Falling attendances at London's Design Museum contributed to a cash crisis earlier this year that left the institute with a deficit of £1.2 million, Dezeen has learned.

Total visitor numbers fell 16.5 per cent last year, with just 518,000 attending in the financial year 2018-2019, compared to 620,000 the previous year.

Visitors to the paid programme, which includes group tickets and family tickets, decreased 20 per cent from 228,960 to 183,392, while the number of tickets sold fell from 157,269 to 138,269.

This led to a £500,000 decline in ticket revenue, which was down to £1.7 million from £2.2 million the previous year.

The museum's financial plight is set out in its latest annual report, which was published in March.

Written by Lord Mandelson, the chair of the museum's board of trustees, the report describes the financial situation as "not sustainable in the medium term".

Revenue fall blamed on "specialist" exhibitions

The report blames the fall in ticket revenue on a combination of a natural decline since the museum's high-profile opening three years ago, and the exhibitions programme, which it describes as "more specialist focussed".

"The decrease was due in part to the museum being new in 2017-2018, and a more specialist focussed programme for 2018-2019," the report says.

Management consultants were appointed earlier this year to propose ways to return the institution to profitability, and recruitment consultants briefed to identify a business-savvy leader.

The recruiters sought someone "who will be able to see both the breadth on an international stage, and craft the vision for the next stage of [the museum's] development," according to emails sent to potential candidates.

Museum given £3 million loan

The museum has been loaned £3 million by the Conran Foundation, the charity set up by retailer and Design Museum founder Terence Conran.

£1.5m was provided in March 2018 with the total becoming "fully drawn down" on 31 March this year, allowing the museum to continue trading while it rolls out its new business plan.

In addition to the loan, the foundation donated £352,940 to the museum in 2018 – making up the entirety of its charitable donations that year – compared to £74,417 in 2017.

Meanwhile cost controls on exhibition spending led to savings of £1 million in the last financial year.

The annual report for the 2018-2019 financial year was submitted to the Charity Commission earlier this year and is dated 31 March 2019.

It says that the museum lost £2,026,462 during the financial year ending 31 March 2019, leaving it with a deficit of £1.2 million. Revenue was £10,413,000, down from £12,940,000 the previous year.

Income fell by £1.7 million in 2018

Besides the decline in visitors, the museum was hit by a £750,000 debt from a donor that agreed to donate £1m but has so far only paid £250,000. The donation was related to the capital cost of building the museum.

"Income has fallen in 2018 by £1.7m, with project expenditure reducing by £0.3m as above and the remaining reduction due to cost control exercised over exhibitions and trading in the light of the reduced footfall," the report says.

"This is not sustainable in the medium term and therefore the trustees engaged two respected consultancies during the year, to lead a strategic review of philanthropy and the museum's business plan … to achieve operational profitability over the next four years."

Departure of directors "not related" to finances

A leadership change, announced earlier this month, will see co-directors Deyan Sudjic and Alice Black replaced early next year by new director and chief executive Tim Marlow. However the museum said this was unrelated to the board's move to turn the museum's fortunes around.

"The change of leadership is not related to the museum's financial position," the museum said in a statement. "Deyan and Alice have spent many years leading the successful transformation of the museum and are ready to explore new opportunities."

Sudjic became director of the museum in 2006, with Black joining the following year. Together then masterminded the museum's move from a former banana warehouse in Shad Thames, east London, to its new home in the former Commonwealth Institute in Kensington, west London.

The listed building was converted by architect John Pawson at a cost of £83 million and opened in November 2016. At 10,000 square metres, the new museum is three times the size of the former one. Entry to the museum's lofty atrium and permanent show is free, while tickets are sold for temporary exhibitions.

The museum expected to receive 800,000 visitors in its first year, according to its 2017 accounts.

Attendance figures were initially strong, with 672,000 visitors in its first 10 months. However just 134,000 of these were paid tickets. The museum welcomed its millionth visitor less than 18 months after opening. But numbers have fallen since then.

Visitor numbers low compared to V&A

The decline in visitor numbers is thought to be blamed on a lack of blockbuster shows of broad public interest, especially when compared to nearby rival the V&A museum, which also hosts exhibitions about design.

According to its 2019 Charity Commission report, the Design Museum's purpose "is to make the impact of design visible to the public, policymakers, academics, industry and entrepreneurs."

"We are now a mainstream cultural institution of international stature measuring itself against the intellectual ambition of our peers," it states.

The museum told Dezeen that efforts to turn the museum around were already working. Since the Charity Commission report was filed, the Design Museum welcomed 169,000 paying visitors to Stanley Kubrick: The Exhibition, which has been its most popular show ever.

The previous most popular show was 2017's Ferrari: Under the Skin, which received 100,000 paying visitors. By contrast, the Christian Dior: Designer of Dreams exhibition at the V&A attracted a record 595,000 paying visitors.

The museum said that its new business strategy is working and visitor figures are recovering, with 402,797 visitors in the first six month of the current financial year, of which 206,622 were visitors to paid exhibitions.

New strategy "working" says museum

"Having had a second successful year of trading in the new location where we welcomed over half a million visitors, the trustees worked with the leadership of the museum to agree the museum's strategy to achieve greater operational certainty over the next four years," the museum said.

"This is working – the recent Kubrick exhibition, our most successful to date, is an exciting endorsement of the museum's potential to develop new audiences for design."

The museum added: "Since its foundation 30 years ago the Design Museum has been supported by the Conran Foundation. As a museum without significant government funding we are grateful for their ongoing commitment, including the loan facility you mention, and for the support of all our other sponsors and donors."

The main photo of the interior of the Design Museum is by Luke Hayes.