Support for the creative economy

Written evidence submitted by Creative Skillset [SCE 077]

Introduction

1. Creative Skillset commends the Committee’s Inquiry into the support for the Creative Economy, and welcomes the opportunity to respond. We would be happy to support the Committee with any further information it might require including perspectives from our board members (see appendix 1 for Board membership and our chairs of the film, TV and computer games industry skills councils).

About Creative Skillset

2. Creative Skillset is the Creative Industries’ skills partnership. We were established to help the UK Creative Industries to be world-beating by leading the sector’s skills and talent drive. Owned and invested in by employers, senior representatives across every part of the sector lead our work from Board level through to the development of individual strategies, products, and services. We work in partnership with senior employment and stakeholder interests from across the Creative Industries including large and small employers, SMEs, trade associations and unions.

3. The leading producer of intelligence and research on employment and skills in the Creative Industries, we provide insight and expert opinion on industry issues and trends and work with our employers to develop and implement skills strategies with allied investment vehicles.

4. We are active members of the Creative Industries Council (CIC) which plays an important role in addressing cross-sectoral concerns and in bringing together industry leaders with government. The CIC recognised the skills as one of the three key barriers to growth and tasked Dinah Caine, CEO of Creative Skillset, to lead the work to develop industry led approaches to address skills and talent issues. (More information on this work can be found at http://cicskills.creativeskillset.org/)

5. Creative Skillset’s remit includes the following industries relevant to the Committee’s inquiry: film, TV and games. In addition we cover Advertising, Publishing, and Fashion and Textiles. Music and Design, the other creative industry sectors relevant to the Committee’s inquiry, are the jurisdiction of the Creative and Cultural Skills Sector Skills Council.

Overview

6. The creative industries are rightly at the centre of the country’s growth agenda accounting for 5.1% of the UK’s total employment and forming around 6.2% of the country’s GVA.

7. The Committee’s Inquiry on Support for the Creative Economy asks a series of pertinent questions on how government policy can support and strengthen the creative sector. We would like to see existing efforts on the part of industry and government bolstered by a fully joined up skills policy, one that nests skills at the heart of industrial policy.

8. Skills are an essential driver of economic success and productivity. In order to maximise the potential of the sector, barriers to skills and talent development need to be addressed. Many of these are the consequence of the distinctive structure of the sector: where SMEs, start-ups, micro-businesses, freelancers, and project working dominate (84% of creative media firms employee fewer than 10 people) and fragmented recruitment and training practices and narrow entry routes are typical.

9. A great deal of work is already being done by the few large companies in the industries, at a sectoral level and at a cross-sectoral level by the CIC which addresses issues that are common to all sectors in the industry. But the fruits of current plans will only be fully realised when there is greater coherence to skills policy: when there is better alignment in departmental objectives, reduction in overlap, and a coherent investment and funding environment.

10. We agree with the Committee that the Olympics provided a great opportunity to showcase the Creative Industries at their best. We believe that a fitting legacy would be to keep on investing in the talent base and skills of these industries in the same way we are rightly investing in our world-beating elite athletes.

11. Our response to the Committee’s inquiry therefore offers a snapshot of the substantial work that is already in train, but a sober reflection on the gaps and barriers that will need to be overcome if the creative industries are to continue to be world beating.

12. We look at the opportunities in terms of a strong skills base and the value of clusters, before providing an analysis of barriers, particularly around the alignment of government machinery and maximising investment.

Opportunities

A strong skills base

13. The CIC has proved an important forum for the industry and government to collectively address barriers to growth that affect the creative industries. Identifying skills as one of the three blockages to growth, the CIC tasked Creative Skillset, as the appropriate industry body, with chairing the group to bring forward solutions. This we did in a report in January 2012 (which can be found at http://cicskills.creativeskillset.org/the-report).

14. In the report, we identified eight challenges that need to be addressed in order to unlock growth:

· Industry ownership of investment in skills

· Leadership and management skills

· Building the creative generation

· Supporting talent for growth

· Fusion: the new skills imperative

· Building the market for high-quality provision

· Producing and sharing the intelligence we need

· Increasing flexibility and reducing bureaucracy, joining up investment and clarifying roles

15. We are now leading on the development of solutions and their implementation, and our recommendations to industry and government cover five broad areas.

· Continuing professional development and nurturing the business leaders of the future

· Inspiring the next generation of creative talent and equipping them with the right skills and information

· Increasing and enriching pathways, so that talent from all backgrounds can enter and prosper in the Creative Industries

· Bringing information to market: co-ordination to meet knowledge gaps and making robust data and intelligence available for all

· Reducing the bureaucratic burden, joining up investment and clarifying roles

16. It is worth noting that these recommendations are concerned with the common issues and actions across the sector that benefit all parts of these industries and the bids that we are submitting to Government for co-investment reflect that.

17. The eight challenges listed below are also reflected, to varying degrees, in the sectors of the Committee’s inquiry. They are being addressed in our work with industry leaders in each sector and detailed skills development plans and allied investment vehicles are in place or being developed for film, TV, and animation, with work underway for gaming. Sector strategies for Film (A Bigger Future 2), TV Content and recommendations for Computer Games [1] (Next Gen Skills) are included in the appendix 2, and we are sourcing both industry and government investment to deliver these strategies.

