Support for the creative economy

Written evidence submitted by Arts Council England [SCE 067]

1. Arts Council England’s mission is 'great art for everyone'. We work to achieve this by championing, developing and investing in arts and cultural experiences that enrich people's lives. Between 2011 and 2015, we will invest £1.4 billion of public money from government and an estimated £1 billion from the National Lottery.

2. As the national development agency for the arts, museums and libraries, we support a range of activities from theatre to music, reading to dance, photography to digital art, carnival to crafts. We support and invest in high quality arts practice and the best emerging practitioners whom we believe are essential for underpinning a dynamic creative economy.

3. Cultural organisations operate in a mixed economy where private capital and earned income is crucial alongside any public funding. Our sector is made up predominantly of small and medium enterprises, 92% employing less than 10 people [1] . We help them to access finance, draw in private investment and expert advice, as well as develop cutting edge technology and artistic work. For every £1 we invest, arts organisations generate £2 from elsewhere.

4. The culture sector is an important driver for the creative economy, with 66,910 businesses contributing £28 billion each year to the UK economy. This is the largest cultural economy in the world as a share of Gross domestic product (GDP). It is more productive than the UK as a whole, with a contribution to Gross value added (GVA) per head of £34,110 each year, compared to £31,800 in the wider economy. The contribution of the music, visual and performing arts sectors alone exceeds £4bn [2] . It is the largest employer across all creative industries, with the largest number of businesses: 1.46% of all UK enterprises [3] .

5. The arts, museums and galleries are an important part of the UK’s offer to tourists. London musical theatre and classical music sales to tourists are estimated at £67 million each year [4] . A survey of 25,000 overseas residents showed that on a visit to Britain 49% of visitors would be very likely to go to a live music concert or event, and 38% said that they would go to the theatre, opera or ballet. [5] In some places museums are the main tourist offer, and English museum expertise is in high demand in Brazil, Russia, India And China (BRIC) and other foreign markets.

6. The wider creative economy is fuelled by the publicly subsidised arts sector with a rich vein of talent, skills, and ideas. 86% of the film workforce crossover into other audio/visual production, including music and theatre [6] . The Arts Council supports the creative industries by developing public and private sector partnerships to invest in innovation, growth and regeneration across England. We invest in cultural education, jobs and training. Moreover we help promote the UK on a global stage: attracting talent, investment and tourism, exporting the best of our arts and culture to the world and engaging in cultural diplomacy.

7. There are real and exciting opportunities for the UK’s creative industries. To realise them we must ensure creative enterprises are able to access finance; our education system delivers the skilled employees they require; and public funds continue to allow the space for artistic risk as well as entry routes into the sector.

How best to develop the legacy from the Olympics and Paralympics of the display of UK talent in the creative industries

8. The success of the opening and closing ceremonies of the Olympics and Paralympics were made possible by over a decade of sustained investment in our cultural landscape, and helped to showcase Britain’s creative industries.

9. It is striking that the Olympic artistic team all had their talent nurtured in the subsidised arts. Stephen Daldry apprenticed at The Crucible in Sheffield before going on to Artistic Director of the Royal Court. Jenny Sealey and Bradley Hemmings, creators of the Paralympic ceremony, are directors of arts organisations that shift perceptions of disabled artists. Danny Boyle worked with David Hare at Joint Stock and then with Max Stafford Clark at the Royal Court.

10. The Olympics and Paralympics gave us an opportunity to show the world class dance, opera, orchestras and theatre that exists across the country. Our art galleries and museums, located in most of our major cities, have internationally important work. A rich network of pioneering and creative companies support writers, artists, and digital innovators. This nurtures Brand Britain, opening up new markets in cultural exports and attracting tourism.

