Appendix H - Economic Impact Assessment

8/3/2019 Appendix H - Economic Impact Assessment

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GARDINER & THEOBALD LLP 56

ECONOMIC IMPACT ASSESSMENT

Introduction

The proposed Community Stadium is likely to generate various positive impactsthat will benefit residents, businesses and visitors, as well as potentially the widerCornwall and regional economies (if the project is of a significant scale withregional connectivity). This section of the report summarises the economicoutputs and other benefits which this project could generate.

As aspects of the Community Stadium project still need to be confirmed (includingthe facility mix, capital costs, development phasing, management / operatingarrangements, and the involvement of the colleges), this economic appraisalshould be regarded as an initial view of possible benefits that could be generatedby this project.

The economic impact assessment is based on the facility mix (as of September2011). The elements of the facility mix which are relevant for this economicappraisal are as follows 1:

A 10,000 capacity stadium that will be shared by Cornish Pirates RugbyUnion Club and Truro City Football Club.

15 Executive boxes (each with a capacity of 12 people), capable of beinglinked to create larger space and be used on non match-days for variousfunctions / activities.

Flexible hospitality and function space to cater for a maximum of 400 peoplefor meetings and pre-match hospitality.

The current estimate for the capital cost of the stadium is 14,377,000 (includingsite works, stadium build and fit-out, contingency, and professional fees) 2.

Quantification of possible economic benefits (i.e., visitor spending and jobs

supported)There is a need to assess the additional impact (or additionality ) of the proposedstadium.

HM Treasurys Green Book states that an impact arising from an intervention(e.g. grant or other form of support such as planning) is additional if it would nothave occurred in the absence of that intervention. The approach adopted for thiseconomic impact assessment is therefore in line with this guidance. The goal is todetermine the Total Net Additional Effects which could be created by the stad ium.To estimate this, we have worked through the following process:

1 The Miller Partnership (2011) Cornwall Stadium Potential Facility Mix. 2 Gardiner & Theobald (2011) Cornwall Stadium Cost Model (All Stands) Summary, dated 24th August 2011.


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Estimate the Gross Direct Effects : This consists of total spending madeby visitors both (1) within the stadium, and (2) in the wider destinationduring their trip.

We then remove the leakage effects : Leakage reflects the proportion of the gross direct effects (i.e., the proportion of the total visitor spending)which is likely to benefit those outside of the area of benefit (which in thiscase is Cornwall, given the potential scale and impact of the project).

We then consider whether there is any deadweight impact :Deadweight represents the economic outputs that would have occurredwithout the development of the stadium.

We then consider any displacement and substitution effects :Displacement and substitution are closely -related concepts. Where theeconomic outputs of the project result in reduced outputs elsewhere inCornwall, displacement occurs (e.g. visitors deciding to spend money withinthe stadium rather than another Stadium / leisure facility in Cornwall).Substitution is where an organisation substitutes one activity for a similarone (e.g., recruiting a jobless person while another employee loses a job).

The economic multiplier is then considered: The economic multipliereffect involves further economic activity (e.g. jobs, expenditure and/or

income) associated with additional county-wide income and supplierpurchases. The multiplier reflects the income created across Cornwallseconomy through the injecti on of the projects gross expenditure (asdiscussed above).

The output of the above analysis is an estimate of the Total Net Additional Effect.

Direct and indirect employment supported by the proposed stadium is then estimated . The figure for the direct employment (i.e., jobs createdwithin the stadium itself) is based on an initial estimate. The total net

additional effect figure is used to derive an indication of the (in -direct) full -time equivalent employment which could be supported by the stadium. Thisis estimated by adjusting the figure to take account of the proportion spenton salaries, wages and other payroll costs, and then dividing this by theaverage annual earnings in Cornwall.

Please note that as an ex -ante assessment (i.e., an e conomic appraisal that isundertaken before the project has been funded, developed and is operating), andgiven the early stages of the planning and development of the proposedCommunity Stadium for Cornwall, various assumptions have been used in relationto each of the above variables.

We have sought to minimise potential optimism bias through conducting what weregard is a cautious preliminary economic assessment in order to illustrate thepossible economic benefits which could be generated. As the project develops,the economic impact assessment will need to be revisited and potentially revised.