18. Skills strategies need to be met with training that is fit for purpose and to this end Creative Skilllset has developed a quality assurance scheme, known as the Tick scheme, which is being rolled out to ensure that all HE courses and apprenticeships meet the quality standards required by industry.

19. We are pleased to say that the scheme is held in high regard. Sir Tim Wilson, who led the recent review of business-university collaboration, noted the value of engaging business in developing an accreditation scheme and called the Tick scheme "an excellent example of successful business/HE partnership". The Creative Skillset Tick has also been singled out for commendation in Lord Heseltine’s Report, No Stone Unturned, as a recommended model for kite-marking degree courses which have been endorsed by employers.

20. In review, there is a concerted approach to building a solid skills base-at a cross-sector level led by the CIC and at the individual sector level, led by the industry and its skills arms. What we don’t have yet is an investment environment or machinery of government that fully supports this activity.

21. We would like to note here that the government’s proposed tax reliefs on high-end TV, animation and computer games are extremely welcome. They will stimulate a major expansion of production activity that will, in turn, generate skilled employment, contributing to growth in UK GDP. The opportunities are substantial and we are in a strong position to capitalise on their impact.

22. But there remain some large challenges and we think the proposed tax reliefs should act as a spur for both industry and government action on skills. The reality is a history of lack of concerted action and investment coming face to face with a rapidly changing sector with a real potential for growth. The result is that some key areas in the creative industries are under-skilled and will not be able to capitalise on their opportunities in the global marketplace unless action is taken.

23. It is positive to see that work is underway to address both cross-cutting and individual sectoral shortages, and to increase the investment needed to do so. The three sectors in our remit that the Committee Inquiry is concerned with-film, TV and games-are moving towards increasing investment and closer action.

24. We have submitted detailed analysis of skills needs for each sector, ranging through crafts, leadership, cutting edge-technologies and enterprise in our response to the HM Treasury Consultation on Creative Sector Tax Reliefs (see appendix 3).

25. However for the value of this effort to be maximised, an equally joined up framework for public funding in needed. Current problems with investment flows and a lack of alignment in government reduce the impact of existing funding and act as a disincentive to the industry, reducing investment confidence. This topic is further covered in the section on Barriers.

Supporting clusters

26. The creative industries have often developed in clusters, from the historic post-production centre in London’s Soho to the new MediaCityUK cluster in Salford, and have found many benefits in doing so.

27. The benefits of clusters include the opportunity to share training and to develop collective approaches in particular areas such as Apprenticeships and high-level business and enterprise skills.

28. Clusters enable employers, especially small ones-which are the overwhelming majority in the creative industries-to leverage improved ‘buying power’ through economies of scale. They also provide opportunities to bid for public funding to invest in skills.

29. Clusters work for the creative industries, but to maximise their value a joined up skills approach needs to follow. Industry benefits of co-location can be undermined by having to deal with a range of training bodies and agencies all of which will have different contact points, criteria and forms.

30. This ‘skills labyrinth’ is an unhelpful drain on a company’s resource and can place a particularly heavy burden on the smaller players in our industry. These small organisations-powerhouses of the creative industries as well as the economy as a whole-are not well served by existing structures.

31. One part of the solution is to develop a closer working relationship between ourselves and LEPs. Government should incentivise this by expecting, as part of their investment, to see partnership working between Creative Skillset at the LEP. This is not currently happening, causing potential for confusion with employers approached by different sources at the same time for similar reasons. It leads to overlap and unnecessary competition in bidding for public funds.

32. MediaCityUK, a significant and established creative industries cluster in the UK, offers an example of how we can create proactive and ambitious skills support to a cluster. Creative Skillset has brought employers and the supply chain together to examine skills gaps, and to develop and implement a skills strategy capitalising on joined-up action and bidding opportunities. A new University Technical College (from 2013) has been formed and the University of Salford Creative Skillset Media Academy is a key partner in the supply of training that will provide a career progression programme from school upwards and which will build the mix of creative and enterprise skills required by this cluster and its wider supply chain. We will produce one map that can be easily followed and understood by any company in the sector, no matter how large or small. We are also working with west of England (Bristol and Bath) and London to develop similar approaches.

33. Of course, the vast majority of firms are not in clusters. We are currently awaiting a decision on a bid to the Growth and Innovation Fund 2 for ‘Creative Catalyst’, a programme that, following the recommendations of the CIC Creative Skillset Skills Group Report, combines some of the benefits of working closely with industry clusters with an online hub which connects and delivers a network of information, advice, guidance, training, tools, resources and services.

Barriers

34. Industry works well with government both at an individual departmental level and through the CIC. We welcome the fact that the CIC, in bringing the departments together with industry, creates the potential for aligning strategies and practice. However, we feel more needs to be done to make the desired joined-up approach become reality. We think there is a real opportunity with the CIC. If it were given the vision and resources to work across government, it could play a key role in building the greater alignment that the industry needs.

