Transport for London’s (TfL) approach to sponsorship deals – like those for the cable car and Barclays cycle hire scheme – needs to be clearer, more consistent and transparent, a new report from the London Assembly says today.
Whose brand is it anyway? by the Assembly’s Budget and Performance Committee, recognises sponsorship creates an opportunity to bring in extra investment for new transport infrastructure, but highlights the potential ethical and reputational risks to TfL.
The Committee notes there are signs TfL now recognises it got it wrong in the past, having strengthened aspects of its sponsorship policy following criticism of its deal with high interest payday loans company Wonga. A lack of transparency has also fuelled public speculation and criticism of sponsorship deals with Barclays and Emirates.
So Londoners can be confident they are getting the best deal in the future, the report calls on TfL to conduct deals in the open and show it can effectively manage both the benefits and risks of using private sponsorship to fund projects.
John Biggs AM, Budget and Performance Committee Chair said: “Sponsorship offers a chance to bring in large sums of money for London’s transport network, which might make the difference between new infrastructure going ahead or remaining on the drawing board.
“However, so far Transport for London seems to have taken an ad hoc approach to sponsorship, which could expose it to unnecessary risk if a sponsor suffered serious reputational damage. This is something you can’t always predict – look at what happened to BP.
“TfL has acknowledged the need for a new single policy on sponsorship but it must also take a more consistent and transparent approach so Londoners can be sure any future deals are in the best interests of the capital.”
The report highlights a number of concerns that have been raised about current sponsorship deals:
Barclays Cycle Hire Scheme
- TfL rejected bids for the cycle hire scheme that met the independent valuation, raising questions about the quality of information provided at the approval stage and methods used to set a benchmark price.
- Questions have been raised over whether TfL secured the best deal with Barclays, especially when it extended the contract to 2018 for £25million. The scheme was already proving to be popular and TfL has not demonstrated why this was better than going back to the open market.
- The terms of the contract with Barclays could mean TfL will not receive the full £50 million agreed for the cycle hire scheme.[5}
- It is unclear whether TfL’s initial expectations for sponsorship income were met and is likely to mean that some of the construction costs will have to be found from TfL’s own budget unless future private income is found.
- Awarding station naming rights and the inclusion of the Emirates brand name on the Tube map is at odds with TfL’s reasons for not seeking sponsorship for Underground stations. It also has not revealed whether TfL received a premium for allowing the cable car sponsor onto the Tube map.
- The actual value of the 10 year deal for £36 million is likely to be less because of the effects of inflation.
The Committee’s recommendations are intended to inform TfL’s new sponsorship policy before it enters into any further sponsorship arrangements.
Notes for Editors:
- Read the report, Whose Brand is it Anyway? An examination of TfL’s sponsorship policy
- Current transport sponsorship deals are set to bring in extra investment for the capital, which could amount to £10 million in 2012/13.
- Wonga sponsored free New Year’s travel in 2010. Wonga is a legitimate company approved by the Financial Services Authority, but its short term loans have interest rates that can be as high as 2689 percent APR. A motion was passed by the Assembly in January 2011 which branded the decision to sell advertising space on Tubes and buses to Wonga as “irresponsible.”
- TfL says use of sponsorship is a “matter of judgement”
- The contract signed by Barclays includes clauses that allow for reductions to the sponsorship payments it makes to TfL.
- TfL said it would not seek sponsorship for Tube station names because the Tube map is an iconic brand and “to clutter it up with other people’s brands excessively would be inappropriate”.
- The deal with Emirates for the cable car includes station naming rights and its inclusion on the Tube map.
- Or before the end of 2012, whichever is sooner
- The report will be formally agreed on 28 February 2012.
10. John Biggs AM, Chair of the Budget and Performance Committee is available for interview. See contact details below.
11. As well as investigating issues that matter to Londoners, the London Assembly acts as a check and a balance on the Mayor.
For media enquiries, please contact Lisa Moore/ Julie Wheldon on 020 7983 4228/ 4283. For out of hours media enquiries, call 020 7983 4000 and ask for the London Assembly duty press officer. Non-media enquiries should be directed to the Public Liaison Unit on 020 7983 4100.