatre is a significant generator of economic activity, in terms of the direct jobs it provides and the indirect jobs that are dependant on direct expenditure by the theatre and spending power of theatregoers and staff directly and indirectly employed by the theatre. The next section will examine the overall effect of the theatre on the local economy once the multiplier has been applied.

7. Total Impact of the Festival Theatre on the local economy

Thus far the report has mainly concentrated upon the direct effects upon local income and employment in the Chichester District of the Chichester Festival Theatre. However, it is clear that a full analysis of the importance of the theatre to the local economy must take into account all the indirect effects likely to result from the activities associated with the theatre’s presence in Chichester.

Explanation of indirect effects

It is useful to explain what is meant by the term "indirect effects". These effects are mainly of two types; firstly there are indirect industrial effects. Direct demands for products and services used by the theatre will lead to "knock on" benefits for other local firms. These knock on or multiplier effects will continue on as firms in the supply chain also purchase goods and services from other firms within the district. The overall size of the local multiplier effect will depend upon the structure of the local economy and its ability to meet the supply needs of local firms. The smaller the local economy, the more likely it is that some industry sectors will be either absent or under represented in the area. If this happens supplies and services will have to be imported in from outside the area thus increasing "leakages" out of the area which will reduce the value of any multiplier effect.

The second type of indirect effect is that associated with household spending. As shown above the theatre is a fairly large direct employer in the district and it is also responsible for the employment of a number of people on a temporary basis. Even more importantly a large percentage of these workers live in the area (at least during the period of their employment), this means that the theatre provides a significant boost to local household income. The derived household income, will in turn, be spent by its recipients within the district on various goods and services, many of which may be obtained locally. This spending will then be further re-circulated as local people are employed in shops and businesses and in the firms that supply the goods to local shops and services. Once again, a multiplier effect is created; the value of which will be dependent upon the ability of local firms to supply the needs of local consumers.

Input Output methodology

Having recognised the importance of measuring these indirect effects, the next problem is to decide exactly how this can be achieved. It is generally agreed by economists that the most accurate method of tracing the various multiplier effects through an economy is by means of input-output analysis and it is this approach that is used in the model constructed for this study. This model was specifically constructed to provide an accurate simulation of the structure and interactions within the local economy. Using the latest Census of Employment data, updated for productivity effects, we are able to weight national input-output tables so that they reflect the current industry structure of the district economy.

Baselines measures of local output and employment

The input-output model may be used either to analyse the effect of macroeconomic changes to the local economy or to examine the contribution of particular sectors or establishments in the local economy. The main aim of this report is to pursue this latter strategy in order to examine the likely impact of the Festival Theatre. However, to be able to do this it is first necessary to quantify the current level and structure of output and employment in the Chichester District.

The output figure in £m (see Table 8) relates to all transactions between firms, enterprises and individuals located in the Chichester District. This and the accompanying levels of FTE jobs relate to the employment structure of the district, as presented in the 1996 Census of Employment. It should be noted that the table shows the estimated number of jobs and expenditure by firms that are in Chichester (according to the Census of Employment). This is not necessarily the same as the number of people who live in Chichester that have jobs or the amount that they might spend locally.

Table 8 – Estimated output and employment in the Chichester

District economy 1998/99

Source: CLREA, 2000

It is estimated that total output is over £1.6bn with the largest sectors; financial and business services, manufacturing and the public sector. In terms of FTE jobs the largest sectors are; the public sector, financial and business services, manufacturing and retail and wholesale.

Total output and employment resultant from Chichester Festival Theatre.

The outcomes from the CLREA model are displayed below in Tables 9 and 10. Table 9 shows estimated gross output by the theatre’s activities, benchmarked against the total for the district and differentiated by the contributions of direct expenditures (theatre and theatregoers) and expenditure by households and individuals receiving direct payments from the theatre. In addition, the total inputs from the theatre and its activities in the district are also shown (see final column of Table 7). Table 10 shows estimated employment (expressed as FTEs) resulting from direct jobs at the theatre, those resulting from direct expenditures (theatre and theatregoers) and those dependant on expenditure by households and individuals, again this is benchmarked against the district total.

Table 9 – Inputs and Outputs resulting from the activities of Chichester Festival Theatre 1998/99 (in 1999 prices)

Source: CLREA, 2000