35. Our focus for this paper is on the context in England, where the government departments we need to work closely with are DCMS, BIS and DfE, along with the CIC for a cross-sectoral approach. It is perhaps worth noting here that our remit covers each of the nations and regions in the UK, and we believe there is interesting work being done by the Devolved Administrations to join up support for the Creative Economy that would be worth examining in the England context. This includes the Scottish Government/Scottish Funding Council's decision to inject around £5.8m over five years into Creative Skillset's Screen and Media Academies in Scotland, designed to boost the country's position as a world-leader in creative industries. Another example would be the inclusion of creative subjects in the Welsh Baccalaureate.

Nesting skills policy within industrial policy

36. The government’s approach to a strategic industrial policy is to be applauded. However we do not feel it will be able to fire on all cylinders until skills-a key plank of growth-is fully nested within industrial policy. The reality is that skills policy is still fragmented, the bodies managing it are not aligned with one another, and investment is scattered between bodies and frameworks.

Maximising the value of skills funding and investment

37. We welcome BIS’s move towards recognising employer-led training and we would like to see this become the norm. Currently the vast majority of BIS’s budget for skills goes to providers; we would like to see more of this going to employers.

38. The current environment is neither joined up nor strategic. Fragmented decision-making and overlap between government bodies creates a dissipation of investment, and a disincentive to further investment from industry. As well as placing a burden on companies it is hindering progress to address skills gaps. This ad hoc approach is far from the ideal of an active industrial policy.

39. Using an example from our own experience, in the previous 20 months, Creative Skillset has undertaken 12 separate bids for skills investment, including the Employer Investment Fund (rounds 1,2,3), the Growth Innovation Fund, Employer Ownership Skills Pilot, the skills Funding Agency for Higher Level Apprenticeship Development, and the National Apprenticeship Service for Employer engagement on Apprenticeships. Although we’ve achieved successful outcomes, the resource expended to respond to these bids-each with different contact points, criteria, and so on, but with the same people sitting on the agencies and committees-has been high and would have been better deployed elsewhere in support of industry objectives, rather than chasing government processes.

40. Given that skills requirements for the industry are set out by employers and their skills arms, we ask whether it makes sense that the £2.6bn available to support skills is divided into relatively small amounts, a fraction of which, 350m, we can bid for (the majority going to colleges).

41. The adoption of an intelligent investment model, which is strategic, joined up, with one-pot funding, would make a significant contribution to efforts to build skills. When we have a situation where funding flows go to employers and their skills arms rather than to providers, we can expect a freeing up of investment giving employers the confidence to invest further in skills.

42. This lack of an industry focus can be seen at many levels, for example in the models and assumptions used by BIS where current skills policy assumes permanent employment contracts which are a mismatch for this industry, being largely project-based and freelance. As a result there has been problems in apprenticeships where entrants needing to move from project to project across the life of the course.

43. Meanwhile we believe the DCMS initiative on the Creative and Digital Funders Group is a welcome move to bring together agencies in receipt of public funding in order to achieve greater clarity and simplicity for employers and to make better use of investment. It is a very welcome initiative and would be further enhanced by a review of the roles and alignment of investment between these bodies.

44. In relation to the DfE we have significant issues relating to the school curriculum. We are concerned that the absence of creative subjects in the Ebacc will lead to a sidelining of these subjects in schools. The danger is that the knock on effect is a major reduction in entrants into these industries within a generation. It is a sober example of the lack of alignment in government policy towards a crucial growth industry. We have briefed the government on our specific recommendations on the school curriculum.

November 2012

APPENDIX 1: CREATIVE SKILLSET BOARD

The Creative Skillset Board of Directors is made up of leading industry figures who guide every aspect of Creative Skillset's work. The board is chaired by Stewart Till, CEO of Sonar Entertainment.

Stewart Till, CBE
Chair of Creative Skillset
CEO, Sonar Entertainment

MT Rainey
Vice-Chair of Creative Skillset
Founder,
Rainey Kelly Campbell Roalfe and latterly Founder, The Horsesmouth

David Abraham
Chief Executive, Channel 4

Eileen Gallagher, OBE
Chief Executive, Shed Media Productions

Andrew Harrison
Chief Executive Officer, RadioCentre

Professor Stephen Heppell
Founder, Heppell.net

Betty Jackson, CBE
Founder of Betty Jackson Ltd

Stephen Page
CEO,
Faber and Faber

Christine Payne
General Secretary, Equity (on behalf of the Federation of Entertainment Unions)

Tim Richards
Founder and Chief Executive Officer,
Vue Entertainment

Peter Salmon
Director, BBC North

Stephen Woodford
Chairman and CEO, DDB UK

Chair of the Creative Skillset Film Skills Council: Iain Smith, Producer

Chair of the Creative Skillset TV Content Strategy Group: Anne Morrison, Director BBC Academy

Chair of the Creative Skillset Computer Games Council: Ian Livingstone, Life President, Eidos plc

APPENDIX 2: SECTOR SPECIFIC STRATEGIES

FILM: A BIGGER FUTURE 2: SKILLS. JOBS. ACTION. www.ABiggerFuture2.co.uk

A Bigger Future 2 is Creative Skillset’s training and skills strategy for the UK film industry, funded in part by the industry itself through the Skills Investment Fund (SIF), as well as by the National Lottery through the British Film Council.

Building on six years of success with the original A Bigger Future strategy (http://www.creativeskillset.org/film/bigger_future/background/) , A Bigger Future 2 focuses on addressing the vital skills and training needs of the industry to deliver maximum economic return: safeguarding today’s jobs, creating tomorrow’s and maintaining the UK’s position at the forefront of the international film industry.

