National Theatre ‘at risk of shutdown without DCMS subsidy’

The National Theatre (NT) would be unable to avoid “permanent shutdown” of its largest stage, The Olivier, without £27.5m of repair works largely subsidised by the government, according to a Department for Culture, Media and Sport (DCMS) assessment.

The scenario is laid out in a report by the Subsidy Advice Unit (SAU), which evaluated the assessment of the proposed subsidy – at the request of DCMS – to offer non-binding advice. 

Based on evidence provided by DCMS, the SAU report says the subsidy is necessary to prevent "the mothballing or closure of either the entire or part of the National Theatre South Bank estate".

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In its assessment, DCMS cautions that in the long term, the absence of the subsidy could mean the NT would be forced to leave its Arts Council England-owned South Bank site, warning it would be “unlikely” a replacement occupant could be found, meaning the Grade II* listed building "may remain empty and go into disrepair”. 

Announced in the Spring Budget by former Chancellor Jeremy Hunt, DCMS has proposed to grant the National Theatre £26,159,635 for a two-year programme of infrastructure works across its site. The SAU report indicates the NT will contribute £1.1m to the overall £27.5m project costs. 

These projects include refurbishing the Olivier Theatre’s unique 1970s drum revolve and extensive work to replace the wiring, scenery lift, lighting, dimming and flying systems of its smallest stage in the Dorfman Theatre, which reopened in 2014 after a major auditorium overhaul, and is due to close for around a year for this latest revamp.

According to the SAU report, DCMS's subsidy assessment asserts that, without this intervention, the NT would have to deal with "frequent and impactful" cancelled performances, leading to a loss of audiences and income, degradation of the building and continued maintenance costs.

SAU's report does not disclose how many performances at the NT are cancelled annually due to system failures or the direct financial consequences of issues such as "show stops". 

In consideration of "relevant disclosure", as set out in the 2002 Enterprise Act, SAU instead provides broad ranges within which the actual values lie.

The report indicates that over 30 years, the works would reduce the frequency of cancelled shows and avert the loss of up to five million audience members, resulting in predicted savings within the range of £200-£300m. 

DCMS also proposes that "increased audience confidence" and "enhanced reputation" as a result of the works could prevent a decline of between 10 to 20 million audience members, averting a loss of £10-20m income and reducing spending on repairs by £5m to £10m.

'A lack of clarity'

The DCMS assessment says that if the NT had to finance the maintenance without government support, the permanent shutdown of the Olivier Theatre and the potential shutdown of other parts of the theatre would be unavoidable, increasing its annual deficit, which stands at £2.7m on unrestricted funds with an operating budget deficit of £4m, according to draft unaudited accounts for 2023/24.

In this eventuality, the assessment says the NT would prioritise the most urgent projects requiring capital investment and finance them through fundraising efforts. But it cautioned this could still result "in a complete closure of one or more of its theatres for a prolonged period, with associated reputational and financial impact". 

In SAU's evaluation, the assessment clearly defines the package of works to be carried out using the subsidy and demonstrates that DCMS and the NT have taken, and will take with ACE, measures to ensure that the cost of the works is limited to what is necessary.

However, it notes “a lack of clarity” about the outcome of a “do-nothing” scenario, interpreting this as a "business as usual" outcome in which the infrastructure of the NT building would continue to deteriorate, putting at risk future productions.

The NT's renovation programme forms part of a wider £125m overhaul of the South Bank site dubbed Stories Start Here. The remaining £100m will be generated by private philanthropy, at least £42m of which has been secured so far, including £2m raised by the venue’s biennial Up Next gala in May.

In its advice, SAU recommends that DCMS improve its explanation of why external funds, such as donations, could not be sought to fund part of the proposed works, “particularly as such donations are already expected to contribute to other capital expenditures the National Theatre is planning".

SAU also suggests that DCMS could better clarify why alternative subsidy options, such as guarantees and subsidised loans, were discounted.

Competitive advantage?

On the issue of the subsidy's competitive consequences, the DCMS assessment states that theatres do not necessarily compete for resources but instead operate in an ecosystem "working collectively to constitute a world-class sector to deliver social and economic benefits".

Citing its "unique role," the report says that the NT considers itself "in more of a leadership role than a competitive one".

However, DCMS also noted that it is not typical for a specific arts organisation to receive such a high level of publicly-funded capital investment and that "comparable enterprises" are expected to cover maintenance costs themselves or else face cancellations and eventual mothballing. 

The SAU report suggests that DCMS "reconsider and reconcile a number of contradictory statements" about the NT's competitive position to improve the coherence of its assessment.

It says: "This is particularly important given that the National Theatre is likely to compete with a number of other theatres in London and that the subsidy confers an advantage to the National Theatre over other ‘comparable enterprises’."