The Arena – coming soon

I was surprised over the last few days to see coverage given to claims being made about the Bristol Arena. The topic even came up as a question in my most recent Facebook Live.

I expected a recognition of the existential threat to pubs, clubs, theatres and stadiums from lockdown, and that it would be financially catastrophic for us to be trying to make a go of an arena right now. We would have just borrowed £160m+ to build an arena during the largest pandemic in a century, been on the cusp of the deepest economic depression since the 1930s, and had the added economic uncertainty of the government’s negotiations for a deal on Brexit. We’d be in possession of a £160m building in the middle of the city, empty and earning no rent, while we continued to make our annual multi-million pound mortgage payments on it.

But I’m always happy to revisit the processes we worked through and the sober, evidence-led approach that enabled us to take the decision that assured the interests of Bristol came ahead of political vanity.

The myths

Before setting out the decision, it is worth tackling the myths shared recently on social media – which is never the best place to tackle complex issues.

The first myth is that the Brabazon Arena is not going ahead. YTL have confirmed that, following the Council’s and Secretary of State’s planning approval earlier this year, they still are on schedule. The UK’s third largest event space and most sustainable arena will be opening in the repurposed Brabazon hangars in 2023.

They have said: “YTL is committed to building a world-class arena and live entertainment venue for Bristol and the South West. The venue will be privately funded and there will be no cost to the public purse.”

A claim has also been made that the Temple Island arena was due to be delivered at a fixed cost. This is not true. These kinds of contracts – where the cost is fixed – don’t exist on major capital projects like an arena. In fact, by the time the serious work had been done, the costs had already increased to £160m (2018) from the initial optimistic promise that Bristol would get its arena for £95m (2013). And that cost increase happened before anyone had even put a spade in the ground. Under the terms of the contract, Bristol City Council was liable for 50% of all increased costs.  

The decision

The decision we made in 2018 was about the best use of Temple Island – it was not about where to build the arena. The location of the arena only becomes an issue if there is a better use of Temple Island – which there is. Temple Island is Bristol’s land. We get to use it once and we need to get the maximum benefit for the city. The numbers speak for themselves. Over 25 years, the mixed-use scheme outperforms an arena on every measure:

 Arena    Mixed use scheme
GVA£350-400m£900m
Jobs6502,000
Homes0500

Add to this the following environmental considerations:

  1. Even if large numbers came by train, there would still be thousands arriving by car, driving down the M32 and A4 into the middle of Bristol for a 7pm gig. That’s not ideal and makes no sense when you set that against our efforts to improve our air quality.
  1. Building an arena from scratch creates demand for the manufacture of thousands of tonnes of concrete and steel, two of the dirtiest industries on the planet. The amount of concrete and steel required would produce tens of thousands of tonnes of CO2. If we are to have an arena, recycling an existing building is the more planet-friendly option.

In the explanation I made at the time of the decision, I explained the precarious financial position we would have put the council and future generations in. It was not the case that there was an arena ready to go. We would have had to borrow £160m to build it and we would be locked into a circular relationship. It is one in which the council, on your behalf as the taxpayer, held all of the risk:

  1. BCC borrows £160m to build the arena
  2. BCC builds the arena  
  3. BCC finds private contractor to run the arena. Contractor generates a revenue from which they pay rent and take a profit.
  4. We use that rent to may repayment on our debt.

You can watch me set out this argument at the time here: https://www.youtube.com/watch?v=jqv2SDScu9E

I warned that once entered into, there were only two components of that circular relationship that would not change: the existence of the physical arena and the debt repayments. I explained there was a risk of the operator (Arena Island Ltd which was owned by Live Nation) declaring themselves, for whatever reason, unable to make the rent we had agreed. What if they came back to us asking to renegotiate the amount of rent they were paying? And what if that were below the amount we needed to cover our debt repayments? They could then have given us a choice: reduce the rent or we have no choice but to walk away. 

I noted when the decision was taken: “There’s a lot of risk in music venues: they are not great at making money”. At the time I shared a number of warnings I was getting from industry professionals that 10,000 seats was too few for a venue to be profitable, that any operator would struggle and that Brexit posed a risk.  

In 2018 nobody would have predicted a global pandemic. But I did set out the small margins and scale of risk that existed even without the pandemic.

On 6 August this year, NME reported that Live Nation’s revenues were down by 98% due to the coronavirus lockdown. In Europe, during the second quarter of 2020 there was a total of just 131 concerts, down from 3,309 during the same period in 2019. On 13 August, Rolling Stone reported:

“Live Nation has taken other cost-cutting measures as well, including hiring freezes, reduction in the use of contractors, rent renegotiations, furloughs, and reduction or elimination of other discretionary spending. Live Nation is targeting $500 million in savings for 2020 through the new measures.”

On 14 August, AE Daily reported“Live Nation Entertainment is live music’s dominant force and among the biggest occupiers of space in the events business. But the company is now looking to make big spending cuts, including renegotiating on $2.3 billion in lease deals.If we had ploughed ahead, we would now be part of those renegotiations. 

Instead, L&G are pressing ahead with the plans for Temple Island as part of the wider regeneration of Temple Quarter, including the new university campus and renovation of Temple Meads. And YTL are repurposing an existing aircraft hangar with its thousands of tonnes of steel and concrete already in place. They are doing this at their cost and risk. Transport links are already scheduled for the housing planned for the same site, including a train station, MetroBus stop and bus links. Bristol will get its arena.

Conclusion

I am not happy about the circumstances which we find ourselves in with coronavirus, far from it. But when an issue as significant as the arena is contested, it is important we step in to lift the lid and share the insight you deserve. It is also shocking that the press repeated the unfounded allegation without any scrutiny. Not once was the person making the claims on social media asked to defend the allegations with any evidence.

Bristol City Council had no more business getting into the entertainment venue industry than in had getting into the energy business. They are alike in that they were two ventures Bristol City Council were led into, making wildly optimistic promises to the city, while ignoring the seriousness of the risks. On both occasions it fell to us to discover the true fragility of the situations and try to delicately navigate our way out of them.

I have always publicly shared my reasoning behind the arena decision. The situation we would face today is we would be over £160m in debt, with an empty arena. I am sure you will agree that Bristol’s interests have been served.    

You can reread the blogs I wrote at the time here, and about the work we are doing to support Bristol’s nightlife and hospitality during the pandemic at the links below:

https://thebristolmayor.com/2020/10/02/saving-our-scene/

https://thebristolmayor.com/2018/08/15/arena-a-good-use-of-your-money/

https://thebristolmayor.com/2018/09/05/arena-cabinet-speech/

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