Channel 4 is no stranger to privatisation talk – but this feels different

Published

4 years ago

June 18, 2021

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Almost since Channel 4 launched 38 years ago, with the first episode of Countdown, there has been speculation that it is facing privatisation.

In January 1983, just two months after the channel launched, Kevin Goldstein-Jackson – the executive who helped launch hits like Tales of the Unexpected and who later headed the ITV franchise operator Television South West – was calling for it to be privatised.

As Margaret Thatcher’s privatisation revolution rolled on through the 1980s, the calls kept coming, often from surprising directions.

In 1987, Michael Grade, who was then managing director of BBC television and who later went on to be dubbed Britain’s ‘pornographer in chief’ when he became Channel 4’s chief executive, said “it would be a very good thing indeed for British broadcasting if that were to happen”.

Somehow, though, Channel 4 managed to remain state-owned. The last serious calls for the broadcaster to be privatised came after David Cameron’s 2015 general election victory, when John Whittingdale, the then Culture Secretary and Matt Hancock, the then Cabinet Office Minister, were said to be pushing for it.

A key aspect to their proposal was that it would raise up to £1bn for the government.

Now, however, privatisation talk is again in the air.

The Financial Times reported on Friday that Channel 4 will be “steered towards privatisation” by the UK government as soon as next year. It said ministers were set to launch a formal consultation within weeks on the future of the broadcaster.

This could, according to the FT, even see an outright sale of Channel 4.

Ominously for Channel 4, which has always opposed being privatised, the FT said the consultation would be run by Mr Whittingdale himself.

There are a number of reasons why the idea has resurfaced now. The first is that, in the eyes of some in government, Channel 4’s business model is under pressure. As a free-to-air broadcaster that has few programme rights to exploit, it is unusually exposed to the vagaries of the advertising market, as has been shown during the last year.

The broadcaster reported a pre-tax loss of £26m in 2019 – Channel 4 itself has put this down to the cost of opening its new site in Leeds – but then suffered a collapse in advertising revenues when the COVID-19 pandemic erupted in March last year.

For its part, Channel 4 itself has said that it expects to report a surplus for the year, with advertising having bounced back strongly in the second half of the year.

The broadcaster also shored up its finances with aggressive cuts to its budget during the pandemic and by taking out loans. One indication of its recovery to financial health was that it repaid furlough money to the Treasury as long ago as last autumn.

It is also argued that the rise of streaming platforms like Amazon Prime, Disney+ and Netflix and the continued strength of multi-channel television broadcasters like Sky, the owner of Sky News, makes Channel 4 vulnerable to a loss of viewers that would eventually hit its advertising revenues.

Channel 4 has responded by arguing that, in 2020, it actually raised its share of television viewing, not only in terms of linear television, but also via digital platforms. It said at the end of last year that digital viewing now accounted for one in every eight hours of Channel 4 viewing.

Despite all this ministers fear that, as a business, Channel 4 is unusually vulnerable.

Earlier this year, Oliver Dowden, the Culture Secretary, vetoed the reappointment of two of Channel 4’s directors, Uzma Hasan and Fru Hazlitt, even though both Channel 4 itself and Ofcom, the broadcasting regulator, were supportive.

It was reported at the time that Mr Dowden wanted the two women, both of whom come from a production background, replaced with new directors boasting more financial experience.

Another reason why privatisation may be back on the agenda is the public finances.

Some in Whitehall believe that a significant sum of money could still be made from a sale of Channel 4 – although most analysts who have run the numbers believe any sale proceeds would fall well short of the £1bn mooted six years ago.

It is also argued that a new owner for Channel 4, with deep pockets, might help ensure the quality of its output. The problem is that there are few obvious buyers out there for the channel.

Most of the big US buyers who might be interested are focused on other things while Channel 4’s relative lack of intellectual property rights – a big contrast with, for example, ITV – means there would be few gains to be made by a big media buyer.

