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License Fee Increases

 

ACAVA welcomes the opportunity to address issues that have arisen in relation to the recent announcement of increases to studio licence fees. We want to be as open as possible as we regard this as an important part of a wider discussion about organisational resilience in the arts.

Our circumstances reflect similar financial and operational challenges faced by many buildings based arts organisations in London and other cities.

While ACAVA needs to address some aspects of its operation the process is a positive transition that will deliver a professional management structure supported by a robust business model. ACAVA has collated considered responses to numerous questions that have emerged and these are set out below.

 

What is ACAVA?

ACAVA (the Association for Cultural Advancement through Visual Art), is an arts organisation, studio provider and educational charity established almost fifty years ago. It is one of the longest running studio providers in the UK and manages a growing portfolio of 28 sites in London, Essex and Stoke-on-Trent, supporting almost 600 artists, designers and makers.

 

What is ACAVA’s charitable purpose?

ACAVA’s core charitable purpose is to enrich the lives of individuals and communities by enabling their participation in the creation, presentation and understanding of the visual arts and culture. ACAVA achieves this by establishing artists’ studios, developing arts programmes and projects that enable artists to work creatively with diverse communities.

 

Give examples of ACAVA’s arts programmes

As a pioneer of socially engaged community arts since the 1970’s, ACAVA’s activities have evolved over decades, responding to need and shifting cultural, economic, and social contexts. Today, ACAVA’s programmes reach participants through workshops, training, co-commissions, health and wellbeing programmes, exhibitions and open studios.

ACAVA’s programmes have been supported by a range of agencies, including: local and regional authorities; HEIs; schools; the NHS; clinical commissioning groups; trusts and foundations; charities; regeneration agencies; social landlords; the Arts Council and others.

ACAVA’s ongoing community engagement work includes the Artspace project, which has worked with the NHS for over twenty years, providing access to purposeful creative activity for people living with long term mental health needs, and those with a history of substance misuse. The Flourish programme offers family focused inter-generational arts activities for communities affected directly, and indirectly, by the Grenfell Tower fire, close to our two North Kensington studios and head office of 20 years.

 

Why are licence fees being increased?

A recent evaluation of ACAVA’s finances highlighted the urgent need to increase income to cover the cost of running the organisation.

 

Can project funding subsidise studio licence fees?

Project funding supports ACAVA’s community engagement programmes but cannot not subsidise studio provision.

 

What is the current average monthly license fee for an ACAVA studio?

£11.60 per square foot.

The Mayor of London's latest research (2017) shows that workspaces are becoming more expensive. In 2014, 56% of sites in London charged an average of £11+ per square foot. In 2017, this had risen to 79% of sites. Clearly, this information is already out of date and ACAVA's current average of £11.60 in 2019 is comparatively low.

Source: https://www.london.gov.uk/what-we-do/arts-and-culture/culture-and-good-growth/artists-workspace

In the five years since 2014 changes to the law governing land and property development have had a dramatic negative effect on the availability of buildings suitable for use as studios. New legislation introduced in 2017 permitting the use of brownfield land for development created new profitable opportunities for property developers. Inevitably, this led to the inflation of rents on existing buildings, with some landlords demanding 40% increases. Buildings are harder to find and the limited stock is significantly more expensive to rent or buy than before.

It should be noted that direct, like for like, comparisons between studios are almost impossible, due to the considerable variations in the factors that dictate studio prices such as lease or freehold ownership, history, location, rents charged, duration of lease, fit out costs, type and condition of building, health and safety requirements, maintenance, management overheads and local economic conditions. These are all variables that can differ from site to site.

 

When was the last time there was an increase in rates for studio license fees that was above inflation?

Increases in licence fees have generally been in line with inflation for many years. In a portfolio of approximately 28 buildings (it varies over time) two buildings have incurred unavoidable studio licence fee increases in recent years. In both cases, landlords demanded higher rents from ACAVA on lease renewal. These two studios will not receive further studio licence fee increases in April 2019.

 

Loss of studios

During the early years of the economic crisis (from 2009) ACAVA faced the problem that while short term property was available for low rents long term leases became very expensive.

Leaving aside losses and gains before 2012, these are the studios that were closed and those that were developed in the seven years since.

Studios closed because of leases coming to an end and landlords developing the sites:

1. Parkham Street
Started 4/3/2012 ended 31/8/2013, 59 studios 69 artists

2. Palace Wharf
Started 1994 ended 29/9/2014, 35 studios 43 artists

3. Grange Walk
Started 2/4/2013 ended 3/11/2014, 86 studios 93 artists

4. Cremer Street
Cremer 1 started 2002, Cremer 2 added 2004, totalling 90 studios 132 artists, ended 4/3/2016

5. Vyner Street
Started 2004 ended 10/8/2016, 22 studios 26 artists

6. Harlow North
Started 2015 ended 1/7/2017, 17 studios

7. Mare Street
Started 2001 ended 8/9/2017, 12 studios 16 artists

8. Park Royal
Started 2009 ended 31/12/2017, 6 studios, 9 artists

9. Nine Elms
Started 2014 ended 24/9/2018, 4 studios

Studios developed:

1. Limehouse
Started 2014, 53 studios

2. Barham Park
Started 2015, 31 studios

3. Maxilla
Started 2015, 24 studios

4. Spode Works (Stoke-on-Trent)
Started 2016, 43 studios 46 artists

5. Honeypot Lane
Started 2016, 4 studios

6. Borthwick Street
Stated 2016, 6 studios

7. Whitefriars
Started 2017, 14 studios

8. Ardleigh (Essex)
Started 2018, 34 studios

In the period 2012-2018, 331 studios supporting 409 artists were lost and only 209 gained, an accumulated loss of 200 studios.