" As an industry we must continue to collectively invest in our own future."

Iain Smith, Producer and Chair of the Creative Skillset Film Skills Council

The Priorities

Through consultation with a wide range of organisations, as well as direct input from industry professionals, five key funding priorities have been identified to deliver the greatest impact on the future success and sustainability of the UK film industry:

Retraining in New Technologies

Creative Skillset will invest in training for the existing workforce in new industry practices, specifically in areas such as 3D, HD, VFX and digital technologies to match the changing demands of employers.

Supporting Trainees, Apprentices and New Entrants

A new Creative Skillset Craft and Technical Academy funded through the Skills Investment Fund (SIF) will be a centre of excellence in craft and technical training, supporting new industry trainees to enter areas of the film industry most in need.

Developing Creative Talent

Creative Skillset nurtures talent by investing in the training of the most promising directors, writers and producers. We do this through our Creative Skillset Film Academy Network and Accredited courses, by funding short courses and mentoring, and partnering with National and Regional Agencies to respond to local needs and identify a diverse pool of talent.

Enhancing Business Skills

Through training bursaries in skills specific to production, distribution and exhibition, as well as general finance and management skills, Creative Skillset promotes business development and business success.

Improving Health and Safety Awareness and Expertise

Ensuring the safety of the workforce and the financial attractiveness of the UK to production investment, Creative Skillset funds health and safety training that meets the National Occupational Standards and that is recognised in the joint industry Health and Safety Framework.

TV: Sector Strategy (summary & work in progress)

"UK TV Industry investing and working collectively to identify and develop the best creative talent" (Creative Skillset TV Content Strategy Group)

Key business drivers and opportunities facing the Industry:

· Rise of technology and direct to audience channels

· Globalisation of TV marketplace

· Identifying and engaging with new platforms & audiences, while protecting IP

· Re-invigorated production hubs in Nations & Regions

Top 5 Priorities for Cross Industry Action

1) Diversity: changing the profile of new entrants and the workforce

· Communicating the ‘bottom line’ benefits of a diverse workforce to employers

· New models of Apprenticeship and paid internships

· Revised schools’ curriculum to develop skills valued by industry

· Signposting to Accredited Creative Skillset Ticked undergraduate and short courses

· Talent Showcase events opens direct, personal access to employers

· Targeted initiatives around diversity

2) Future Skills: developing new ‘fusion’ skills and multi-platform skills

· Embed concept of ‘Fusion skills’ in the curriculum

· Work with HE to support Innovation and new developments and wider HE / Industry initiatives around future skills

· Multiplatform drive to be an underpinning skills priority in all training and priority for collective investment

· Inspire and improve understanding of Fusion amongst Leaders

· Promote new approaches to working in cross-functional creative / technical teams within and across companies

3) Freelance Skills: tackling immediate & medium terms skills gaps and shortages

· Allocate TV Skills Fund Bursaries against skills gaps

· More training day events for freelancers like Fast Train (with BBC Academy)

· Roll out Accredited Creative Skillset Ticked Short course provision to identify quality provision

· Increase availability of online training - flexible delivery of when and where

· Better communication of opportunities available

4) Skills in the Nations and Regions: ensuring a skills and talent base across the UK

· Working with the Devolved Governments / Agencies to fund local solutions for local issues

· Online learning increases accessibility to training to those Out-of-London

· Co-ordination and Collaboration in training and talent development – working with clusters and group of employers

· Develop high level creative and executive producer talent – reverse talent drain

· Aggregation of requirement to provision (bringing benefits of economies of scale)

5) Supporting Growth: developing Managers and Business Leaders

· Mentoring and Virtual Boards

· Contextualised Business development programmes

· Contextualised Management & Leadership (M&L) programmes

· Communicate the value of M&L training, and providing the appropriate solution.

Computer Games: Sector Strategy

We are a partner to the Next Gen Skills Coalition Campaign and with our Computer Games Skills Council we are focusing on routes in and upwards in the industry (new entrants and Continuous Professional Development).

Recommendations of NEXT GEN REPORT http://www.nesta.org.uk/publications/assets/features/next_gen

Schools

1. Bring computer science into the National Curriculum as an essential discipline.

2. Sign up the best teachers to teach computer science through Initial Teacher Training bursaries and ‘Golden Hellos’.

3. Use video games and visual effects at school to draw greater numbers of young people into STEM and computer science.

4. Set up a one-stop online repository and community site for teachers for video games and visual effects educational resources.

5. Include art and computer science in the English Baccalaureate.

6. Encourage art-tech crossover and work-based learning through school clubs.

7. Build a network of STEMNET and Teach First video games and visual effects Ambassadors.

8. Introduce a new National Video Games Development and Animation Schools Competition.

9. Design and implement a Next Generation of Video Games and Visual Effects Talent Careers Strategy.

10. Provide online careers-related resources for teachers, careers advisers and young people.

Universities, Colleges and Vocational education

11. Develop kitemarking schemes, building on Skillset accreditation, which allow the best specialist HE courses to differentiate themselves from less industry-relevant courses.