Viacom-CBS, the owner of Channel 5, is seen as the likeliest buyer but it, too, is more focused currently on building its streaming service, Paramount+, as well as trying to shore up confidence among its investors after a calamitous drop in its share price earlier this year related to the collapse of the hedge fund Archegos Capital.

Investors also suspect Viacom-CBS will be looking to conserve capital to invest more in content as it battles it out with rivals like Netflix and Disney, whose Disney+ streaming service has strongly outperformed Wall Street’s expectations, rather than use it buying an asset like Channel 4.

Moreover, if any of the big US broadcasters were interested in acquiring a UK free-to-air broadcaster, they are far more likely to alight on ITV which, unlike Channel 4, has its own production arm in ITV Studios and far more intellectual property assets to exploit.

That might make a flotation on the stock market, which would provide Channel 4 with more access to capital, as a likelier outcome – although it has been speculated in some quarters that ITV itself might be a buyer.

Expect Channel 4 to strongly resist any attempt to privatise it.

In the past the broadcaster has been able to muster a substantial lobbying campaign, relying on members of the arts establishment, to argue that its remit to produce distinctive programming would be jeopardised by a change of ownership.

It is also likely to point to the fact that it is a major investor in British content and spends heavily with independent production companies.

That, however, is a harder argument to make when the likes of Sky and Netflix are investing record sums in British programming, when the BBC’s drama output is still scoring hits and when ITV’s production arm is in such fine fettle.

In short, a lot of the arguments Channel 4 has used to resist privatisation in the past may not be as pertinent as was once the case.

This may represent Mr Whittingdale’s best opportunity yet to push for a policy he has sought for 25 years.

Business

Welsh visitor tax plans spark anger in local tourism industry: ‘We’ll be clobbered by it’

Published

2 days ago

December 25, 2024

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Welsh visitor tax plans spark anger in local tourism industry: 'We'll be clobbered by it'

The rugged mountains, limestone caves and spectacular waterfalls of Bannau Brycheiniog – the Brecon Beacons – attract visitors from all over the world.

Tourism is a vital part of the local economy. But local attractions say the industry would be devastated by the Welsh government’s plans for a nightly visitor tax.

“In an area like this all we’ve got is tourism and farming – there is nothing else,” says Ashford Price from the National Showcaves Centre, a visitor complex of cathedral sized caverns, winding tunnels, a dry ski slope, shire horse centre, self-catering accommodation and campsite.

“If they go on like this the future for Welsh tourism is really, really bleak. It will be an absolute catastrophe.”

The proposed fee would be £1.25 for those staying at hotels, bed and breakfasts and self-catering accommodation – and 75p for campsites, caravan sites, and hostels.

Ashford is secretary of the Welsh Association of Visitor Attractions. In protest against the plans, its more than one hundred members closed their attractions for a day.

“Even Welsh people who live in Wales will be clobbered by this tourism tax,” he said.

“It’s quite high, there’s no reduction for children. For a family that will add roughly £35, £40 a week. If you’re staying two weeks, as many people do, it’s £70 on top of your bill. At a time when everybody’s earnings are really struggling, it’s utter insanity to put Wales at such a disadvantage.

“There will be no more big developments. We already cancelled a development for £1.5m and I know other attractions are doing the same. I don’t think the Welsh government really understands how demoralised people feel.”

‘It’s a disaster’

In the nearby village, Anthony Christopher, landlord of the Penycae Inn, is deeply frustrated.

“I just feel like calling this government a bunch of weasels,” he said.

“We’re a small family business and all these extra taxes are taking away the will to do anything else.

“We have national insurance already – contributions are very high. VAT is very high. Now this tax is coming – it’s a disaster. We have to put this extra charge on the customers – how much more can we put on the customers? It’s terrible.”

Anthony has just converted an old school building into a 14-bedroom hotel – due to open in January.

“If I knew this was going to happen I may not have built my hotel. It’s very worrying.”

Many areas in Wales have struggled with the impact of tourism in recent years, with complaints about overflowing car parks, traffic jams, litter and even human faeces on Mount Snowdon.