11. The Arts Council’s investment into the Cultural Olympiad and London Festival included 477 branded projects-totalling an investment of £39m. LOCOG estimate 19.8 million people participated in the Cultural Olympiad, 80% of whom attended free events. They further estimate that 10 million people have been inspired to take part in further cultural activity. [7] The Arts Council is currently evaluating its impact, but initial figures show that in the West Midlands alone the Cultural Olympiad generated £80m of gross economic activity and a Return on investment (ROI) of £11.1m for public money.

12. The ceremonies provided an important moment where we found a contemporary way to express and share who we are as a nation, showing how art can bring us together, explore our collective identity and make our lives better. 68% of those who watched the opening ceremony thought it made them ‘proud to be British’ [8] .

Access to finance and cross-government support as a barrier to growth in the Creative Industries

Finance and funding in the creative and cultural sector

13. Some sub-sectors within the creative industries suffer difficulties in obtaining loan or equity finance. These businesses often hold relatively fewer assets to be used as security in obtaining finance. Many non-specialist lenders perceive risk to be higher in the creative sector [1] , preferring larger scale investments and higher returns.

14. Creative businesses are typically sole traders or small enterprises, driving skills and innovation which crossover into the wider economy. More flexible funding and microfinance options are essential. The work of the Creative Industries Council in developing wider access to mainstream finance options for small enterprises should be supported across government.

15. Arts and cultural organisations operate in a mixed economy and a substantial portion of their turnover is earned. For every £1 we invest, arts organisations generate £2 from elsewhere. In the theatre sector, earned income makes up 59% of turnover. Many cultural organisations will generate this earned income levered by Arts Council and Local Authority subsidy. Investment by the Arts Council and local authorities will also generate business for other businesses throughout supply chains, and we have commissioned a report that will quantify the contribution of arts and culture to the economy.

16. Currently household budgets, local authority finances, and central government spending are all under pressure at the same time. We are concerned about the disproportionate impact small changes to local authority and central government subsidy for parts of the creative and cultural sector might have on their ability to lever investment and income from other sources. Given much subsidy supports talent development, it is possible some impacts might be long term.

17. Cultural organisations seek finance not only from lenders but also philanthropists and corporate donations. The £95 million investment in Catalyst by Arts Council and DCMS aims to help cultural organisations diversify their income streams and become more resilient.

18. Arts & Business figures show corporate donations are under pressure, falling for a fourth consecutive year in 2010/11, although this fall was offset by donations from individuals, trusts and foundations. [2] However heritage and museums bring in just over half of these donations. Over 50% of accredited museums in England are now governed independently from national or local government, raising and levering in funds from a wide variety of sources in common with other creative businesses.

How the Arts Council supports the creative sector to access finance

19. We have invested £1 billion of National Lottery funding over the last decade to transform the physical infrastructure of the cultural sector. The Southbank Centre’s redevelopment in 2007 saw a 48% increase in visitors to the site. It almost doubled SBC’s generated income to £23.7m and attracted commercial franchises onto its forecourts, with strong performances from such outlets.

20. Our £2 million investment in Acme Studios in 2004 allowed them to invest in an £8 million project to create four major permanent studios. 49 purpose-built affordable artists’ studios were developed at Matchmakers Wharf, London; and a major mixed-use project developed in partnership with Telford Homes Plc. With our grant, they purchased a 999-year lease on the studios, and the forecast income means that Acme expects to be self-sustaining by 2015.

21. The Royal Shakespeare Company’s (RSC) Matilda shows how high risk, subsidised art can flower into a critically and commercial hit with British theatregoers and tourists, and is about to become a valuable cultural export. Our subsidy enabled artistic director Michael Boyd to spend 7 years to create the work and take the risk on two brilliant writers, new to musicals. Today, total matured and advance gross sales now exceeds £24m, with the advance standing at £4.5m, and the RSC has a partner in the US to launch the show on Broadway next year.

22. In addition to supporting cultural organisations the Arts Council is also designing a number of funds to support other parts of the creative industries. We recently launched the Creative Industry Finance pilot programme, offering business development support and access to finance for creative industry enterprises. Businesses that have benefitted from support and received funds include a textile designer, a fashion house and an arts publishing company.