 

How much does ACAVA expect to raise by increasing the license and membership fees and introducing new administration charges?

Income from studio licence fees needs to meet the costs of operating the studios. This has not been achieved in recent years; an unsustainable position temporarily mitigated by asset sales. ACAVA needs to recover a shortfall in income of approximately 20% of turnover. Increasing studio licence fees is a necessary measure that aims to balance the budget and enable continued operation. ACAVA derives its income entirely from studio licence fees and receives no regular funding from external agencies.

 

Is ACAVA concerned that studio licence fee increases will force artists to leave and place the company at risk?

ACAVA recognises that these increases are likely to lead to some artists leaving our studios. There is a risk that ACAVA will struggle if large numbers of tenants leave. However, our historically low levels of licence fees means that, in most cases, we are confident that we will remain competitive when compared to other studios providers of a similar scale.

 

Will this impact on the demographic of artist studio holders?

We do not anticipate an immediate change to the demographic of ACAVA artists.

 

What other factors have impacted on ACAVA’s finances?

It is important to understand the changes that happened in the organisation during 2018. ACAVA appointed its first f/t Property Manager, a senior management post, in anticipation of the retirement of its founder/Artistic Director of 48 years in June 2018. ACAVA’s Assistant Director (Finance and Administration) of 15 years retired in November 2018. The organisation replaced these roles with two new appointments. Recruitment costs in the year, therefore, were significant and had never been incurred previously.

ACAVA has embarked on an essential new programme updating its health and safety systems and has completed installations of a number of fire alarms, electrical works, general maintenance and building repairs. Other large unexpected outgoings, which were not budgeted for, include legal costs and other professional fees.

 

Why is this process urgent?

In recent years, ACAVA has been absorbing large shortfalls in income caused by the closure of a number of studios (described above) while maintaining low levels of studio licence fees and tight operational overheads.

To mitigate these losses ACAVA adopted a strategy to sell several property assets. The income from these sales maintained the cash flow position and enabled ACAVA to continue operating while seeking to develop its business model and adapt to a challenging economic environment.

The planned sale of a property in 2018 became entangled in a complicated legal process beyond ACAVA's control. This caused a delay in the sale and no income will be recouped in the FY 2018-19. The process is ongoing. This only became finally apparent to ACAVA towards the end of December 2018.

At that point, ACAVA had no alternative but to trigger the increases in studio licence fees as a matter of urgency. The need to act quickly meant that ACAVA did not have enough time, capacity or financial resource to properly engage artists and stakeholders in a consultation process, which we certainly wanted to do.

 

Have wages increased at ACAVA?

There has been a small overall increase in wages with the appointment of one new role (Property Manager). ACAVA employs a minimal level of staff – four f/t employees and seven p/t in its offices, including two p/t programme staff not involved in the running of studios. Compared to other studio providers of similar scale it is an extraordinarily small team. This does not include artist/caretakers based in studios.

 

What could happen if ACAVA did not introduce the 25% increase?

ACAVA would find it difficult to continue trading and its studios would close with little or no notice.

The figure of 25% is an average across all studios. Our calculations indicate that very few studios will reach, or exceed, this figure but a small number will. Two studios will receive no increase in licence fees because they have been subject to landlord rent increases as per their leases.

 

What is a studio licence fee?

A studio licence fee is the charge made by ACAVA for the rental of its studios. It is paid monthly by Direct Debit.

 

Why could there not be more notice given of the licence fee increases?

ACAVA has given a notice period of three months. The detail will be communicated as soon as possible but no later than the end February 2019.

 

When will I know how much my new studio licence fee will be?

ACAVA is working on this as a priority. Our deadline is the end of February. However, we hope to complete the work much sooner.

 

When will the new studio licence fees be introduced?

New studio licence fees will take effect from April 2019.

 

How much are studio licence fees going to be increased by?

Increases will vary from studio to studio. ACAVA will take into account any recent history of studio licence fee increases and local economic contexts, where possible.

 

Can cost savings be made elsewhere in ACAVA?

Yes. ACAVA plans to make numerous cost efficiencies over the coming year.

 

Does ACAVA generate income from activities other than from studio licence fees?

ACAVA’s income is entirely generated from studio licence fees. All activity delivered as part of our public programme, including programme staffing costs, is funded by external sources, as detailed above.

 

Does ACAVA receive regular funding?

ACAVA receives no regular funding and relies entirely on studio licence fees to cover all the costs of operating its studios.

 

Are there other ways to generate income for ACAVA?

ACAVA has plans to introduce new income generating activities but these will take time to implement.

 

How much notice do I need to give to leave my studio?

Two months’ notice is required for full licences. Short let and sub-let licences require one month.

 

If I choose to hand in my notice at the beginning of March will I have to pay the new increased licence fee during April?

No. If you hand in your notice between 1 February and 31 March 2019 ACAVA will honour the two month notice period in your Licence Agreement.

 

Increasing studio licence fees goes against the ethos of ACAVA.

To some extent this is true. For almost fifty years ACAVA’s ethos has been to provide affordable studios for artists. ACAVA aims to continue to do that, where possible, but needs to find a different financial model to do so.