The Welsh government argues giving councils the power to charge a tourism tax would help pay for better local services.

“During a period of sustained austerity of the sort we’ve seen over the last 14 years, local authorities inevitably end up focusing their spend on those things for which they’ve got statutory obligations – social care, education and so on,” said Finance Secretary Mark Drakeford.

“That has meant there’s been a reduction in the amount of money available for local authorities to invest in infrastructure that makes them successful places for tourists to visit. This is a way of collecting a very small contribution from every one of us who makes a visit to be reinvested in the conditions that make for that visit to be a success.

“It’s money that would be reinvested in the tourism industry, for example, clean beaches and safe footpaths and car parks and public toilets.”

‘People simply absorb it’

The tourism industry accounts for 11% of all jobs in Wales. But an impact assessment commissioned by the Welsh government predicted that in a worst case scenario, 730 jobs could be lost in the sector if a visitor tax was introduced across the country, with an economic cost of £47.5 million. It also predicted 340 local authority jobs would be created.

Mr Drakeford insists the tax will boost tourism – not damage it.

“For those who have fears that the very modest visitor levy will put visitors off, the experience of around the world is that simply isn’t the case. There is a great deal now of empirical evidence for many places that have introduced visitor levies of this sort, not just abroad, but in Manchester, for example,” he said.

“The evidence is not just from big places like Venice, but from rural France, where there’s a levy of this sort. People simply absorb it as part of the costs of their holiday.”

Tourism taxes in cities across Europe range from around 50p to £5 a night, although businesses generally benefit from lower rates of VAT than the 20% paid in the UK.

The idea is becoming increasingly popular across the UK.

The Scottish Parliament voted through similar legislation to that proposed for Wales in July, with Edinburgh set to become the first council to start charging visitors a tourist tax of 5%.

While some regional mayors like Andy Burnham have been calling for equivalent powers to be introduced in England, the Westminster government has no plans to do so.

But local areas can work around this through businesses coming together to set up their own schemes. Manchester’s £1 a night charge raised £2.8m in its first year and hoteliers in Liverpool are about to vote on a similar idea.

Other cities, including York and London, are also considering the option – though a plan for Bournemouth, Christchurch and Poole has been put on hold after objections from hotel owners about the ballot held there.

Despite the backlash from local businesses, the Senedd are due to vote on the legislation in the summer.

If passed, councils will then consult with local people on whether to take up their new powers. Tourists could then start being charged in 2027.

Business

Oxford herbicide spinout Moa seeds $40m funding round

Published

2 days ago

December 24, 2024

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Oxford herbicide spinout Moa seeds m funding round

An Oxford University spinout which is developing a new generation of weed-resistant herbicides has begun planting a $40m (£32m) fundraising with prospective backers.

Sky News understands that Moa Technology, which was co-founded by the world-leading university’s head of plant sciences Professor Liam Dolan, is kicking off a Series C funding round.

Moa has already raised $59m (£47m) from prominent investors including Oxford Science Enterprises (OSE), BGF and Lansdowne Partners, the Mayfair-based hedge fund.

Its existing shareholders are understood to be supportive of the new fundraising plans, although potential new investors will also be approached.

Moa is developing active ingredients which can break weeds’ resistance to herbicides – a key challenge for the global agricultural sector – with the aim of securing approval from regulators.

Similar to the growth of antibiotic resistance in humans, resistant ‘superweeds’ are able to kill a farmer’s entire crop, ultimately endangering food security.

Industry data suggests that farmers spend up to $40bn (£31.2bn) annually on herbicides, and a further $25bn (£19.9bn) on weed-resistant seeds.

However, a number of leading weedkillers, including Bayer-owned Roundup, have sparked multibillion dollar lawsuits over their alleged implications for human health.

Moa has developed more than 70 so-called ‘modes of action’, with several of the company’s products in advanced field trials in six countries, including the UK, US and France.

According to Moa, these could, assuming they gain regulatory approval, be commercially available by the end of the decade.