23. The Arts Council retains an interest in traditionally commercial aspects of the creative sector. For example, the popular music industry is going through huge change, with reduced budgets to support new talent and shorter windows for new acts to become commercially successful. Some countries already use public funding to ensure talent is supported in their popular music industry, including Canada’s FACTOR (Foundation to Assist Canadian Talent on Records) [1] . We are working with the industry to examine the need for a fund to support emerging acts in a similar way.

Cross Government Co-operation

Visas and migration

24. Despite changes to the regulations around Tier 1 visas for exceptionally talented artists, the UK’s immigration arrangements remain restrictive. The complicated and lengthy process for applying for a tier 2 or 5 visa, and the lack of clarity on how this applies to individuals with cultural talents, is a deterrent to creative talent migrating to our country, meaning they do not bring with them the innovation and skills essential to growth. Migrants made a ‘net fiscal contribution of £2.5 billion’ to the UK in 2007. [1] We believe there should be a greater emphasis on creative skills in developing the framework for immigration and ensuring there is flexibility in the provision of short term visas for artists and producers of creative content.

25. Uncertainty resulting from UKBA’s approach to regulation may also make it more difficult for HE institutions to attract foreign students in the future, potentially impacting on their ability to provide high-quality tuition to students from the UK.

The impact on the creative industries of digital and creative media, and the recent Hargreaves Report.

26. Intellectual Property and the implementation of the Hargreaves Review remain a concern for the creative sector. The Arts Council welcomes Hargreaves’ recognition of the importance of unlocking orphan works and 'permitting parody'. We would like to ensure that works like Christian Marclay’s The Clock [2] , a 24-hour montage of thousands of time-related scenes from movies and TV shows, and winner of the Golden Lion at the Venice Biennale, are encouraged rather than inhibited.

27. The Arts Council has a strong track record of supporting pioneering digital arts practice and innovations. The focus of our Creative media policy is to support an increase in the quality, volume and reach of digital content and experiences for economic growth as well as artistic and audience development.

The Space

28. The Space is a free digital, pop-up arts service, developed by Arts Council England in partnership with the BBC, that helps to transform the way people connect with, and experience, arts and culture. With over 700,000 hits this small pilot is already showing with great imagination how we can sweat the digital arts assets of our portfolio.

29. The Space has had a multiplier effect on audiences. A capacity audience of 500 saw the UK premiere of Stockhausen’s Helicopter String Quartet: a further 13,000 people globally have watched it on The Space to date. The Space will continue in pilot form until March 2013, and has a huge potential to make more of the arts available in new ways to new audiences.

Research & Development

30. In July 2012 we announced a new partnership to invest £6 million into the Digital R&D fund for arts over the next three years, with National Endowment for Science, Technology and the Arts (NESTA) and Arts and Humanities Research Council (AHRC) contributing a further £1 million each, following a successful pilot in 2011. The fund will support research and development projects that use digital technology to enhance arts audience reach and/or explore new business models.

Taxation and the creative economy

31. The recent announcement of a series of tax reliefs for the film, animation and high-end television sectors is welcome. [3] Nevertheless, we still lag behind other countries in fiscal support for the wider creative and cultural industries. In Germany ‘public cultural operations’ are exempt from VAT and corporate tax, and since 2000, Austria have offered generous tax deductions for artists and authors. In Ireland, artists are exempt from income tax. [4]

32. Without similar arrangements the UK risks losing its competitive advantage and driving investment overseas. Our response to the Heseltine review suggested extending the tax reliefs offered to animation, film and high-end television to a broader range of cultural sectors to maintain international competitiveness across the creative industries. The film tax credit has helped generate over £1 billion of film production investment in the last year.

Establishing a strong skills base to support the creative economy

33. Talent plays an important part in growth for the creative industries. It begins with the cultural education of Britain’s schoolchildren, through Further Education (FE), Higher Education (HE) and into the workplace. Early engagement with arts and culture is vital in sparking the creativity of young people and allowing opportunities for them to progress and develop their interest and skills. The arts fuel curiosity and critical capacity, and inspire future audiences as well as the next generation of artists.

