New EY report shows impact of Channel 4 privatisation on UK creative economy

Channel 4 haspublished a new independent EY report commissioned by the broadcaster to assess the potential implications of privatisation. It shows the impact a change to Channel 4’s ownership could have on both the UK’s economy and the broadcaster’s support for jobs across the whole of the UK in the next ten years.

The new report finds that a scenario where Channel 4 is privatised with its unique publisher-broadcaster model removed could result in a £2bn (29%) reduction in the broadcaster’s contribution through its supply chain to the economy by working with creative companies, including the UK independent production sector, over a ten year period when compared to no change of ownership.

Significantly, the £2bn contribution could be transferred from the creative economy and Nations and Regions, to a new private owner of Channel 4.

The report also finds that the majority of the impact to jobs supported by Channel 4 would be felt in its supply chain, estimating that the number of jobs supported by Channel 4 in its supply chain across the UK on average each year ‘could decline by 26% if Channel 4 is privatised and the publisher-broadcaster model is removed, compared to Channel 4’s current model (7,100 jobs supported each year compared to 9,500 jobs supported each year).’

The new economic analysis shows that the UK’s regional economy could be disproportionately impacted by a privatised Channel 4.

Of the reported £2bn reduction from Channel 4’s supply chain contribution to the creative economy, around £1bn would be from the Nations and Regions – a c. 40% decline on the regional supply chain contribution under Channel 4’s current model.

‘Given Channel 4’s current level of spend with external producers outside London, privatising Channel 4 and removing the publisher-broadcaster model could have a disproportionate impact on the wider creative economy in the Nations and Regions. Our analysis suggests that the present value of GVA generated by Channel 4 in the Nations and Regions in its supply chain over a ten-year period could be 37% lower if Channel 4 is privatised and the publisher-broadcaster model is removed, compared to Channel 4’s current model (£1.8bn vs. £2.8bn), due to a shift in commissioning spend towards in-house productions.’

Furthermore, the number of jobs supported by Channel 4 through its supply chain in the Nations and Regions is also estimated to decline by around 35% [or 1,250 fewer jobs supported on average each year over the ten year period], compared to no change of ownership.

The EY report says, ‘Our analysis illustrates the policy choices relating to Channel 4’s remit and model and, in particular, the impact of policy choices on Channel 4’s role as a stimulus to the wider creative economy, particularly in the Nations and Regions.’

In addition, EY’s analysis suggests that the impact of removing Channel 4’s publisher-broadcaster model could be felt most by small and medium sized production companies ‘resulting in a reduction in revenues from primary commissions for these producers of up to 16%.’

The report also suggests that privatisation could significantly impact Channel 4’s wider social and cultural contribution made by appealing to young audiences with distinct content and supporting new emerging UK talent.

It shows that a new private owner could ‘be incentivised to prioritise mainstream content that it expects to be commercially successful to reduce costs and maximise profits.’ As well as commissioning ‘content that appeals to a more global audience to maximise the appeal of the content and revenues, potentially undermining the role that public service broadcasters play in representing the UK to the rest of the world.’

‘Operating as a not-for-profit organisation, Channel 4 can take risks on emerging talent, acting as a first ‘big break’ for new writers and talent. Nurturing talent from an early stage carries a level of risk that the new owner of Channel 4, faced with an incentive to generate returns for shareholders, may not have the appetite for.’

An EY report published earlier this year showed that the broadcaster contributed nearly £1bn to the UK economy and supported more than 10,000 jobs across the UK in a single year. It also found Channel 4 generated £274m of GVA in the UK Nations & Regions and supports nearly 3,000 jobs outside London. BCS Bureau