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Written Evidence Submitted by LW Theatres

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Written Evidence Submitted by LW Theatres Written evidence submitted by LW Theatres This note forms LW Theatres Group Limited’s response to the call for evidence by the Department for Digital, Culture, Media and Sport (“DCMS”) as regards the impact of the current Covid-19 epidemic. LW THEATRES GROUP LIMITED (“LW Theatres”) LW Theatres is a theatre company based in London, owned by Andrew Lloyd Webber. LW Theatres own and operate seven of the most prestigious and desirable theatres in the world, including the iconic London Palladium and the stately Theatre Royal Drury Lane. We play host to some of the world’s best musicals and plays, as well as a popular variety of concerts and comedy. The LW Theatres portfolio also includes Her Majesty’s Theatre, the Cambridge Theatre, the Gillian Lynne Theatre, the Adelphi Theatre (owned in association with Nederlander International Limited) and The Other Palace. We are the largest operator of musical theatre in London with 1 in 3 of all visits to a London musical being to a LW Theatres venue. Resident shows currently suspended include Matilda the Musical and the world famous The Phantom of the Opera. EXECUTIVE SUMMARY These are the main challenges facing the theatre industry due to the current Covid-19 epidemic, and the areas in which we require further support from the government:- 1. Clarity on ending Social Distancing measures and/or the use of technology to find an alternative solution to reopen Restarting the industry with significant Social Distancing measures (which reduces capacity to 30%) will not be viable. On average, a production needs to have sold at least 65% of tickets simply to cover production costs. In addition, it will not be operationally feasible for theatres to reopen with Social Distancing in place; the industry, by definition, operates with people in close contact, both in the audience and on stage, and for support crews behind the scenes. Clarity on timeline for ending Social Distancing will be vital to the industry reopening and time is pressing. In order to reopen shows at the end of 2020/start of 2021, we need to start securing investment and building productions now. As long as uncertainty remains and no roadmap towards reopening exists, producers and investors will not be willing to take on risk for future shows, when the liabilities are potentially so costly: new large-scale West End musicals can cost in excess of £10m to stage and can require anywhere from 4 to 12 months of planning prior to opening. Any decisions to ask the industry to open again need to be made with a degree of certainty, as incurring the considerable costs necessary to reopen a production only to immediately have to close down would be financially devastating for producers and theatre operators. Collectively, we need to find alternatives to the blunt instrument of Social Distancing, and time is pressing. Technological developments (e.g. the app recently developed and implemented in South Korea, and other countries, using track and trace to assess and manage audience risk) should be explored. 2. Coronavirus Job Retention Scheme Theatre owners cannot maintain their current workforce without support because their operations have been severely affected by Covid-19. Since 16th March there has been zero revenue generated for LW Theatres. Thankfully, the Coronavirus Job Retention Scheme (“CJRS”) has allowed LW Theatres to retain its employees for the time being and therefore protect a large part of the London theatre industry during the initial period of furloughing. LW Theatres employs over 500 people across our seven theatres and at Head Office, and has furloughed all staff who, in the current situation, are unable to work (e.g. bar and front of house staff). 290,000 people are employed across the UK theatre industry and currently over 70% of jobs are deemed to be at risk as theatres face an unstable future. Given the above, we are asking the government to extend the existing CJRS on an industry-specific basis while theatre operations remain affected by Covid-19. This will allow London’s West End to reopen both when practically viable and importantly when there is an audience to support the endeavours. The alternative is that London’s West End does not return in its current form any time in the forecastable future. The impact for the broader West End economy is devastating. Whilst we remain closed, restaurants and hotels will be losing significant revenue/bookings. We do not want to rely on handouts, but we do need help to get restarted and generate our own revenue. 