12. Higher Education Funding Council for England should include industry-accredited specialist courses in their list of ‘Strategically Important and Vulnerable’ subjects that merit targeted funding. Industry commits to these courses through industrial scholarships and support for CPD for lecturers.

13. Raise awareness of the video games and visual effects industries in the eyes of STEM and arts graduates.

14. Give prospective university applicants access to meaningful information about employment prospects for different courses.

15. Develop a template for introducing workplace simulation into industry-accredited video games and visual effects courses, based on Abertay University’s Dare to be Digital competition.

16. Leading universities and Further Education colleges sponsor a high-tech creative industries University Technical College (UTC), with clear progression routes into Higher

Education

 17. Kitemark Further Education courses that offer students the best foundation in skills and knowledge to progress into Higher Education.

Training and continuous professional development

18. Skillset Creative Media Academies and e-skills UK’s National Skills Academy for IT to work with industry to develop specialist CPD training for video games and visual effects industries.

19. Support better research-oriented university-industry collaborations in video games and visual effects.

APPENDIX 3: Creative Skillset Response to HM Treasury Consultation on Creative Sector Tax Reliefs

1. Introduction:

1.1 Creative Skillset is the licensed Sector Skills Council for the Entertainment Media, Advertising, Publishing and Fashion and Textiles. We help the UK Creative Industries to be world-beating by leading the sector’s skills and talent drive. We are an industry-owned organisation that actively involves trade unions, professional bodies and other stakeholders to address skills issues in our industries. We are the leading producer of Labour Market Information on the Creative Industries, and use this intelligence, as well as close consultation with our industries, to inform all the work we do.  www.creativeskillset.org

1.2 Creative Skillset welcomes the opportunity to respond to the to the consultation on the Creative Sector Tax Reliefs published by HM Treasury (HMT). [2]

1.3 Creative Skillset strongly supports the introduction of the proposed tax reliefs for high-end television, animation and games. We believe that they will help incentivise significant new inward investment, boost domestic production and help increase exports. This will benefit the UK economy by increasing GDP and will also help to stimulate creativity, innovation and the further development of a flourishing culture across these sectors. The new tax reliefs for film introduced in 2006 have been extremely successful in delivering a range of cultural and industrial benefits and in addressing the market failures which affect film. The market failures which affect film include those which affect skills. Similar failures for skills affect the three creative sectors which are the subject of these tax reliefs. These are described at Annex One.

1.4 The tax reliefs for these three creative sectors will stimulate a major expansion of production activity across all three sectors which will generate skilled employment across all three sectors, thereby contributing to growth in UK GDP. The reliefs will thus assist the competitiveness of the UK economy, as well as contributing to a flourishing culture of high-end television production, animation and games.

1.5 Many of these skills will be in cutting-edge digital technologies, delivering high added value to UK GDP and stimulating the growth of our digital economy. They are also highly transferable skills which could potentially deliver spillover benefits to other sectors such as engineering and manufacturing.

1.6 The opportunities are substantial and we are in a strong position to capitalise on their impact however we need to attend to some key skills issues if the benefits are to be maximised.

2. Skills and Talent Development

This response to the HMT consultation focuses only on the issue of skills and talent development as that is our specific sphere of expertise.

2.1 The relevant section of the consultation is Section 6.13;

"The Government believes that investment in UK skills and talent development is a critical element to sustaining UK production. In developing these measures, the Government would like to consider how the benefits from the tax reliefs can be utilised to invest in UK skills and talent development. Question 44: What systems and measures could be developed or enhanced to ensure that the animation, high-end television, and video game industries have a world class skills and talent base capable of supporting the growth that the new measures will be designed to support?" [3]

2.2 Many highly skilled people work in the UK’s creative industries and the strength of this varied pool of talent helps to ensure that these sectors punch well above their weight in contributing to the growth of the economy. High-end television production, animation and games have all relied on a supply of highly skilled people. The proposed tax reliefs will help these three sectors to grow significantly, building on their historic strengths.

2.3 However, there are significant concerns that, in specific areas of all three sectors, that the size and strength of the existing skills and talent base is insufficient to cope with the significant amount of additional production activity which is likely to be incentivised by the tax reliefs for these three sectors. Alongside that, there is a risk that there would not be a sufficient supply of skilled people to service the additional activity, thereby leading to productions migrating elsewhere and undermining the core drivers of the tax reliefs – namely to retain production in the UK, to attract production here and to increase exports.

2.4 Examples include:

High-end television production: There are issues in craft and technical grades and a shortage of line producers. According to the Production Guild, there may be gaps especially in lighting and camera, and there is likely to be a need for Continuous Professional Development (CPD) to allow people working in certain production grades (e.g. production co-ordinators and assistant accountants) to move into management positions on productions. The Guild also says that at present a high level of VFX co-ordinators, supervisors and producers are being brought in to UK from US due to lack of skills and knowledge in resident labour force. Directors UK, which represents directors across the screen industries, has provided evidence to Creative Skillset that there will be a need to develop skills to ensure that a continuing supply of world-class directors is available to direct the increased numbers of productions. This will need to include Continuous Professional Development to take account of new technological developments – for example in Computer Generated Imagery (CGI). Concerns about pressure on the skills base were strongly voiced at a recent Department for Culture, Media and Sport (DCMS) seminar on TV content, which formed part of a series around the Communications Review. [4]

Animation: There will be particular pressures in CGI (which the sector already relies upon heavily and which will become even more important in the future) because the tax breaks for computer games will create further demand. Other pressure points include higher end animation, short-form animation and rendering and demand created by the potential return of stop-go. There is real and on-going concern about the level and quality of graduates emerging form relevant courses in the UK. Through the Creative Skillset Accreditation and "tick" process, progress has been made in identifying courses that are working in partnership with industry, but more needs to be done by the sector to help ensure that they better meet employers’ needs.