Primary and Secondary Schools

34. At Key Stages 1, 2 and 3 we must allow for engagement and progression across the whole range of art forms. Drama and dance can bring our cultural heritage to life. Meanwhile art & design and music should be recognised as subjects comparable and compatible with subjects like science and mathematics.

35. We believe in a sixth strand to the English Baccalaureate for creative subjects at Key Stage 4. Otherwise new rigorous and comparable qualifications must be made available in art & design, music, performing arts and dance. Employers and schools need to be assured high quality, industry relevant, qualifications exist in the ‘spare’ 20% of curriculum time, alongside the core subjects. If students are unable or discouraged from studying these subjects at Key Stage 4, potential applicants for creative subjects at FE and or HE level will be further limited.

36. The Arts Council is the fundholder for over £170 million between 2012-15 of Department for Education investment in Music Education, for the network of 123 Music Education Hubs and In Harmony. The aim is to ensure all young people have access to high quality musical experiences, including free instrumental tuition, ensembles and singing. Most activity takes place in schools, with opportunities to progress to conservatoires and vocational training.

Progression Routes

37. Entry routes should be open to all and help build the range of skills needed to make a successful contribution to the economy. Apprenticeships should provide a viable entry route into employment in the arts and cultural sector, with comparable prestige to higher education. They should also help employers build a workforce with the right skills.

38. Many creative businesses struggle to find the time and resources to offer paid internships and work placements or to take on an apprentice. We have launched the Creative Employment Programme, investing £15 million to provide match funding for 6500 apprenticeships and internships for people aged 16-24. It will encourage greater collaboration and innovation by employers to generate new jobs in the arts and culture sector, support the next generation of arts entrepreneurs and freelancers, and directly address skills gaps and shortages. We have been working with the National Skills Academy for Creative and Cultural (NSA) for the past four years and invest in them as a National Portfolio Organisation.

39. We have invested over £8 million in High House Production Park in Thurrock as a national centre of excellence for technical skills, crafts and production, in partnership with the National Skills Academy (NSA), Royal Opera House, and local organisations. It addresses a long-term need for skilled professionals in the performing arts and live music sector and will create an internationally recognised hub for creative industries complete with state-of-the-art facilities available to local residents. We envisage the Park will act as a magnet for creative companies and a catalyst for regeneration.

Higher Education

40. A recent report by the Higher Education Commission raised serious concerns that undergraduate debt, inability to obtain further loans and credit will have a major impact on the access to postgraduate studies. [5] There could be a cumulative effect from 2015, when students who are already carrying a large debt load might turn away from post graduate studies.

41. The Arts Council believes that the recent focus in Government support towards Science Technology Engineering and Mathematics (STEM) subjects at HE level should be widened to include Art & Design (STEAM). Creative professions where the UK has a strong presence, such as Architecture, require a degree of proficiency in Art & Design. Similarly, the Engineering Professors Council are clear that, "Art & Design, the humanities and performing arts and languages are also important formative components for many professional engineering disciplines." [6]

42. The UK’s conservatoires are an important part of cultural education at an HE level, enjoying a considerable international reputation. It is currently estimated that there are 6,900 conservatoire students in the UK-0.27% of students in our higher education system. However Conservatoires carry high overheads, with the cost of tuition between £14,000 to £16,000 per year. There are concerns that if Higher Education Funding Council for England (HEFCE’s) exceptional funding remains capped at its current level, real-terms reduction in income would begin to have a negative impact on the quality of tuition that can be provided.

The importance of "clusters" and "hubs" in facilitating innovation and growth in the creative sector.

43. Clusters or hubs are frequently based in areas of significant Arts Council investment. In turn our funding also supports organisations that help to drive innovation within the creative industries, such as Brighton Digital Media Festival, Watershed in Bristol and Cornerhouse in Manchester, through our National Portfolio and Grants for the Arts.

