Derby Museums facing ‘existential challenge’

The charitable trust running museums in Derby has commissioned a comprehensive review of its operations in an attempt to secure its future, revealing that it is currently using its reserves to cover its operating costs.

Derby Museums, which was established as an independent charitable trust in 2012 to manage the city’s museum sites on behalf of Derby City Council, said that while it has achieved significant successes in the last decade, it now faces "existential challenges". 

It said that a combination of reductions in public funding and rising costs has resulted in it using its reserves to cover a deficit of £500,000 in 2022/23 and an expected deficit of £400,000 in 2023/23, leaving it with £1m in the bank.

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The review, which is being funded by a grant awarded by the National Lottery Heritage Fund and is scheduled to be completed by March, is expected to provide guidance for the "future sustainability and success" of the trust.

This will include a review of its current operations including staffing and opening hours, and the potential for additional income generation.

A tender document for the £60,000 contract to carry out the review states that Derby Museums hopes the work will "guide it towards future sustainability and build a stronger partnership with its stakeholders".

Reduced public funding

"Over the last decade, the external economic, social and political environment has changed dramatically," the document states. 

"10 years of austerity have made the organisation vulnerable through large reductions in public revenue funding. More immediately, high inflation and the energy crisis have increased costs at a time when income has declined," the tender document states.

"The current financial model and thus the shape, size and scale of the organisation cannot be sustained without change. 

"It will not be able to perform obligations under the partnership agreement with Derby City Council nor will it be able to deliver its commitments as outlined in its Arts Council NPO agreement."

The museum trust says that investment from Derby City Council began to reduce in 2015/16 and by 2020/21 it amounted to £630,000 per year. 

Meanwhile, investment from Arts Council England (ACE), which in 2015 stood at £400,000 per year, has remained static into its current core funding settlement as part of the 2023-26 National Portfolio.

The trust said that in order to grow the business and to deliver its strategic aims whilst public investment reduced, it has quickly increased its capacity to fundraise through individual giving, trusts and foundations, and generate income from commercial sources, a mixed economy model which it says  theoretically spreads risk through diverse income streams. 

As a result, in the financial year 2022/2023, the ratio of direct public investment against project or earned income was 50:50. For the current financial year (2023/24) that figure will be 40:60. 

'Immediate challenge'

However, the tender documents state that the current financial year provides an "immediate challenge" as it is first year since 2015 where there will be no [National Lottery Heritage Fund] revenue support for the organisation.

"At the beginning of 2022/23 the museum was in a steady financial position," the tender document states. 

"It had weathered both nearly a decade of austerity and the privations of Covid. The sudden increase in energy costs, higher levels of inflation and the subsequent cost of living crisis has presented unexpected short and medium-term financial pressure.

"In addition, with less money in visitors’ pockets, secondary spend and earned income is likely to reduce. Public sector funding is at best at standstill from ACE and in decline from Derby City Council. Costs are rising just as public funding is falling.

"In 2022/23, Derby Museums had a deficit of £500,000, in 2023/24 the deficit is predicted to be £400,000. Whilst this will still leave over £1m in unrestricted reserves, to continue to run the business in this way will be financially unsustainable."