As a recent Animation UK report indicated the industry also supports musicians, set designers, puppeteers, musicians and camera people and there are likely to be skills needs in relation to all these jobs. [5]

Games: Even before the announcement of the reliefs it was clear there were significant skills gaps in the sector. According to the landmark Next Gen. report published in 2011, "skills shortages and problems with the education system…[already] rank as one of the main barriers to making video games in the UK." [6] The authors of the report commissioned research that revealed that the skills that are hardest to find in people straight out of education are management skills, expertise with specific platforms and technical skills for production such as maths or physics. [7]

2.5 Unless comprehensive skills strategies are put in place for high-end television production, animation and games to address these areas of pressure, the result could be that the costs of production personnel with the required skills in these areas rise significantly. Because many people work between feature film, television and animation in particular there is also a danger that the film sector could be affected by this inflation.

2.6 As a result of discussions with the TV Coalition, PACT and Animation UK, Creative Skillset has secured broad agreement that there is a need to put in place comprehensive investment strategies skills in high-end television and animation. Discussions are taking place with computer games. Unless such strategies are put in place, the result could be that the costs of production personnel rise significantly. The strategies will need to reflect the fact that most people working in high-end television and animation are freelance and employed on short-term contracts by small and medium-sized enterprises (SMEs). In the games sector, most people are employed on permanent contracts and the strategy for games will also need to reflect this. A survey for the authors of the Next Gen report showed that small companies dominate the sector – with just under three quarters of the sample having fewer than 25 permanent employees and only 8% having more than one hundred, although relatively few employers account for a significant proportion of the workforce with the four largest companies employing a third of the overall workforce in the sample. [8]

2.7 Creative Skillset has offered to work with all three sectors to develop these costed, industry-led and evidence-based investment strategies for skills development. In the period from now until the end of 2012, Creative Skillset plans to work with the TV Coalition for high-end television production, with Pact and Animation UK for animation, and with the Next Gen Coalition and UKIE for games to flesh out the strategies.

2.8 By April 2013 which is the planned date for the introduction of the reliefs, (subject to state aid approval), there will need to be agreement on the mechanisms necessary for delivering the industry investment, in order to demonstrate to Government how the benefits from the tax reliefs can be utilised to invest in UK skills and talent development.

2.9 For high-end television and animation, the strategies could be funded, in part, by a levy modelled on the Skills Investment Fund (Film), a voluntary training levy on films produced in the UK, which has been very successful in supporting training for the next generation of film talent. Details of the way in which the SIF works are set out in Annex Two. This levy has had a 70% compliance rate and raises approximately £700k annually from a UK spend on feature film of around £1 billion annually.

2.10 This levy could be collected by Creative Skillset, in its role as the Sector Skills Council, and it essential that all investment collected is overseen and directed by industry-led groups in high-end television production and animation respectively, to areas of need which they had identified through the development of the strategies.

2.11 For the games sector, the Next Gen report provided an analysis and action plan which is currently being implemented. Significant progress has been made in certain key areas such as computer science in the curriculum. However, investment on progressing the recommendations has, to date, largely been made by Government rather than industry. The introduction of the reliefs in the sector will enable the industry to focus more clearly on the actions and investments it will make to contribute to delivering the skills needs identified by Next Gen such as the support and benefits it can bring to industry-accredited HE courses and to Continuing Professional Development. The strategy should also help start-up developers and publishers to grow and to develop new businesses models.

2.12 Creative Skillset is an active member of the Next Gen Coalition and we recommend that through the Coalition a more detailed section of recommendations should be developed which prioritises a number of key actions. These actions should help where the industry can demonstrate what action and investment it is making to help deliver Next Gen’s vision and ambition. We understand that the trade association TIGA is not yet a signatory to the Next Gen. Coalition. We would recommend that in order to address these critical skills issues, that cut across trade association boundaries, there is a need for all parts of the industry to work together in partnership and to address how companies who will be enjoying financial benefits through the tax breaks are going to demonstrate their commitment to investing in their future and that of the sector.

2.13 What is required is an investment mechanism that is suited to the dynamics of the games sector, which is proportionate to budgets and therefore to the financial benefits received through the tax reliefs. Such a mechanism should be designed so that those who have and have not contributed to it can be easily identified. We believe there is merit is exploring whether a levy mechanism is a route to achieving that.

2.14 In addition to industry investment, we will also need to look at other partnership opportunities for investment. In the case of high-end television production and games, there is no complementary support from the National Lottery for skills development, although there is currently some support for animation. There is also public investment to support apprenticeships.

2.15 Creative Skillset would plan to keep Ministers and the Unit responsible for certifying these new reliefs aware of which companies have made a skills investment contribution and which have not, with a list published every six months.