3. Business Rates Relief Every penny of profit made from LW Theatres is ploughed back into the conservation and improvement of our grade I and grade II listed buildings. We understand that business rates will not be payable for the 2020 to 2021 tax year on our theatre properties (but that our office premises, and those of many of the independent producers whom we rely upon to present productions at our venues, will still attract the usual business rates). In order to help mitigate the long-term impact of coronavirus on the theatre industry, we are asking (i) that this relief is extended into the 2021 to 2022 tax year, and (ii) that the relief is available for both tax years on the support properties of our business, i.e. the offices and non-publicly accessible premises occupied by the staff that operate our theatre business. 4. VAT Deferral HMRC advises that certain VAT payments due in 2020 are able to be deferred. We are asking, in order to assist cash flow during an uncertain period, that this deferral scheme be extended for businesses such as ours that will not be able to reopen in the short-term. 5. Insurance Legitimate business interruption and denial of access claims have been refused by our insurers due to what we consider are inequitable policy exclusions. Irrespective of the current action by the Financial Conduct Authority, we are seeking government assistance to increase pressure significantly on insurers to pay out on legitimate business interruption and denial of access claims due to the Covid-19 epidemic. The lifeline of our business is the content that fills our stages. Every promoter, producer, and hirer of our venues has told us that they are unable to secure sufficient insurance for events/shows going forward. We need the government to back an insurance policy to enable content to reach us in the short to medium-term. BACKGROUND This submission is primarily concerned with London’s theatres and the ecology within which they operate, and the impact thereon of the Covid-19 epidemic. More than 15.3 million people attended London theatres in 2019 – nearly 1 million higher than Broadway – equating to £799 million in box office revenue and generating £133,165,820 of VAT. Of the £799 million generated, £523m (65%) came from the box offices receipts of musicals with the remainder generated by plays, operas, dance etc. London theatres rely upon audiences not just from across the UK but from around the World. The West End and other London theatres are a vital component of the tourism industry in London and play a major part in drawing audiences to London who then go on to spend additional money across London in restaurants, on hotels and through the transport system. While the government mandated lockdowns of theatres and live venues are in place, this revenue has dropped to zero with no income available to cover running costs during the closure period or pay the 290,000 people employed in the UK theatre industry. SUBMISSION 1. What has been the immediate impact of Covid-19 on the sector? The most immediate consequence of the Covid-19 epidemic on London’s live theatre and entertainment sector has been the complete closure of theatres and live venues by the UK government, and the catastrophic impact of going (overnight) from a thriving sector to zero income. 1.1. Effect on LW Theatres’ business This closure has had a dramatic effect on LW Theatres’ business as all seven of its theatres are now closed and zero revenue is being generated. Our revenue has fallen from £10m per month to zero, with around 200,000 members of the public per month no longer visiting our theatres. As a result, LW Theatres losses are increasing very rapidly as every day goes by and will be extremely large by the end of the year. Taking one specific example, the production of ‘Waitress’ at the Adelphi Theatre was due to play until 4th July 2020 but as a result of the lockdown will now not be able to re-open in 2020. This will result in a loss of nearly £5m of gross box office revenue. Every penny of profit made from our largely grade I and grade II listed theatres is ploughed back into their conservation and improvement. With our theatres shut, an earmarked sum c. £500,000 per month cannot be spent within the industry (and supporting industries) on the refurbishment of these heritage assets that are of great importance both economically to London and historically to the nation. The operation of LW Theatres relies entirely on producers supplying us with content to present on our stages. The future programming of this content is at risk for a number of reasons: i) producers are unable to commit to considerable pre-production costs (sets, costumes etc.) when the date that theatres can reopen is unknown. New large-scale West End musicals can cost in excess of £10m to stage and can require anywhere from 4 to 12 months of planning prior to a confirmed opening date; ii) productions on limited engagements may not be able to recoup costs on a reduced run necessitated as a result of the current closure; iii) advanced ticket sales have severely declined since the start of the lockdown meaning that box office advance sales will be much lower than required at the point of reopening; iv) uncertainty around audience numbers and the willingness of audiences to commit to expenditure when theatres can eventually reopen; and v) investors are nervous about committing to future projects in the current climate of uncertainty.
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