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Scrapping licence fee would kill off many BBC radio stations, analysis suggests

The BBC's Broadcasting House in London
The BBC's Broadcasting House in London - Mike Kemp/Getty Images

Radio 4 would face a 50pc budget cut if the BBC’s licence fee funding model were replaced by advertising, new research has found.

Analysis by consultancy firm Compass Lexecon found that funding the BBC’s radio services through advertising would have a “devastating” effect on its output.

The BBC would face an estimated 63pc shortfall in funds required to run its existing services, meaning most radio stations would be loss-making and many forced to close.

Radio 4, which broadcasts many public service programmes in news, current affairs and drama, would likely become unaffordable as its budget would need to be cut by 50pc.

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Youth-focused music station Radio 1 would need to change fundamentally due to budget cuts of around 25pc.

Economists warned that a sharp increase in advertising space on British radio would depress the value of ad spots.

They also said the BBC would be less able to attract brands as its audiences are on average significantly older than those of commercial rivals.

Radio 2 and 6 Music are the only stations that would be able to break even, according to the study, providing they could retain current audiences after introducing ad breaks.

The Government has launched a review of the BBC’s licence fee model amid concerns it is no longer sustainable as audiences increasingly shun the broadcaster in favour of streaming rivals such as Netflix and social media apps including TikTok.

A move to a commercial ad-funded model is among alternatives to have been mooted, alongside subscriptions and central taxation. The research has been submitted to a newly-formed panel of media experts that will consider options for the BBC’s future funding.

It comes after the BBC last month announced plans to introduce adverts around some of its radio programmes and podcasts when they are streamed in the UK via platforms such as Apple and Spotify.

The move sparked concerns among commercial radio stations that advertising could be expanded more broadly across the BBC’s services.

The analysis found any such move would spark a 36pc drop in revenues for commercial stations, forcing many to close and squeezing out specialist and niche services.

Matt Payton, chief executive of commercial radio body Radiocentre, which commissioned the research, said: “This study demonstrates that introducing advertising on BBC radio and audio services is a dangerous road to go down and will ultimately be bad for everyone.

“It would have a devastating effect on the BBC and commercial radio, as well as a huge impact for audiences, with the disappearance of public service radio as we know it and less choice available in future.

“While we recognise this is only one scenario, even partial advertising would have a significant negative impact. These findings are stark, and we hope that both the Government and the BBC will take them into account.”

A BBC spokesman said: “We have no plans to introduce adverts on BBC Radio. The licence fee is in place until 2027 and it is absolutely right there is a debate on how or whether it needs to evolve in future and how the BBC is best funded to ensure it continues to thrive.

“We want the public to be at the heart of this, which is why next year we will conduct a major public consultation on our future.”