ECONOMIC IMPACT ASSESSMENT

Introduction The proposed Community Stadium is likely to generate various positive impacts that will benefit residents, businesses and visitors, as well as potentially the wider Cornwall and regional economies (if the project is of a significant scale with regional connectivity). This section of the report summarises the economic outputs and other benefits which this project could generate. As aspects of the Community Stadium project still need to be confirmed (including the facility mix, capital costs, development phasing, management / operating arrangements, and the involvement of the colleges), this economic appraisal should be regarded as an initial view of possible benefits that could be generated by this project. The economic impact assessment is based on the facility mix (as of September 2011). The elements of the facility mix which are relevant for this economic appraisal are as follows1: A 10,000 capacity stadium that will be shared by Cornish Pirates Rugby Union Club and Truro City Football Club. 15 Executive boxes (each with a capacity of 12 people), capable of being linked to create larger space and be used on non match-days for various functions / activities. Flexible hospitality and function space to cater for a maximum of 400 people for meetings and pre-match hospitality. The current estimate for the capital cost of the stadium is 14,377,000 (including site 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 proposed stadium. 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 not have occurred in the absence of that intervention. The approach adopted for this economic impact assessment is therefore in line with this guidance. The goal is to determine the Total Net Additional Effects which could be created by the stadium. To estimate this, we have worked through the following process:

1 2

The Miller Partnership (2011) Cornwall Stadium Potential Facility Mix. Gardiner & Theobald (2011) Cornwall Stadium Cost Model (All Stands) Summary, dated 24th August 2011. 56

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Estimate the Gross Direct Effects: This consists of total spending made by visitors both (1) within the stadium, and (2) in the wider destination during 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 this case 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 occurred without the development of the stadium. We then consider any displacement and substitution effects: Displacement and substitution are closely-related concepts. Where the economic outputs of the project result in reduced outputs elsewhere in Cornwall, displacement occurs (e.g. visitors deciding to spend money within the stadium rather than another Stadium / leisure facility in Cornwall). Substitution is where an organisation substitutes one activity for a similar one (e.g., recruiting a jobless person while another employee loses a job). The economic multiplier is then considered: The economic multiplier effect involves further economic activity (e.g. jobs, expenditure and/or income) associated with additional county-wide income and supplier purchases. The multiplier reflects the income created across Cornwalls economy through the injection of the projects gross expenditure (as discussed 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 created within 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) fulltime equivalent employment which could be supported by the stadium. This is estimated by adjusting the figure to take account of the proportion spent on salaries, wages and other payroll costs, and then dividing this by the average annual earnings in Cornwall.

Please note that as an ex-ante assessment (i.e., an economic appraisal that is undertaken before the project has been funded, developed and is operating), and given the early stages of the planning and development of the proposed Community Stadium for Cornwall, various assumptions have been used in relation to each of the above variables. We have sought to minimise potential optimism bias through conducting what we regard is a cautious preliminary economic assessment in order to illustrate the possible 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 made the following assumptions: Spending within the stadium: Match day and non match day visitor spending is as per the financial model (dated 8 th September 2011). Match day income includes general ticketing and season ticket income, as well as programme, catering and hospitality income. Non match day income includes conference and functions income. Car parking income is also included. 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 the stadium, there will be expenditure made by visitors outside of the stadium within the wider area during their trip. For example, visitors may also spend in pubs, bars, cafes, restaurants, shops and on other entertainment activities during their trip, as well as in accommodation (in the case of those people staying overnight in the area). The level of spending is likely to vary according to the type of visitor. For example, day visitors 4 are likely to spend significantly less - per trip - than people who are staying overnight in the area following their visit to the stadium (as overnight tourists stay longer and many will spend in hotels and other visitor accommodation) 5. Given this, we need to differentiate between day trippers and staying tourists. The total 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 calculated from the financial model. Using this as the starting point, we then make the following assumptions: o Day visitors: We have assumed that 95% of total visitors to the stadium are day trippers (i.e., 112,434). We have then assumed that these visitors spend an additional 5 each during their trip (e.g., in a pub or local shop). These are initial assumptions, which we consider to be cautious. This results in a total expenditure of c. 0.6 million. o Staying tourists: The remaining 5% of total stadium visitors are assumed to be staying tourists (i.e., 5,918). For the purposes of this preliminary economic appraisal, we have assumed that staying tourists 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 546. As these visitors will have also spent 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 the area 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 friends and relatives. It is important to note when viewing average spending figures for staying tourists that there will be accommodationrelated spending made by visitors who use serviced accommodation (such as hotels or guest houses). However, there is unlikely to be any 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. GARDINER & THEOBALD LLP 58

so we have adopted a figure of 40 worth of additional spending outside 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 on the site. This will need to be considered further once the level of any college involvement in the project has been confirmed. Based on the above assumptions, the table below summarises the assumed gross direct effects of the proposed stadium. Table 1: Assumed gross direct effects Spending (million) 2.2 0.8 3.0

Spending within the stadium Spending outside the stadium TOTAL

Now that we have estimated the gross direct effects, it is necessary to determine the possible net additional effects by considering various other variables, namely leakage, deadweight, displacement / substitution, and the multiplier effect. These are considered below. Estimate of leakage As mentioned, leakage represents the proportion of the gross direct effects which may leak outside of Cornwall. The factors to consider when estimating leakage include the following: The number of companies which will supply goods and services to the stadium which will be located outside of Cornwall. It is expected that the stadium as a community based project - will be planned to optimise local and county benefits. For example, the stadiums supply chain (of supplies of goods and services) will predominantly be local and county-wide.

