Written evidence submitted by Alexandra Park and Palace Charitable Trust (APPCT)
DCMS Call for Evidence
Impact of Covid-19 on DCMS sectors
15 May 2020
Introduction to your organisation
We appreciate that the current circumstances means that DCMS may not be able to review the same volume of evidence from individual organisations, as it may normally, and may prefer to receive submissions from representative industry bodies. We are an independent organisation operating across the DCMS spectrum from popular entertainment to heritage. We are the largest independent live music venue in the country. Despite our size, remit and heritage, we receive no grants from Central Government or Arts Council England. We therefore feel that no single industry body fully represents our situation.
Alexandra Park and Palace Charitable Trust (APPCT) is responsible for restoring, maintaining and repairing Alexandra Palace and Park as a place of public resort and recreation. The charity undertakes a range of activities from historic building repair, nature conservation, health and wellbeing and creative learning activities as well as delivering a broad and varied programme of entertainment from opera, music gigs, theatre and leisure activities, with associated food and beverage operations. Activities that are considered commercial in nature are delivered through the charity’s trading subsidiary and whilst these provide essential funding, they also remain true to our charitable purpose. The Trust is also a Landlord to several small businesses and charities who are also impacted.
The Palace is a huge iconic grade II listed building, one of the largest buildings on Historic England’s ‘At Risk’ Register, surrounded by 196 acres of parkland. APPCT is a statutory charity governed by an Act of Parliament dating back to 1901. Since 1980 its Corporate Trustee has been a Local Authority which, in line with Charity Commission guidance, delegates its responsibilities to a Trustee Board.
The Park and Palace date from 1860 and have supported the nation during times of crisis and has been the location for significant innovations; from accommodating ‘enemy aliens’ and refugees during World Wars 1 and 11 to being the birthplace of BBC television. Our history tells the story of leisure and recreation in society, and interruptions to it, since leisure time first became available to the population as a whole. The physical impact and emotion people feel when they are in a heritage site like Alexandra Palace cannot be under-estimated – the spaces can stimulate ideas, creativity and excitement in all ages and at Alexandra Palace the people we provide this for is truly diverse.
In response to the Covid–19 pandemic, we have been working with a number of organisations to positively contribute towards the response effort. In late March we had several conversations with representatives from the NHS to establish whether Alexandra Palace was a suitable location for a recovery hospital; since 30 March, the Great Hall has been operating as a distribution centre, working in partnership with Haringey Council and Edible London; and our Park hosts a military mobile Covid–19 testing centre.
What has been the immediate impact of COVID-19 on the sector?
The immediate impact of Covid-19 is that the majority of our income-generating and other activities have effectively ceased. We closed the Palace to protect the public, our staff and volunteers, before the Government made this compulsory. We made a judgement call based on consumer confidence, public sentiment and our own assessment of what was in the best interests of our staff and volunteers. At this point in time, we do not have a clear sense of when our operations will be able to recommence but we are occupied with working out how they may be able to.
The impact of this is:
How effectively has the support provided by DCMS, other Government departments and arms-length bodies addressed the sector’s needs?
The Job Retention Scheme has been a vital lifeline, without which we would have been forced to make over 150 redundancies, losing one of our most vital resources, our people, in which we have significantly invested. Our recovery from this situation would be doubtful and at the very least incredibly slowed, without the ability to retain our workforce, which in turn enables us to retain our volunteer cohort.
The funding and support from heritage arms-length bodies such as Historic England, National Lottery Heritage Fund and Arts Council England are all very welcome, but with competition high and funds limited, we are concerned that even if we were successful, it would be a drop in the ocean in terms of our financial shortfalls.
Our size of operation and stage of development means that we fall between the funding pots available; too large for many government and funding grants - our only recourse is to burden our charity with debt through the government loans scheme. Our independence means that we don’t have the economies of scale or membership that English Heritage or National Trust properties will benefit from.
What will be the likely long-term impacts of COVID-19 be on the sector and what support is needed to deal with those?
