Hertford Theatre: East Herts Council’s executive member for wellbeing Sarah Hopewell on why spending extra £6m to finish the show is essential

After East Herts Council agreed to spend an additional £6m to complete the Hertford Theatre project, its executive member for wellbeing Cllr Sarah Hopewell (Green, Hertford Castle) has set out the background for Indie readers...

The redevelopment of Hertford Theatre was proposed in 2018 and works began in 2022, with a budget agreed of £24m.

The intention was to create a fantastic facility for East Herts, offering much wider opportunities for arts, culture and entertainment, along with full accessibility and a varied, engaging programme of outreach work.

The redevelopment was also intended to move Hertford Theatre from requiring an annual £100,000 subsidy to being able to generate revenue. With ongoing government funding cuts to councils, any revenue generation helps protect important services.

Financial background

In the UK between April 1992 and October 2021, the rate of inflation remained consistently low, peaking at 5.2% across a period of nearly 30 years. An entire workforce generation has known little other than stable prices. This is a very good environment for businesses to thrive.

Towards the end of 2021, there were sharp increases in the cost of energy, hitting 20% inflation by the end of the year.

Energy is a key cost component in just about everything that is bought and sold. It affects material extraction, manufacturing, transport and everything across the supply chain.

However, the expected impact on costs is extremely difficult to estimate, especially given 30 years of previous stability. Costing major projects in late 2021 and early 2022 became less predictable.

The total budget for Hertford Theatre agreed in March 2022 comprised £18.8m in construction costs and £5.2m in non-construction costs. The £18.8m contract to build the theatre was then signed with GPF Lewis. Unfortunately, from a cost stability point of view, the timing could not have been worse.

The slight uptick in energy costs from late 2021 might have just started to feed through, but the rapid increases of 2022 would still need to work through the supply chain. Throughout the remainder of 2022 and 2023, upward pressures on energy costs continued, peaking at 59% in mid-2022.

Negotiations about the construction costs took place and by the end of 2023 a new final construction cost of £24.43m was agreed. This represents a 30% increase on the original construction costs.

Compared to similar construction projects around the country, the increase looks fair. The budget for the Aviva Studios in Manchester grew by 120%, the Kingston Leisure Centre budget grew by 100% and the proposed Scala Theatre in Worcester, which was subsequently cancelled, grew by 86%.

Of course, each of these could be examples of gross mismanagement. However, more likely is that each suffered the same energy-induced cost pressures as Hertford Theatre.

That Hertford Theatre costs rose only by 30% is due to multiple changes to specification to help keep costs from spiralling.

While the construction costs increased by 30%, the increase in non-construction costs is just 6%, as compared to inflation which peaked at over 10% during this period. We feel this represents a fair price.

Will the costs rise again?

This is of course a possibility. World events can affect prices very quickly. However, as completion draws nearer, the risks lessen each day, and it’s likely that the current trend of reducing inflation will ensure there are no more surprises.

Couldn’t the £6 million be better used elsewhere?

With the project so close to completion, not adding the spend would make poor fiscal sense. The council would be left with a theatre that is almost built, that requires maintenance to stop degradation and that is earning absolutely nothing.

They would also still need to pay back the money borrowed so far and the interest on that money too. This would be a financial catastrophe as the drain would quickly bankrupt the council.

The project could be sold at a reduced cost to a private company, but this would mean missing out on both the benefits and the opportunity to control pricing, programming or any other aspect of the facility.

The business plan by industry experts indicates an excellent return on investment, predicated on modest visitor numbers.

And if these figures prove too optimistic, they can review and find ways to improve performance once the theatre is fully open.

The council will now work closely with the theatre, partners, arts organisations and other key groups to ensure that the theatre is not only every bit as successful as predicted, but that it exceeds these expectations, becoming an exciting, thriving hub for all.