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Gross direct effects

In order to estimate the possible gross direct effects of the stadium, we have madethe following assumptions:

Spending within the stadium: Match day and non match day visitorspending is as per the financial model (dated 8 th September 2011). Matchday income includes general ticketing and season ticket income, as well asprogramme, catering and hospitality income. Non match day incomeincludes conference and functions income. Car parking income is alsoincluded. The total figure from these sources of income is c. 2.2 million 3.

Spending outside of the stadium: In addition to the spending within thestadium, there will be expenditure made by visitors outside of the stadium within the wider area during their trip. For example, visitors may alsospend in pubs, bars, cafes, restaurants, shops and on other entertainmentactivities during their trip, as well as in accommodation (in the case of thosepeople staying overnight in the area). The level of spending is likely to varyaccording to the type of visitor. For example, day visitors 4 are likely tospend significantly less - per trip - than people who are staying overnight inthe area following their visit to the stadium (as overnight tourists stay longerand many will spend in hotels and other visitor accommodation) 5. Giventhis, we need to differentiate between day trippers and staying tourists. Thetotal number of visitors to the stadium has been projected at 118,352. (i.e.,visitors to matches plus non match day visitors). This figure is calculatedfrom the financial model. Using this as the starting point, we then make thefollowing assumptions:

o Day visitors: We have assumed that 95% of total visitors to thestadium are day trippers (i.e., 112,434). We have then assumed thatthese visitors spend an additional 5 each during their trip (e.g., in apub or local shop). These are initial assumptions, which we considerto be cautious. This results in a total expenditure of c. 0.6 million.

o Staying tourists: The remaining 5% of total stadium visitors areassumed to be staying tourists (i.e., 5,918). For the purposes of thispreliminary economic appraisal, we have assumed that stayingtourists spend one night in Cornwall during their trip to the stadium.South West Tourism statistics suggest that the total average spend,per day, by staying tourists is 54 6. As these visitors will have alsospent within the stadium, we need to assume a lower figure than this,

3 All figures in this appraisal exclude VAT. This is because VAT (and other taxes) is not local / regional benefits. They leak outside t hearea of benefit (e.g., VAT goes to the HMRC). 4 Day trippers are people that will visit the stadium a day trip from their home (i.e., returned back home following their trip). 5 Staying tourists are people that will stay in hotel and other visitor accommodation during their trip, as well as staying with friendsand relatives. It is important to note when viewing average spending figures for staying tourists that there will be accommodation-related spending made by visitors who use serviced accommodation (such as hotels or guest houses). However, there is unlikely to beany spending made by tourists staying with friends or relatives. This reduces the overall average of expenditure - on accommodation -made by staying tourists. 6 South West Tourism (2009) Value of Tourism 2008.


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so we have adopted a figure of 40 worth of additional spendingoutside of the stadium during their trip. This results in a total

spending of c. 0.2 million.

This appraisal currently excludes the impacts of any college staff being based onthe site. This will need to be considered further once the level of any collegeinvolvement in the project has been confirmed.

Based on the above assumptions, the table below summarises the assumed grossdirect effects of the proposed stadium.

Table 1: Assumed gross direct effects

Spending (million)

Spending within the stadium 2.2Spending outside the stadium 0.8TOTAL 3.0

Now that we have estimated the gross direct effects, it is necessary to determinethe possible net additional effects by considering various other variables, namelyleakage, deadweight, displacement / substitution, and the multiplier effect. Theseare considered below.

Estimate of leakage

As mentioned, leakage represents the proportion of the gross direct effects whichmay leak outside of Cornwall. The factors to consider when estimating leakageinclude the following:

The number of companies which will supply goods and services to thestadium which will be located outside of Cornwall. It is expected that thestadium as a community based project - will be planned to optimise localand county benefits. For example, the stadiums supply chain (of suppliesof goods and services) will predominantly be local and county-wide.

The staffing at the stadium and the number of these that will live outside ofCornwall. For current purposes, we have assumed that all staff employedwithin the stadium will live within the county.

It is also possible to reflect on available published leakage benchmarks. The tablebelow shows the benchmarks provided by English Partnerships.


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Table 2 : Leakage ready reckoner

Level Description Leakage

None (i) All of the benefits go to the target area/ thetarget group

0%

Low (ii) The majority of benefits go to the target area/ the target group

10%

Medium (iii) A reasonably high proportion of the benefitswill be retained within the target area / the targetgroup

25%

High (iv) Many of the benefits will go outside the area ofbenefit / outside of the target group

50%

Very high (v) A substantial proportion of those benefiting willbe outside of the area of benefit / be non-target groupmembers

75%

Totalleakage

(vi) None of the benefits go to members of thetarget area / target group(vii)

100%

Source: English Partnerships (2004) Additionality Guide - A Standard Approach to Assessing the Additional Impacts of Projects.