2.16 The strategies will also need to help individuals to plan their own "user journeys" in relation to the development of their own skills by providing a map of ladders of progression through which they can develop their careers. This will need to include reference to the role of guidance and mentoring in helping individuals to realise the full range of their talents and creativity. The strategies will need to take account of the continuing impact of digital technologies on the content production industries and the implications this has for skills needs.

2.17 Creative Skillset would welcome the opportunity to respond to questions on any issues raised in this paper and looks forward to discussing and further developing the proposals.

Annex One

The General Case for Intervention around Skills

Creative Skillset believes that there is a clear need for public interventions in the form of systems and measures to support training for the three creative sectors, based on market failures and the public benefits which are generated by such interventions.

A report published in July 2012, Understanding Training Levies, by the UK Commission for Employment and Skills (UKCES) identified a number of specific and market failures which justify public intervention around training. [9]

These market failures were identified as follows:

1. "Poaching externalities. Since in practice skills usually have general, occupational, and firm-specific elements, much training is in transferable skills which are of use to several firms. In these circumstances, some firms may seek to avoid the costs of training and try to secure already trained workers from other firms. There is thus a threat to the training firm, and this will dissuade such firms from future training. This is essentially the poaching or free-rider problem.

2. Informational imperfections. Firms and individuals may have insufficient information about the likely returns to training. Thus an individual may not know whether his/her training will be seen through to the end by the employer – the employer may lay off trainees because of business conditions or may go bankrupt. Similarly a firm may underestimate the benefits and overestimate the costs of training. These are problems associated with imperfect information about returns. Better information on costs and returns and on the external availability of labour may result in more training.

3. Informational asymmetries. Firms and individuals may wish to invest in training, but lack the necessary funds. In this case they should be able to approach lenders such as a bank to borrow funds. However, the potential lender may well lack the necessary information to calculate the payoff of the training and therefore will be hesitant to lend. This constitutes a credit constraint on training."

A 2012 report by the Organisation for Economic Co-Operation and Development (OECD), identifies the externalities which may be generated by public intervention:

"Training subsidies firms are usually motivated by the presumed existence of externalities, i.e. benefits accruing to firms other than the investing one (Johanson, 2009, p. 33). Provided that such external value of training activities does exist, it must be assumed that there is under-investment in enterprise training. Subsidies are intended to mitigate this problem by levering additional funds from enterprises and increasing the volume of training provided. Further, subsidies can address specific target groups, thus providing a means to attain a more equitable distribution of enterprise training among

(a) industry sectors

(b) small, medium and large enterprises, as well as

(c) male and female employees or workers with different skill levels.

In many cases, subsidies focus on forms of training that are considered as inducing a transferable qualification, for instance during apprenticeships." [10]

Creative Skillset believes that these externalities and market failures exist in the case of the three creative sectors which are the target of the tax reliefs and that they provide the basis for intervention.

Annex Two - The Skills Investment Fund (SIF) A Briefing Note

 

1. Background:

a. In 1998 the Film Policy Review Group, chaired by Chris Smith, published its report for Government entitled A Bigger Picture. [1] The report identified the need to address particular skills shortages if the British film industry was to remain competitive. With 89% of the film production workforce being freelance, the Review highlighted the "need to ensure an adequate supply of appropriately skilled people" requiring "a sustained increase in investment in training." [2]

b. To help generate such increased funding, the Review proposed the introduction of a new Skills Investment Fund (SIF). [3] The Fund would be supported through a voluntary levy on productions with contributions calculated against budget.

c. As a consequence of this recommendation, the Department for Culture, Media and Sport (DCMS) and Creative Skillset, worked with a group of industry stakeholders including the Motion Picture Association (MPA), PACT and BECTU to develop a costed model. The SIF was established, on a voluntary basis, with the agreement of UK and overseas film producers. It subsequently became part of a larger strategy for film co-developed by the UK Film Council and Skillset which was launched as A Bigger Future in 2004 and then extended in 2009 As a Bigger Future 2, with an annual budget of £3.5m.

"The industry absolutely must continue to invest in UK film skills and talent by paying the Skills Investment Fund. The SIF directly benefits productions here in the UK by providing talented, skilled and often subsidised crew, but more crucially, it allows the industry to remain competitive in the global marketplace and uphold the tradition of great British filmmaking talent." – John McVay, Chief Executive, PACT

The Motion Picture Association and its members are proud and honoured to have been associated with Skillset's endeavours to nurture the talents of so many over the years. Creativity needs all the courage and perseverance of those who care. That is what the Skills Investment Fund is all about. Senator Chris Dodd, Chairman and CEO, MPA

d. In 2012, fourteen years after the publication of A Bigger Picture, Chris Smith, now Lord Smith of Finsbury, chaired the Film Policy Review, an independent report commissioned by DCMS which again underlined the crucial role of skills. The report stated that; "The development of skills and talent provides the backbone which underpins the success of the entire film sector in the UK; from production, sales, distribution, and exhibition to archive. The future success of the UK’s film industry and the vitality of its film culture depend on the ability to nurture new talent and skills." [4]

2. How is the SIF calculated?

a. The SIF is calculated as a 0.5% contribution of the production budget up to a maximum of £39,500. Certain budget lines are excluded from the calculation; the completion bond; licensing fees for material in a pre-existing format (music, archive footage, story rights etc); financing costs (interest payments, financing fees, bank charges etc); business overheads not specifically incurred in the production of the film and the SIF contribution. Contributions are mandatory for those in receipt of certain forms of public funding (the National Lottery, support from BBC or Film 4, and investment from National Screen Agencies and some other public agencies including Creative England and Film London).