The OSE-backed spinout has a commercial agreement with Nufarm, an Australian agrichemicals company, to further develop one of its products.

A Moa spokesman said it intended to operate a royalties model similar to that of ARM Holdings, the chip designer, in semiconductors, meaning it will focus on research and development, and license its products to global manufacturers and distributors.

The company is run by chief executive Dr Virginia Corless, who has had extensive experience commercialising sustainable solutions in the energy, water and agriculture sectors.

An update on Moa’s fundraising progress is likely in the first half of next year.

Business

Vinted boss says cost of living crisis has ‘boosted’ secondhand industry

Published

3 days ago

December 24, 2024

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Vinted boss says cost of living crisis has 'boosted' secondhand industry

The cost of living crisis has “boosted” the secondhand industry, Sky News has been told, as more than £2bn is spent on pre-loved gifts this Christmas.

Adam Jay, CEO of Vinted Marketplace, said the “trend” in buying pre-loved was “happening anyway” but described rising costs elsewhere as a possible “accelerator”.

“I’m sure the cost of living crisis has been a boost,” he told Sky News, adding that it had supported “the secondhand industry and trading of secondhand”.

“But I do think this trend was happening anyway because of people’s consciousness around overconsumption, around sustainable buying and sustainable consumption.

“I think all of these have I think these are deep trends and I think they’re trends that are here to stay. I really think secondhand can become the first choice ultimately,” he said.

Vinted, an online marketplace for buying and selling pre-owned items, made its first annual net profit last year of €18m (£15m).

The company’s revenue also rose by 61% year on year amid a rise in demand for secondhand goods.

The Vinted boss’s comments come as more than £2bn is expected to have been spent buying pre-loved gifts this Christmas.

A report by Vinted and Retail Economics found that secondhand shopping will account for just over 10% of all gift spending.

More than four in five people also said they might spend some of their budget on pre-loved gifts this year.

Vicky Saynor, from Hertfordshire, has bought all of her Christmas gifts secondhand, with a total budget of £150.

“This year I said, that’s it – it’s only secondhand or they’re not getting anything,” she said.

She has spent £20 on each of her children and believes she will have saved possibly over £1,000.

“We have so much stuff in this world we just don’t need to keep buying more of it. One person’s rubbish is another person gold,” she continued, “I love old things – they have a life, they have a history.

“And secondhand clothing – why not? When I was young I would reuse or pass on and that all changed in the 90s and 00s when it really focused on consumerism. But we have to change our ways – we have to change our habits.”

According to the Vinted report, shoppers are also selling their own belongings to fund Christmas gifts, with 43% selling online.

More are planning to increase how much they buy secondhand too with over a third (35%) expected to buy more in the next five years.

In his interview with Sky News, Vinted’s Adam Jay has also highlighted the “confusion” around new reporting rules on tax in the new year.

Regulations from HM Revenue and Customs (HMRC) mean that if someone sells above a certain threshold Vinted must ask the seller for their national insurance number and share it with HMRC.

Mr Jay explained, however, that it is “a relatively small proportion of the overall sellers” on the platform and most will “already know” if they have to provide details.

“Vinted is obligated to collect the national insurance number for any seller who sold more than 30 items or more than £1,700 worth of product in the previous 12 months,” he said.

“But here’s the really important thing,” he added, “the obligation to give your national insurance number does not mean there is any obligation to actually pay tax… there is no tax to pay on the private sale of secondhand items.”

He also described the new rules as “a little challenging” for Vinted, as many members already sell at least 30 items.

“Hopefully they’ll [HMRC] rethink whether those thresholds are set in exactly the right way to make sure that ultimately the right people are paying the tax.”

While “supportive” of HMRC decision to change regulations, Mr Jay added: “I wish the thresholds had been set a bit differently. They’re actually set consistently across all OECD countries.

“I would hope even across all of Vinted markets in which we operate, that the tax authorities will consider changing those thresholds or making them more appropriate for business models like Vinted.”