Taking the above into account, we suggest that there may be low leakage effects,so have assumed a leakage figure of 10%.

Estimate of the deadweight effect

Without this project, the rugby and football clubs would continue to operate withintheir existing venues (or alternative facilities in the County). However, it is likelythat each clubs attendance would be somewhat lower than that achieved in thenew stadium.

At this stage, we have assumed that the deadweight for this project will be 25%.However, the possible deadweight effect of this project should be examined - inmore detail - when there is a clearer view of the facilities and any occupiers (e.g.,tenants).

Estimate of the effects of displacement and substitution

As with all major sporting and leisure venues of this scale and type, there will besome displacement and substitution, as a number of users will be diverted awayfrom existing sports and other facilities in the area. However, it is likely that given the scale of the project the stadium will stimulate additional visitor trips andspending.


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The available displacement benchmarks are shown in the table below.

Table 3 : Displacement ready reckoner

Level Description Displacement

None (viii) No other firms / demand affected 0%

Low (ix) There are expected to be somedisplacement effects, although only to alimited extent

25%

Medium (x) About half of the activity would bedisplaced

50%

High (xi) A high level of displacement isexpected to arise

75%

Totaldisplacement

(xii) All of the activity generated will bedisplaced

100%

Source: English Partnerships (2004) Additionality Guide - A Standard Approach to Assessing the Additional Impacts of Projects.

Reflecting on the above, a combined figure of 25% has been assumed to reflectthe impact of both displacement and substitution. As can be seen, this figure is atthe low end of English Pa rtnerships benchmarks.

Estimate of the multiplier effect

The multiplier effect involves further economic activity (e.g. jobs, expenditureand/or income) associated with additional local income and local supplierpurchases. The economic benefits of an intervention are therefore multipliedbecause of knock -on effects within Cornwalls economy. As there is no multiplier

for Cornwall (which we are aware of), we need to draw on available benchmarksfor this such as those published by English Partnerships, as per the table below.

Table 4: Multiplier effect benchmarks

Level Multiplier Compositemultiplier

(regional level)

Low Limited local supply linkages and induced orincome effects.

1.3

Medium Average linkages. The majority of interventionswill be within this category.

1.5

High Strong local supply linkages and income or 1.7


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induced effects.

Source: English Partnerships (2008) Additionality Guide A Standard Approach to Assessing the Additional Impact of Interventions.

As discussed previously, we anticipate a large number of the stadiums suppliersto be based within Cornwall. These organisations will have their own supplychains, a proportion of which will involve other Cornwall-based companies. Thissuggests that much of the income generated by the proposed stadium could passthrough various Cornwall-based supply chains. Taking the above into account, wesuggest that there will be a high multiplier effect (i.e., 1.7).

Staffing within the stadium (direct employment)

There will be people employed directly by (1) Cornish Pirates Rugby Club, (2)Truro City FC, (3) the Stadium Management Company, and (4) the contractcaterer (i.e., permanent, part-time, and casual catering staff on match days andnon match days).

Based on very initial estimates, it is possible that there could be [30] full-timeequivalents (FTEs) employed within the rugby club, [20] FTEs within the footballclub. These figures will need to be confirmed by the clubs as the projectprogresses.

With regards to the Stadium Management Company, the financial modellingsuggests [three] FTEs. In terms of permanent, part-time, and casual catering staff,this is difficult to estimate at this stage. However, we have assumed 20 FTEs.

It is assumed that (1) the majority of these jobs will be new (additional), and (2) allof these employees will live in Cornwall.

Employment supported by the net additional effects (indirect employment)

In addition to those people employed directly within the stadium, there will be jobssupported within the wider area through the spending of users and visitors to thedestination.

In order to estimate the potential Net Additional Effects which are spent on payroll(i.e., wages, salaries and related costs), a figure of 35% of the Net AdditionalEffects has been assumed.

To then convert this figure into an estimate of indirect FTEs (which could besupported by the stadium), the proportion of Net Additional Effects spent on payrollhas been divided by an assumed average payroll cost of 25,000.