44. The organisations we invest in contribute to their local economies. Yorkshire Sculpture Park, who are one of our Non Profit Organisation’s, are directly responsible for 108 full time jobs, spends £1.98m in the locality, and brought more than £4.96m in visitors’ spend to the area in 2011.

45. We actively support work within hubs to create opportunities for future growth. For example we are part of the Creative City initiative with Birmingham City Council and other local partners , which will develop the city’s cultural and creative infrastructure as well as skills.

46. We have contributed to the culture-led regeneration in Newcastle and Gateshead. More recently in Margate we delivered the Turner Contemporary, and a wide range of activity in partnership with English Heritage, Thanet District Council and Kent CC. This included bringing historic buildings back into use with Margate Arts Creativity and Heritage. This has been so successful the Old Town is now fully occupied and the project is now moving on to other locations in the town. Our investment in Margate has helped to deliver strong links with the creative sector, including the ‘GEEK Margate’ gaming event.

47. We are working with the AHRC, who recently awarded £16 million to support four Creative Industries Knowledge Exchange hubs to help unlock investment, broker partnerships, and deepen understanding about the sector.

48. But not all creative industries’ operate in large hubs or clusters. Our Creative People and Places (CPP) fund shows investment in areas of low engagement in the arts or the creative sector can attract local investment and have a significant impact on the creative economy of the local area. For example, a CPP project in South Lincolnshire attracted £120,000 in support from a local haulage company.

49. Our Grants for Arts scheme, through which we invest a significant amount of lottery funding, frequently supports start-ups, new enterprises and individuals at the start of their career, providing them with the seed money to fuel future growth in the creative industries. 

The work of public bodies responsible for supporting the sector.

50. We are committed to our work as part of the Creative Industries Council (CIC). It is important that the CIC takes account the many subsectors of the creative industries and not treat them as a single group. This can include producers or presenters of culture closely related to the more recognisable commercial creative sector. Such ‘cultural enterprises’ are places where talent is developed and experiments can be made, and need further recognition by the CIC to help maximise available opportunities.

51. To help public bodies shape funding intelligently to promote growth, the impact of arts and culture on the creative industries should be properly evaluated, and exports for cultural goods and services properly measured.

52. Libraries have a role to play in supporting the creative industries and wider business sector. Manchester and Newcastle libraries operate a Business Information Service helping with business plans, market research, searches for trademarks, and intellectual property. As the development body for libraries, we are exploring libraries’ roles as catalysts to local economic growth through extending the approach to other library services across England.

53. Creative England is vital in driving growth in the sector , and we will work with them on strengthening the significant and fundamental connections between the cultural sector and creative industries . In particular improving access to finance, supporting talent, and creating mutually reinforc ing and supportive career paths .

November 2012

[1] Creative & Cultural Skills: Sector Skills Assessment for the creative and cultural industries, 2010 ,

[2] Ibid

[3] Creative Industries Economic Estimates, DCMS, 2011 ,

[4] The Economic Contribution of Three Conservatoires, London School of Economics, 2012,

[5] Anholt-GMI Nations Brand survey 2010

[6] Skillset/UK Film Council Feature Film Production Workforce Survey, 2008 , h ttp://


[8] Yougov survey, 2-3 August 2012

[1] BIS/DCMS Access to Finance for Creative Industry Businesses, May 2011



[1] Home Office and Department for Work and Pensions, The Economic and Fiscal Impact of Immigration , October 2007


[3] ; HM Treasury Consultation on creative sector tax reliefs , June 2012

[4] Arjo Klamer, Lyudmilla Petrova and Anna Mignosa, Financing the Arts and Culture in the EU , European Parliament, November 2006;


[6] Engineering Professors Council response to Science and Technology Select Committee Inquiry into Engineering Skills, 2011

Prepared 17th November 2012