V&A Dundee’s chairman said high energy bills and visitors spending less than expected were among reasons for a £1.1 million loss before the pandemic hit.
The deficit meant Design Dundee Limited, the charity established to develop and run the V&A, lost two-thirds of its value.
The newly filed accounts show the design museum generated income of £6.23m but incurred costs of £7.34m in the year to the end of March 2020.
The accounts are the first to reflect a full year of trading since the attraction opened in September 2018.
Net assets fell from £1.67m in 2019 to £562,000 at the year end.
Evaporation from ponds added to costs
Businessman Tim Allan, who succeeded Lesley Knox as chair in August 2019, last night insisted the finances of the museum were “stable”.
He highlighted the surplus of £780,000 the charity generated the previous year and subsequent increased support from the Scottish Government.
Mr Allan said: “Until the museum opened we didn’t know how it would trade and what the costs would be. The business plan was written years ago.
“The £1.1m loss is the first indication of what the real costs of the museum are.
“The power and lighting bill was much greater than expected. We discovered evaporation from the ponds was more than expected – it all adds up.
“We had an extraordinary number of visitors to the museum – more than 800,000 in the first 12 months – but they didn’t spend as much individually as the model told us they would.
“In business I’ve invested in more than a dozen start-ups so I’m not surprised that in the first full year of trading a new enterprise like the V&A ended up with a deficit.
“I knew it could be managed. We had a surplus and liquidity facility to deal with it and we were making a profound investment case to the Scottish Government who were amazed and delighted at the economic impact that we’d had in a short period of time.”
Increase in Government support not a bail out
In April last year the Scottish Government provided an extra £2m in funding. This was followed by a further £1m in emergency Covid-19 funding in January.
Last month it committed to up its annual funding from £1m to £3m for the next three years.
Mr Allan dismissed any suggestion the additional funding was a bail out.
The Government had previously committed £1m a year to the attraction for the first 10 years.
But Mr Allan said it was always the plan for this to be reconsidered after the first year.
“The economic impact of the V&A has been £21m in Dundee and £75m in Scotland. It’s supported hundreds of jobs,” he said.
“I view the extra Scottish Government money coming in as always on the cards. When they saw the impact we’d had, they rightly put more investment into the building.
“So our running costs will be between £7m and £7.5m a year and the Scottish Government will pay £3m of that which is a significant contribution to the region.”
The new accounts showed a dramatic drop in income from grants and donations, which makes up the majority of the V&A’s revenue.
This fell from £5.93m in 2019 to £3.65m in 2020 as many groups that donated heavily ahead of opening didn’t provide ongoing support at the same level.
Income generated from exhibition fees also fell by almost a third, from £674,000 in 2019 to £462,000 in 2020.
Expenditure fell slightly last year, from £7.77m in 2019 to £7.34m.
Plans to ‘spill out’ into Dundee
“A lot of learning has been going on in the last year and we keep a close eye on costs,” Mr Allan said.
“We are in a stable position going forward. The question is how do we use this extra investment for exhibitions and programs that will attract people to come to Dundee and stay overnight?
“Under our new director Leonie Bell, people are going to see the V&A spill out into the city.
“It’s going to be a joyous, exciting approach to spread about design culture among the folk of the city. It’s going to be really exciting.
“People are desperate for something good in their lives and we are determined to provide it.”
Dundee V&A reopens on May 1 with a new exhibition on club culture called Night Fever.
📢 We're reopening Saturday 1 May 📢
🎵🕺Tickets are now on sale for Night Fever: Designing Club Culture, the first major exhibition exploring the relationship between club culture and design from the 1960s to today 🕺🎵 #VADNightFever
— V&A Dundee (@VADundee) March 18, 2021