Rapid BBC growth 'will wipe out dozens of commercial stations'

The study, by the economic consultancy Indepen, commissioned by the Commercial Radio Companies Association (CRCA), warns that the BBC's recent wave of radio station launches have unnecessarily distorted the commercial market, threatening the many private stations which are already struggling financially.

Indepen says the vast majority of commercial radio stations are already running at a loss, while even the biggest are only managing to break even.

As a result, the CRCA is calling on the Government to put a cap on the BBC's radio expenditure when it renews the corporation's Royal Charter this year.

The White Paper, which will set out the BBC's governance structure and regulations for the next 10 years, is expected to be published early next month.

Indepen's report says that if more care is not taken to protect the commercial radio sector, thousands of jobs will be lost, as well as more than £1bn of economic value. It adds that any further deterioration of the sector will lower the quality of presenters, depriving future talent of a training ground which has nurtured many of today's broadcasting stars, including the likes of Chris Moyles, Steve Wright and Huw Edwards.

David Elstein, chairman of the CRCA, said: "Uncapped BBC spending on radio will ultimately cost not just the commercial radio industry but also, through a reduction in choice of valuable public services, listeners and the communities in which they live.

"Moreover, the BBC's plans for radio could lead to the loss of thousands of jobs and stymie the training and development of the next Chris Moyles or Huw Edwards."

The commercial radio sector generated revenues of £633m last year, and employed more than 9,000 people. However, growth has been stagnant for the past six years, during which the sector has lost a significant amount of audience share to the BBC, on the back of new station launches such as 6 Music, BBC7 and BBC1Xtra.

The BBC's audience share reached 55.1 per cent last year, up from around 50 per cent at the end of the 1990s.

The report adds that if the BBC was a commercial entity, audience levels of this magnitude would mean it was considered a dominant player, and could face competition restraints.

The CRCA also criticises anticipated increases in the licence fee, which are due to be announced in the summer. The BBC is asking for its budget to be increased by 2.3 per cent above inflation each year. However, the CRCA argues that such increases are unnecessary and will "undermine the legitimacy of the licence fee" as consumers are offered increasing diversity and choice through pay-to-view and listen models, mobile TV and radio services, and the internet.

Indepen says that if the current proposals are put into practice, the licence fee will hit more than £200 a year within a decade.