Estimate of construction employment effectsTemporary employment will also be supported by the project during theconstruction phase. The construction employment effects are related to the totalcost of the development and the length of time the development will take to bringto fruition. When estimating construction employment effects,


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In order to estimate the temporary construction effects of the project, we have

adopted the following assumptions:

We have used the capital cost figure excluding professional fees and VAT,which is 13,190,250.

We then divide the capital cost figure by 80,000 to provide an illustration ofperson years. The 80,000 figure represents an estimate of annual outputper head in the construction industry.

To estimate the number of FTEs supported during the construction phase,we have assumed that ten person years equals one FTE. This is a typicalassumption for ex-ante economic appraisals. It is important to stress thatthe resulting figure does not represent the actual number of workers thatmay be on site during the build period. For example, there may be manypart-time and casual worked on site. Instead, it is an estimate of thenumber of FTEs.

In addition to the direct (FTE) construction jobs, there are likely to beindirect and induced employment supported by the construction activity, asfollows:

o

Indirect employment might be supported through the purchasingactivities of any building or other contractors (e.g., electricalcontractors). In order to reflect this, we have assumed that indirectemployment equates to 0.6 of the direct construction employment.

o Induced employment may also be supported as a result ofemployees spending employees spending their salaries / wages inCornwall. To represent this effect, we have assumed a ratio of 0.2(of direct construction employment).

Based on these assumptions, we estimate - that during the construction period -

28 full-time equivalent (temporary) construction jobs will be supported. Asmentioned previously, there will be more people on site than this during theconstruction of the stadium (i.e., mixture of full-time, part-time and casual workers).This figure represents an estimate of the direct, indirect and induced FTE impactof the construction period.

Please note that this figure relates to the construction of the stadium only. Itexcludes the construction effects across any wider development across the site(e.g., employment supported by the construction of new roads, access routes orany other development across the area).

Summary of economic outputs

Based on the various assumptions detailed above, the following table illustratesthe possible economic outputs which could be generated. It should be noted thatthe possible outputs are annual outputs, with the exception of the construction


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outputs which are temporary (during the Community Stadiums construction periodonly).

Table 5: Summary of economic impacts (annual effects during an assumed stabilised year)

Indicator Outputs

Gross direct effect ( million) 3.0

(less) leakage ( million) 2.7

(less) deadweight ( million) 2.0(less) displacement / substitution ( million) 1.5

Plus the multiplier effect ( million) 2.6

Total net additional effect ( million) 2.6

Direct employment (within the stadium) (FTEs) 73

Indirect employment (supported by the net additional effects)(FTEs)

36

Total direct and indirect employment (FTEs) 109

Possible other strategic, economic, social and other benefits

As a major community- based project, Cornwalls proposed Community Stadiumcould generate a variety of other strategic, social and other benefits. Based on ourexperience of working elsewhere, and our knowledge of this project, these benefits

are likely to include the following:

The project could help build a sense of pride and involvement from the localcommunity, particularly with regards to the supporters of Cornish PiratesRugby Club and Truro FC, as well as the wider communities (if the stadiumis successful in actively engaging local residents through any communitysports / leisure, educational, and health / well-being facilities that may makeup the destination).

Certain components of the proposed Community Stadium have the potentialto generate a disproportionately positive economic impact. For example,the stadium and the wider facilities would be capable of hosting occasionalmajor sports events and conferences, which based on evidence fromother UK stadia - can attract large numbers of visitors from outside of theCounty (although it should be noted that there is often a cost attached toattracting major sporting events, conferences and other peripatetic events


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to destinations).

The new Community Stadium could create a number of opportunities forlocal people to become trained and skilled within specialist areas such assports management and administration, sports development, and marketingand promotions.

A new Community Stadium funded wholly or (as may be more likely) partly by thepublic sector would address an identified market failure, as the financialreturns generated by community projects such as this are typicallyinsufficient to attract significant levels of private sector investment. Forexample, both Sportcity (in East Manchester) and Sheffields varioussporting venues and facilities (e.g., Don Valley, English Institute of Sport,Ponds Forge, etc.) required significant levels of public sector grant funding,as have a large number of other recently-developed community stadia.

Regeneration benefits will also be created through the redevelopment ofredundant land, and bringing it back to economic use (through private andpublic sector investment). Given the likely scale of the development, such aredevelopment could be significant.

Appendix H - Economic Impact Assessment

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