The support being offered by government should not suddenly end. Our operation was one of the first to close and will likely be one of the last to reopen. It will also reopen in a very different way. Current social distancing measures are not appropriate for a cultural heritage and entertainment venue like APP. Re-opening many of our facilities will not be viable. Volume is critical for our business model and margins. We may not be able to open all of our different operations on site at the same time on the same basis, meaning that we will not be able to provide work for all of our previous workforce immediately. Yet our overheads will remain and likely increase as we adapt our operations to accommodate the social distancing and hygiene requirements. A tapered approach to the ending of support, particularly the Job Retention Scheme is critical.
For organisations and businesses that have multiple operations on the same site in related sectors, it will be important that the approach to allowing businesses to reopen is given in broad categories, not tightly defined business types, and that the interdependency of those operations is understood.
It is vital that the government involve the sector in decisions on relaxing social distancing. The current social distancing guidelines are not appropriate for organisations such as event venues, cinemas, museums and pubs, restaurants and many visitor attractions.
The term ‘mass gatherings’ should not be used when referring to the events industry – the term does not acknowledge the specific purpose of the event and there is a real danger that a blanket ban of ‘mass gatherings’ will be too ambiguous and extremely harmful for the events industry to start to try and recover from the pandemic. Organised events such as concerts, exhibitions and shows can be managed in ways that track attendees, organise ingress and egress, increase measures in terms of hygiene and security, and respond quickly to public health requirements as and when required. Organised events are therefore very different from unorganised public ‘mass gatherings’ and should be treated as such.
The impact of this national emergency on our organisation, which relies on volumes of people in public spaces, will last longer than a single financial year. We will likely struggle to make up lost income – all profits made by our trading subsidiary are gifted to the Trust to support our charitable undertakings. If we are to burden our operation with debt to survive, the Government CBILS scheme needs to offer low interest rates, after the initial interest free period, to ensure we can repay the debt and rebuild the business to provide work for our staff and generate wider economic impact.
The reduction of VAT on the tourism, leisure and entertainment sector should be considered for the same reason, even for a temporary period, to enable recovery and to compete with other destinations, when international travel is allowed.
A number of strategic projects that we were focussing on will now have to take a back-seat as meeting our liabilities is now the primary focus. Repair, maintenance and new projects are on hold, as funding for these also stalls.
One of our greatest concerns is that the funding being made available by Government, Trusts and Foundations is for organisations in crisis now. Whilst we have no reserves to call on, our crisis will come later in the year when our funds are exhausted. Due to a quirk in how we receive some of our funding each year, it is front loaded, with trading income paid as gift aid, which funds the charity for the final quarter. We expect that when we reach crisis point, we will not have the expected amount of gift aid and this will impact not only 2020/21 but 2021/22 and beyond. This will impact on all areas of our business, from marketing to events to maintenance. Funding from organisations such as HE, NLHF and ACE will be greatly reduced in the coming years due to the impact of Covid-19 and the necessary level of funding spent dealing with the immediate crisis.
Even when we are able to welcome visitors to site, they may not have the same level of disposable income as previously, or indeed the confidence to return to sites such as ours. The need for capital investment in visitor facilities to make them suitable for social distancing and new hygiene measures for a heritage site such as ours is more than we have available.
Our ability to generate income will be significantly reduced as some events may no longer be viable without near to sell-out capacity. This capacity cannot be reached with social distancing in place. Alexandra Palace contributes over £150m per year to the local economy, so the impact of the pandemic is not only felt in the supply chain, but in local small businesses. If our operations do not recover, the businesses in the local area will also have a slowed recovery.
For organisations that rely on volume visits (museums, theatres, event venues, cinemas etc.) there will be a number of long-lasting, operational challenges, in particular managing hygiene and public expectations of hygiene and social distancing as restrictions are lifted; This will not just apply in the immediate reopening phase; maintaining the discipline with staff and customers will need to last for several months.
What lessons can be learnt from how DCMS, arms-length bodies and the sector have dealt with COVID-19?
Praise needs to be given for the speed of response with regards to the JRS and to HMRC for the speed in developing the successful claims platform and grant payment.
