Report of the Deputy Chief Executive and City Treasurer attached

The Executive considered a report of the Deputy Chief Executive and City Treasurer and the Strategic Director (Growth and Development), which provided update on the delivery of Aviva Studios including progress with the construction programme; the evolution of Factory International,; the success of the recent MIF23 festival and the conclusion of the naming rights agreement with Aviva for Aviva Studios.

The Deputy Leader (Statutory) advised that Factory International had attracted significant government investment of £106.7m, alongside £9m per annum of Arts Council England revenue funding to ensure the success of the facility.  It was noted that the original budget was set in 2015, based on benchmark costs, to secure the government funding package. This was prior to any detailed site investigations or design work and proved to be inadequate to fund a project of this size, scale and complexity.  Leaving aside the complexities of the project, adjusting for inflation alone during this period using ONS construction indices would have increased the budget by c. £40m.

As of July 2023, the building had been sufficiently completed with static completion achieved for operation of MIF23.  The remaining snagging and commissioning works were scheduled to be completed by 7 September, therefore, whilst the physical building had been completed in time for MIF23, the overall timescales were later than planned and there had been a number of factors which had contributed to the delay, which had resulted in the requirement of additional £8.7m to cover the cashflow requirements to static completion for construction and client-side fees and support to cover the additional costs experienced by Factory International.

This additional funding would be funded from £620k increased grant from ACE, £7.3m on an invest to save basis to be funded from naming rights income and £782k to reverse the temporary virement for public realm costs.

In addition, there was a capital budget increase request of £1.1m to be funded from capital receipts, to meet the costs of completing the public realm.

It was reported that a long-term partnership had been announced between Aviva, Manchester City Council and Factory International which included landmark support for Manchester’s iconic new arts and culture venue to be named Aviva Studios. The multi-million-pound investment by Aviva would support the completion and help make the delivery of the world-class building possible.

Councillor Leech expressed concern over the repeated increases in the budget required to complete the project and specifically questioned why the original budget, set in 2015 based on benchmark costs, was agreed prior to any detailed site investigations or design work and proved to be inadequate to fund a project of this size, scale and complexity.  He also asked how confident was the Council in not being required to have to provide additional funding in future years for MIF to take place at Aviva Studios and whether the Council’s contribution to the Sinking Fund would be revenue or capital spend.

The Deputy Chief Executive and City Treasurer advised that the contribution to the Sinking Fund would come from the Asset Management Plan and part of the capital budget and the repairing responsibilities would be split between the Council and the tenant.  It was not expected to meet additional costs for future MIF.

Decisions

The Executive:-

(1)      Note progress with the delivery of Aviva Studios, home to Factory International, the wider economic, cultural and social benefits to Manchester and the significant programme of social value commitments.

(2)      Approve a capital budget increase for Aviva Studios of £8.7m to be funded from:

·                £620k increased grant from ACE

·                £7.3m on an invest to save basis to be funded from naming rights income

·                £782k to reverse the temporary virement for public realm costs

(3)      Note the capital budget increase of £8.7m will be used to fund the cashflow requirements to static completion for construction and client-side fees and £600k support to cover the additional costs experienced by Factory International.

(4)      Approve a capital budget increase of £1.1m to be funded from capital receipts, to meet the final costs of the public realm.

(5)      Note the progress made by Factory International to prepare the organisation to operate Aviva Studios including recruitment, business planning, the sponsorship programme, artistic and cultural programme development and social value benefits, in the lead up to and successful delivery of MIF23, and the formal opening in the autumn.

(6)      Note the naming rights agreement with Aviva for Aviva Studios

(7)      Note progress in the development of employment, training and education opportunities and creative engagement programmes as part of Factory International’s skills and learning development programme.