Cardiff struck a collaboration agreement with Pinewood in 2014 in order to promote TV and film production in Wales.
The government purchased a site at Wentloog in Newport for £6.3m, which it then spent £3.1m transforming into a film and TV studio. This was rebranded as Pinewood Studio Wales.
The facility was then leased to Pinewood for a 15-year term, with the first two years offered rent free. Pinewood was also funded to promote the studio and charged with developing proposals for a share of a £30m media investment budget set up by the Welsh Government to support TV and film production.
However, by 2016, the panel established to scrutinise Pinewood’s investment proposals raised concerns about the fund’s performance.
The WAO found almost half (£13.8m) of the £30m fund had been spent on 14 film and TV projects in Wales, yet these had only recouped £4.3m of the Welsh Government’s investment.
According to Pinewood, demand for the Wentloog studio was undermined by the opening of a rival production facility in Cardiff called Bad Wolf Studios, which had also received government funding. However, Bad Wolf’s owners and the Welsh Government dispute that the Cardiff studio affected occupancy at Pinewood, the WAO noted.
Pinewood’s new owners, who took over in January 2017, also had concerns about the size of the studio, which was not tall enough to accommodate the aerial camera angles required on higher budget film productions, limiting its appeal to the industry.
In October 2017, Welsh ministers decided the Wentloog lease and collaboration arrangement should be terminated. The media investment budget was put on hold.
A fresh three-year arrangement began in November 2017, costing the Welsh Government £392,000 per year plus an additional annual management fee payable to Pinewood. The size of this management fee was not disclosed due to commercial sensitivities.
“The Welsh Government has recognised that these financial projections don’t represent good value for money,” the WAO said.
“However, they considered that the new management services agreement with Pinewood, with the potential to generate commercial revenue streams for the Welsh Government, was better than the costs that the Welsh Government would otherwise incurred by leaving the site empty while looking for a new tenant.”