However, clarity of the detail of the scheme was slow. This meant organisations had to make judgement calls and could not act as quickly as they may have needed to. This impacted on our ability to provide employees with clear information. This is understandable. It hasn’t been done before, but lessons for the future are needed.
In particular, a lack of clarity initially on the eligible groups of workers left us uncertain on the approach to take for our casual workers - subsequent guidance confirmed that ‘limb b’ workers were covered. We resolved this issue by making a discretionary payment to this group in March.
There were some inconsistencies in the interpretation of advice on the lower earnings limit (between the different government support schemes) that suggested a lower earnings limit may be applied. The advice we initially received was to await further guidance. We have reviewed this element alongside our financial position to furlough workers below the minimum earnings level and revised our position, which meant we subsequently furloughed anyone with earnings below the lower earnings limit of £118 per week after tax.
A lack of clarity and detail on a number of key issues included start dates for furloughing and whether it was possible to backdate the start date; the agreement process; calculations for workers without guaranteed hours; arrangements and approach to annual leave and bank holiday accrual, payment and roll over; whether an employer can insist a furloughed worker uses their annual leave; arrangements for sick pay, maternity, overtime payments and discretionary payments; pension implications; whether a worker can be furloughed on two contracts for one organisation; and arrangements for training whilst on furlough.
Some of the other key challenges were:
Given the nature of our site (a historic building and parkland as well as a cultural entertainment venue), we are unable to furlough the staff that are necessary to keep the assets safe – such as facilities, health and safety, building surveying and park management. Despite the loss of all income, the funding of these posts is still essential.
How might the sector evolve after COVID-19, and how can DCMS support such innovation to deal with future challenges?
This is a creative and innovative sector and there are already new event formats, business models, operating models and procedures emerging to respond to a changed reality for the foreseeable future. However, the significant financial losses that organisations are facing means that the capacity for them to take risks, invest in new technology and retain staff will be a barrier.
Grants to organisations that have a viable business plan to invest in staff training, new models of operating, the reconfiguration of spaces and in technology is the quickest and most effective method to assist a swift recovery. However, for an organisation like ours that operates in many of the DCMS sectors, it is likely that we would fall between the gaps in distribution of such grants if they were distributed by sector (i.e. through Arts Council, Historic England, Sport England, VisitEngland etc.).
In terms of digitisation and automation, whilst the consumer-facing digital aspects are being dealt with by many in the DCMS family (both through publicly funded and commercial initiatives) there is huge room for innovation and improvement in the digitisation and automation of systems and processes within business operations, in terms of finance, HR and payroll systems; this aspect is often neglected by the organisations themselves and by the funding and support bodies, but has the ability to create efficiency savings, creating more resilient organisations and quicker response times in situations like this.
The organisations with buildings and premises will have been facing a bigger challenge than those without. The need to reduce utility bills and invest in sustainability initiatives has never been more important and more obvious. The introduction of Invest to Save initiatives for the sector in the next few years should be given serious consideration. Access to finance to enable the sector to invest to reduce carbon footprints and increase efficiency is going to be critical to help these organisations recover and be more resilient in the future. A national ’Invest to Save’ scheme in sustainability, aimed at the cultural sector, would be welcomed. Either as an interest-free loan or grant scheme.
The public will need to be confident to visit and travel even domestically, so public information broadcasts/advertising should be considered, to reassure the public that the industry has taken measures to provide a safe environment and what to look out for from businesses, but also to encourage people to travel, responsibly, for leisure purposes. Especially as this was already a growing concern in relation to sustainability in some of our more fragile sites and destinations prior to the pandemic.
Finally, it is important to note the increased reliance the public have placed on outdoor spaces for fresh air, exercise and general mental health and well-being benefits. With no income, we are having to make difficult decisions about budgets in other areas, including the park funding. As lockdown is lifted, parks and green spaces will become overwhelmed, but the level of expectation in terms of maintenance will have to be lowered as funds will be focussed on absolute essentials only, if there is no funding available from other sources.