3. Establishing a mandatory SIF:

a. For many years the film production sector has wanted to explore options for making the SIF mandatory for all productions filming in the UK, and through an industry consultation agreed to formally pursue this. When the tax relief was introduced, industry was keen to explore the option of linking SIF payment with accessing the tax relief for film. However at the time this was not something that HM Treasury wanted to pursue. Instead, Creative Skillset has been working with officials at the Department for Business, Innovation and Skills (BIS) to amend the relevant Industry Training Board legislation and work towards introducing a mandatory SIF.

4. Who administers the SIF?

a. Led by an industry advisory board, including representatives of those who contribute to the fund, chaired by the film producer Iain Smith (The A-Team, Wanted, Children of Men), Creative Skillset collects and invests the SIF on behalf of the film production sector.

5. How much is collected?

a. Since the SIF was established in 1999 Creative Skillset has collected an average of £700,000 per annum, from UK film production spend of approximately £1 billion each year. In 2011, a contribution from Warner Bros. for the final chapter of the Harry Potter franchise took total SIF contributions since the inception of the levy to over £8 million.

6. How are the funds invested?

a. The SIF is one of the funding streams of A Bigger Future 2, Creative Skillset’s UK film skills strategy. Alongside National Lottery funds via the BFI, SIF contributions are used to directly fund the training and development of the film production workforce.

b. The money is invested primarily in craft and technical grades, supporting new entrants into areas of need such as construction and assistant production accountants, as well as training professionals in health and safety critical roles, while helping industry keep up to speed with the impact of technological advances on their job roles.

c. SIF contributions are also used to fund a Trainee Placement Scheme. Productions that contribute to the SIF are able to access a database of highly skilled trainees, comprising graduates from some of the leading UK film schools and other skilled trainees, all of whom have less than 12 months professional experience. Creative Skillset heavily subsidises the salary of the trainee. The intention is to provide productions with the best trainees, while encouraging diversity in the industry by broadening the talent pool from which people are recruited.

"We are proud of our contribution to the Skills Investment Fund. It is reflective of our long term association with, and commitment to, the UK film industry and our belief in the creativity and talent of those working it in today, and those who will work in it tomorrow." Josh Berger, President and Managing Director, Warner Bros. UK, Ireland and Spain

"There is no easy way to find money from your film budget for something that isn't going on the screen but the Skills Investment Fund is the only way that the industry is going to be able to support itself in the long term and I wholeheartedly believe in the investment in skills for the future."

Andrew McDonald
Producer, The Last King of Scotland, Trainspotting

"We pay the SIF on our productions because we believe that funding training will reap long term rewards in terms of crew quality.

Rebecca O’Brien
Producer, The Angels’ Share, The Wind that Shakes the Barley

"Before successfully gaining a place on the course I was working where I grew up in Sutton Coldfield in the West Midlands as an accounts assistant in various private practice accountancy firms studying towards the ACCA professional qualification.

Upon graduating from the scheme, I worked on ‘The Kings Speech’. Following that, I had an incredible run of work for 2010, working for all but 2 weeks. At the beginning of January 2011, I started on a costume drama called Downton Abbey and I'm currently working on the third series after they asked me back.

The course opened up a world that I never imagined I would work in and now I'm here I can't imagine working in a different one.

We are all never sure of what our future holds, however, I do know that I have a solid foundation to develop further which is wholly and exclusively down to the Production Guild, Creative Skillset and the film industry for its investment in the scheme, so thank you very much!"

Matt Lawson, graduate of the Production Guild’s Assistant Production Accountants Training Scheme (APATS)


[1] We are a partner to the Next Gen Skills Coalition Campaign and with our Computer Games Skills Council we are focusing on routes in and upwards in the industry (new entrants and Continuous Professional Development).

[2] http://www.hm-treasury.gov.uk/d/consult_creative_sector_tax_reliefs_180612.pdf

[3] Ibid., p.31

[4] http://dcmscommsreview.readandcomment.com/communications-review-seminars-video-footage/

[5] http://www.animationuk.org/files/report-pdfs/docs/4I6KD5YW2J.pdf, Perspective.

[6] Next Gen. Transforming the UK into the world’s leading talent hub for the video games and visual effects industries. NESTA, February 2011, p.22

[7] Ibid., p.50

[8] Next Gen. p.22.

[9] http://www.ukces.org.uk/assets/ukces/docs/publications/evidence-report-47-understanding-levies.pdf

[10] http://www.oecd-ilibrary.org/docserver/download/fulltext/5k97b083v1vb.pdf

[1] http://bigpictureresearch.typepad.com/files/a-bigger-picture.pdf

[2] Ibid, p.4

[3] Ibid. p.6

[4] http://www.culture.gov.uk/images/publications/DCMS_film_policy_review_report-2012_update.pdf, p.67

Prepared 21st November 2012