Are music venues as valuable as houses – and can we prove it?

An economic powerhouse? The George Tavern in London's East End. Image: Dan Kitwood/Getty.

It is well documented that London has lost over a third of its grassroots music venues since 2007. One of the reasons given for this phenomenon is that, in our current economic climate and planning framework, venues are market failures.

What that means is that the value of a venue in London simply isn't comparable to that of the flats that could be built on its site. A venue worth £300,000 could be converted into 6 or 8 flats, each worth as much as the venue itself.

For a landowner in these circumstances, it is difficult to provide an economic argument to retain the venue (or art gallery, or rehearsal space, or comedy club, or...). And with our planning system prioritising housing over everything else, those flats are easy to develop, sell and profit from.


And yet, our councils, government and property developers all know that the cultural value of a grassroots music venue – or independent theatre, or cinema, or art gallery for that matter – can make an area desirable. One of the key reasons Hackney is one of London's fastest growing boroughs is its night time offer.

We can take this argument further. What if a venue was as valuable to the landowner as the aforementioned flats? What if, when a venue was supported, those businesses and residences around it would benefit economically? Land value would increase; more traders would open.

To argue this case, over a few cups of coffee a colleague of mine and I dissected his venue in Dalston.  Here’s our take.

Running the numbers

This venue sees 234 people go through its doors each day, each spending an average of £10 per head on entry fees, alcohol and food. It’s open seven days a week, and has a capacity of 250.

Let’s argue that, of these people, 60 per cent live locally. Half of those walked or cycled, while the other half took public transport to get to and from this venue, at a cost of £2.30 each way. The other 40 per cent commuted from other parts of the city. Of these, we estimate that 80 per cent took the tube and 20 per cent took taxis at a cost of £15 per ride.

Let's assume that one-third of these 234 people ate out, either before or after visiting this venue, each spending another £15 per head. On top of this, this venue contributes £64,000 each year in PAYE, alcohol duty, license costs and business rates to the exchequer. In addition, it pays £5,000 per month rent to the landowner, or £60,000 per year.

Using our iPhone calculators, we tallied up that his venue contributes £694,000 to the local economy each year, outside of its independent takings as a business. Include those, and the amount rises to £1.3m.

Furthermore, this venue employs 12 people at the London living wage. In total, this venue is worth, theoretically speaking, as much as £2m a year to the local and national economy.

And this is one venue. On Kingsland High Street in Dalston, there are half a dozen of these. Across Hackney, there are dozens.

Let’s compare this with the value of one flat in a local development in Dalston. A two-bed is retailing at £450,000, a price the developer will earn once. Council taxes and other fees on such a property, on average, add a further £2,500 to £4,000 to the local economy, not to mention another £4,000 to £6,000 in ancillary costs like utilities and other services.


The space this venue inhabits could accommodate perhaps four new properties, which would net a developer around £2m on the sales. That, though, is a one off return, not something that will be pumped into the economy year after year.

Our calculations are inevitably rough – but they merit further investigation. What they show is that the term "value" has different definitions, depending on the party doing the valuing. To a developer, building and then exiting a project is of more value that renting out equal space to a leaser to open a venue, regardless of art form.

But what if this venue, or all six on the High Street, closed? We would lose secondary and tertiary value: the service providers supporting the venue, its rate and PAYE bill, the value of the music (or art, or theatre) being incubated and of course, the space’s cultural value. What's more, the saleability of the flats would be impacted, because there would be fewer things to do in Dalston.

And with business rates returning to councils now, it is in local authorities’ best interests to understand and capitalise on the economies businesses create, both inside and outside their doors.

So when we look at that value of our grassroots music venues, our nightclubs – our music incubators, as they should be referred to – let’s value them both culturally and economically. If we measure their value properly, they are worth their weight in pounds and pence.

Dr Shain Shapiro is the managing director of Sound Diplomacy, a consultancy specialising in music cities and market development. 

 
 
 
 

Two east London boroughs are planning to tax nightlife to fund the clean up. Will it work?

A Shoreditch rave, 2013. Image: Getty.

No-one likes cleaning up after a party, but someone’s got to do it. On a city-wide scale, that job falls to the local authority. But that still leaves the question: who pays?

In east London, the number of bars and clubs has increased dramatically in recent years. The thriving club scene has come with benefits – but also a price tag for the morning clean-up and cost of policing. The boroughs of Hackney and Tower Hamlets are now looking to nightlife venues to cover these costs.

Back in 2012, councils were given powers to introduce ‘late night levies’: essentially a tax on all the licensed venues that open between midnight and 6am. The amount venues are expected to pay is based on the premises’ rateable value. Seventy per cent of any money raised goes to the police and the council keeps the rest.

Few councils took up the offer. Four years after the legislation was introduced, only eight local authorities had introduced a levy, including Southampton, Nottingham, and Cheltenham. Three of the levies were in the capital, including Camden and Islington. The most lucrative was in the City of London, where £420,000 was raised in the 2015-16 financial year.

Even in places where levies have been introduced, they haven’t always had the desired effect. Nottingham adopted a late night levy in November 2014. Last year, it emerged that the tax had raised £150,000 less than expected in its first year. Only a few months before, Cheltenham scrapped its levy after it similarly failed to meet expectations.


Last year, the House of Lords committee published its review of the 2003 Licensing Act. The committee found that “hardly any respondents believed that late night levies were currently working as they should be” – and councils reported that the obligation to pass revenues from the levy to the police had made the tax unappealing. Concluding its findings on the late night levy, the committee said: “We believe on balance that it has failed to achieve its objectives, and should be abolished.”

As might be expected of a nightlife tax, late night levies are also vociferously opposed by the hospitality industry. Commenting on the proposed levy in Tower Hamlets, Brigid Simmonds, chief executive at the British Beer and Pub Association, said: “A levy would represent a damaging new tax – it is the wrong approach. The focus should be on partnership working, with the police and local business, to address any issues in the night time economy.”

Nevertheless, boroughs in east London are pressing ahead with their plans. Tower Hamlets was recently forced to restart a consultation on its late night levy after a first attempt was the subject of a successful legal challenge by the Association of Licensed Multiple Retailers (ALMR). Kate Nicholls, chief executive at the ALMR, said:

“We will continue to oppose these measures wherever they are considered in any part of the UK and will urge local authorities’ to work with businesses, not against them, to find solutions to any issues they may have.”

Meanwhile, Hackney council intends to introduce a levy after a consultation which revealed 52 per cents of respondents were in favour of the plans. Announcing the consultation in February, licensing chair Emma Plouviez said:

“With ever-shrinking budgets, we need to find a way to ensure the our nightlife can continue to operate safely, so we’re considering looking to these businesses for a contribution towards making sure their customers can enjoy a safe night out and their neighbours and surrounding community doesn’t suffer.”

With budgets stretched, it’s inevitable that councils will seek to take advantage of any source of income they can. Nevertheless, earlier examples of the late night levy suggest this nightlife tax is unlikely to prove as lucrative as is hoped. Even if it does, should we expect nightlife venues to plug the gap left by public sector cuts?