Supplementary evidence from the BBC
At the Select Committee session in Manchester
there were three questions where we offered to provide additional
1. Why has the projected total cost of the
move to Manchester been cut by 33 per cent while the projected
annual cost has dropped by 50 per cent?
The original cost estimate for the projectdating
from December 2004was £530 million to £640 million.
This represents the total costs that will be incurred in completing
the move, irrespective of how these costs are funded or who provides
This total splits down into two categories of
cost: those paid by the BBC directly; and those financed via third
party capital (which is subsequently repaid by the BBC over a
number of years). An example of the former is the redundancy and
relocation costs that will be incurred as a result of moving over
1,500 jobs to Manchester. An example of the latter is the construction
cost of the building, which will be financed by a third party
and then repaid by the BBC, either in the form of a rent or a
repayment of some form of debt facility.
The figure of £45 million for the annual
cost to the BBC also dates from December 2004 and represents the
cost to the BBC of that second category: elements originally paid
for using third party capital. Therefore, it is not an additional
cost, but the same cost represented in a different way.
Over the last 12 months, considerable work has
been undertaken by the project team to turn the original plans
for a high level strategy to a detailed implementation plan, a
process which has allowed us to introduce efficiencies into the
plans. For instance, a thorough assessment of the accommodation
requirements of each of the relocating divisions has been undertaken
resulting in a reduction in the space requirement for the new
centre, and a decision to rely on the market to provide the required
studio facilities has reduced the level of funding the BBC would
have to raise. As a result, the latest projection for the total
cost of the project (irrespective of who funds it) is roughly
a third lower than the December 2004 estimate. This in turn has
had the effect of broadly halving the annual amount payable by
the BBC for those elements originally funded by third parties.
There are two reasons why the annual cost to
the BBC has dropped by a larger amount than the total project
cost. First, in the revised plan a greater proportion of the costs
are paid directly by the BBC, thus the level of third party capital
required has fallen by more than 33 per cent. Secondly, we have
done further work to look at how that external capital could be
raised and, as a result, have revised the financing cost assumptions
downwards. Together, these two reasons account for the greater
reduction in the average annual cost to the BBC.
2. How many years will it take for the Manchester
move to pay for itself?
The key driver for the move to Manchester is
not to generate savings, but is instead about creating a more
representative BBC that will connect with audiences from across
the UK. Therefore, the concept of a payback period in purely financial
terms only represents part of the picture. However, we clearly
want to identify the most cost-effective way of undertaking the
move and are endeavouring to realise savings wherever possible.
In relation to the people-related costs, they
will pay for themselves over 25 years, with annual "London
weighting" savings offsetting the upfront relocation and
redundancy costs. We are looking at alternative HR strategies
to identify whether we can reduce the costs further and hence
reduce the payback period.
Property-related savings as a result of the
space vacated in London are currently in the process of being
determined by BBC Property. Since the project is not happening
in isolation, these savings need to be determined as part of BBC
Property's wider property strategy, which is also tasked with
delivering significant savings as part of the efficiency targets
included elsewhere in the licence fee bid. We believe that further
savings are possible, but it is clear that the property element
of the project will remain a significant net cost. The payback
for the project as a whole is dependent on the savings that we
can realise from the accommodation that will be vacated in London.
However, the move is not happening in isolation and hence any
savings need to be determined by the BBC's wider property strategy,
factoring in the implications of the numerous other changes occurring
at the BBC. Detailed work is underway to address the complex issues
involved in developing this strategy, to determine how the vacated
space as a result of the move can be converted into disposals
of whole buildings.
3. How many staff are currently employed in
London, outside London and at BBC Manchester?
As of 31 August 2005, the BBC employed 23,163
people, of which 14,219 were based in London and 8,944 outside.
Of those based out of London, 678 were working in Manchester.
I hope this addresses the outstanding queries.
One further point of clarification is that in one of our responses
in the committee session, we underestimated the number of hours
of radio drama output currently made from Manchester. The correct
figure is actually 74 hours, not 60 as we had stated.
At the time of the Select Committee in Manchester
we were midway through our detailed negotiations with the owners
of the four "media zone" sites, which made it difficult
for me to discuss that part of the project in detail. We have
subsequently concluded the first phase of the site selection process
and are today announcing the two shortlisted sites that the BBC
and the Regional Development Agency intend to take forward into
the next phase. They are the "Central Spine" site near
Whitworth Street in central Manchester and the Quays Point site
at Salford Quays near the Lowry and Imperial War Museum.
Although the existing ITV site did not make
the final shortlist the BBC shares your observation that the greatest
benefits can be achieved by the Media Zone if the media sector
shares facilities. The BBC, the NWDA and the two city councils
believe this is possible whichever site is finally chosen. We
would all welcome ITV's involvement, either as a user of the Zone's
studio facilities or as a fellow tenant alongside the BBC.