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

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

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Table 2: Leakage ready reckoner Level None Description (i) All of the benefits go to the target area/ the target group (ii) The majority of benefits go to the target area/ the target group (iii) A reasonably high proportion of the benefits will be retained within the target area / the target group (iv) Many of the benefits will go outside the area of benefit / outside of the target group (v) A substantial proportion of those benefiting will be outside of the area of benefit / be non-target group members (vi) None of the benefits go to members of the target area / target group (vii) Leakage 0%

Low

10%

Medium

25%

High

50%

Very high

75%

Total leakage

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 within their existing venues (or alternative facilities in the County). However, it is likely that each clubs attendance would be somewhat lower than that achieved in the new 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 - in more 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 be some displacement and substitution, as a number of users will be diverted away from 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 and spending.
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The available displacement benchmarks are shown in the table below. Table 3: Displacement ready reckoner Level None Low (viii) Description No other firms / demand affected Displacement 0% 25%

(ix) There are expected to be some displacement effects, although only to a limited extent (x) About half of the activity would be displaced (xi) A high level expected to arise of displacement is

Medium

50%

High

75%

Total displacement

(xii) All of the activity generated will be displaced

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 reflect the impact of both displacement and substitution. As can be seen, this figure is at the low end of English Partnerships benchmarks. Estimate of the multiplier effect The multiplier effect involves further economic activity (e.g. jobs, expenditure and/or income) associated with additional local income and local supplier purchases. The economic benefits of an intervention are therefore multiplied because 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 benchmarks for this such as those published by English Partnerships, as per the table below. Table 4: Multiplier effect benchmarks Level Multiplier Composite multiplier (regional level) 1.3

Low

Limited local supply linkages and induced or income effects. Average linkages. The majority of interventions will be within this category. Strong local supply linkages and income or

Medium

1.5

High

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 suppliers to be based within Cornwall. These organisations will have their own supply chains, a proportion of which will involve other Cornwall-based companies. This suggests that much of the income generated by the proposed stadium could pass through various Cornwall-based supply chains. Taking the above into account, we suggest 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 contract caterer (i.e., permanent, part-time, and casual catering staff on match days and non match days). Based on very initial estimates, it is possible that there could be [30] full-time equivalents (FTEs) employed within the rugby club, [20] FTEs within the football club. These figures will need to be confirmed by the clubs as the project progresses. With regards to the Stadium Management Company, the financial modelling suggests [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) all of 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 jobs supported within the wider area through the spending of users and visitors to the destination. 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 Additional Effects has been assumed. To then convert this figure into an estimate of indirect FTEs (which could be supported by the stadium), the proportion of Net Additional Effects spent on payroll has been divided by an assumed average payroll cost of 25,000. Estimate of construction employment effects Temporary employment will also be supported by the project during the construction phase. The construction employment effects are related to the total cost of the development and the length of time the development will take to bring to 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 of person years. The 80,000 figure represents an estimate of annual output per 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 typical assumption for ex-ante economic appraisals. It is important to stress that the resulting figure does not represent the actual number of workers that may be on site during the build period. For example, there may be many part-time and casual worked on site. Instead, it is an estimate of the number of FTEs. In addition to the direct (FTE) construction jobs, there are likely to be indirect and induced employment supported by the construction activity, as follows: o Indirect employment might be supported through the purchasing activities of any building or other contractors (e.g., electrical contractors). In order to reflect this, we have assumed that indirect employment equates to 0.6 of the direct construction employment. o Induced employment may also be supported as a result of employees spending employees spending their salaries / wages in Cornwall. 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. As mentioned previously, there will be more people on site than this during the construction 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 impact of the construction period. Please note that this figure relates to the construction of the stadium only. It excludes the construction effects across any wider development across the site (e.g., employment supported by the construction of new roads, access routes or any other development across the area). Summary of economic outputs Based on the various assumptions detailed above, the following table illustrates the possible economic outputs which could be generated. It should be noted that the possible outputs are annual outputs, with the exception of the construction
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outputs which are temporary (during the Community Stadiums construction period only). Table 5: Summary of economic impacts (annual effects during an assumed stabilised year) Indicator Gross direct effect ( million) (less) leakage ( million) (less) deadweight ( million) (less) displacement / substitution ( million) Plus the multiplier effect ( million) Total net additional effect ( million) Direct employment (within the stadium) (FTEs) Indirect employment (supported by the net additional effects) (FTEs) Total direct and indirect employment (FTEs) Outputs 3.0 2.7 2.0 1.5 2.6 2.6 73 36

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Possible other strategic, economic, social and other benefits As a major community-based project, Cornwalls proposed Community Stadium could generate a variety of other strategic, social and other benefits. Based on our experience 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 local community, particularly with regards to the supporters of Cornish Pirates Rugby Club and Truro FC, as well as the wider communities (if the stadium is successful in actively engaging local residents through any community sports / leisure, educational, and health / well-being facilities that may make up the destination). Certain components of the proposed Community Stadium have the potential to generate a disproportionately positive economic impact. For example, the stadium and the wider facilities would be capable of hosting occasional major sports events and conferences, which based on evidence from other UK stadia - can attract large numbers of visitors from outside of the County (although it should be noted that there is often a cost attached to attracting major sporting events, conferences and other peripatetic events
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to destinations). The new Community Stadium could create a number of opportunities for local people to become trained and skilled within specialist areas such as sports management and administration, sports development, and marketing and promotions. A new Community Stadium funded wholly or (as may be more likely) partly by the public sector would address an identified market failure, as the financial returns generated by community projects such as this are typically insufficient to attract significant levels of private sector investment. For example, both Sportcity (in East Manchester) and Sheffields various sporting 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 of redundant land, and bringing it back to economic use (through private and public sector investment). Given the likely scale of the development, such a redevelopment could be significant.

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