Independent festivals could be forced to cancel their 2021 events if they don’t get Government-backed insurance and VAT intervention by the end of March.

Two days before the 2021 budget, the Association of Independent Festivals (AIF) is warning the Chancellor that now is the “final countdown” for many festival organisers, who will need to decide whether to commit significant costs by the end of the month if they are to stage events this year.

In a statement, the AIF says that the sector still needs COVID-19 related cancellation insurance, which is not commercially available, in case the Prime Minister’s roadmap out of lockdown is delayed.

In an AIF member survey, more than 92 per cent of respondents confirmed they cannot stage events without insurance and described insurance measures as vital not optional.

Analysis suggests that, for a festival taking place in early July, an estimated 40 per cent of total costs will need to be paid before June 14 – the date when Government will make a decision on Step 4 of the roadmap. 

Twenty per cent of these costs are payable in April and include not only artist, production and infrastructure deposits, but costs that are essential to events being allowed to go ahead, such as policing, medical provision and licensing.

The expected total cost of staging a festival, based on an AIF member survey, ranges from £130,000 to £12.4 million, with an average cost of more than £6 million (£6,350,000).

Even if festivals sell out well ahead of time, many organisers cannot draw down revenue from ticketing companies, as it remains ring-fenced to be paid out post-event or refunded to customers if necessary. It remains an enormous risk for any independent festival to proceed and incur such costs up to June 14 without insurance.

A Government-backed insurance scheme would enable planning to begin, kickstarting the entire festival supply chain for an industry that generates £1.76 billion GVA annually, supporting 85,000 jobs.

Governments in Germany, Austria, Norway and the Netherlands have already introduced indemnity or insurance schemes in which they are acting as the insurer of last resort for event organisers – and the UK Government has provided such a scheme for film and TV productions.

In terms of VAT, although Government reduced the rate on ticket sales to five per cent last July, festivals have only very recently been able to take advantage of the measure, as this is their first sales period of the COVID-19 crisis.

AIF is reiterating calls for a three-year extension to the reduced rate, in line with DCMS Select Committee recommendations, to support the long-term recovery of the sector.   

Paul Reed, CEO of AIF, said: “The Prime Minister has set out a roadmap and a ‘no earlier than’ date for festivals, and audiences have responded, demonstrating a huge appetite to be back in the fields this summer. But we need Government interventions on insurance and VAT before the end of this month when festivals will need to decide whether they can commit to serious amounts of upfront capital.

“Now that we have a ‘no earlier than’ date, insurance is the last remaining barrier to planning. We know that Government is aware of the insurance issue and AIF has provided evidence and data to support the case. Having injected huge consumer confidence, Government should intervene at this stage and ensure that our culture-defining independent festivals can mobilise and plan for this summer. With the cut-off point for many organisers at the end of the month, this really is the final countdown for many businesses.”