Culture, Media and Sport CommitteeWritten evidence submitted by CBI (Confederation of British Industry)

1. The CBI is the UK’s leading organisation, speaking for some 240,000 businesses that together employ around a third of the private sector workforce. With offices across the UK as well as representation in Brussels, Washington, Beijing and Delhi the CBI communicates the British business voice around the world.

2. The CBI welcomes the opportunity to provide evidence to the Culture, Media and Sport Select Committee for this important inquiry on the creative economy. The CBI has been actively championing the creative industries as an important part of the economy and business community since the launch of our blueprint for the creative industries in July 2010.1 This submission reflects on the progress made to support the sector since then and argues that:

The creative industries should continue to be a UK economic priority.

Despite natural strengths in many creative fields the UK’s creative industries still face significant challenges to economic growth.

Targeted Government support should focus on skills, innovation and incentives.

The Creative Industries Should Continue to be a UK Economic Priority

3. UK creative businesses, entrepreneurs and stars and volunteers played a vital role in the British success story of the Olympics and Paralympics this summer, helping to remind the world that the UK remains a global leader in all things creative.

4. As well as demonstrating world class talent and skills across a range of sub-sectors such as music, film, dance and architecture, the creative industries also continue to punch above their weight economically, employing over 1.5 million people in 106,700 businesses. And as a sector with high growth potential we believe the creative industries could play a significant role in rebalancing the UK economy as we emerge from the downturn.

5. The Olympics was also a critical opportunity for showcasing the export potential of the creative industries given the number of international stakeholders that were both in the UK to see the games and those watching Olympics content that was broadcast globally. In fact the creative industries are already successful exporters, accounting for nearly 11% of the UK’s service sector exports in 2009. The CBI believes they are also well-placed to exploit growing export opportunities in countries such as China, India, Brazil, and Turkey as these markets develop and their increasingly affluent populations seek to consume UK creative films, TV, music, and books. Such opportunities aren’t limited to the content-based sectors of the creative industries. Sectors such as advertising and architecture are equally strong and should also be championed.

Despite Natural Strengths in many Creative Fields, the UK’s Creative Industries still Face Significant Challenges to Economic Growth

6. The UK’s creative industries benefit from a number of natural strengths such as our long heritage of world-class architecture, music, publishing and film-making, and the English language provides a huge international market for our films, music, TV and books. Yet the creative industries still face a number of barriers to greater growth, which need to be understood in order to help creative firms compete internationally and fulfil their potential to grow.

7. The principal challenge facing the creative industries is the development of digital technologies which constantly change the way we consume creative content. Smart phones, which were only a pipe dream five years ago now make up nearly two-thirds of mobile phones used in Western Europe and North America and have a huge influence in how we access creative content.

8. Such changes present opportunities in terms of being able to distribute content much more rapidly to a more international audience via several different platforms. However, they also pose a significant challenge for business leaders who constantly have to redevelop their business models; online piracy has made this an even bigger challenge. In this context the succession of reviews of copyright policy in recent years, without a clear sense of direction, has led to a great deal of uncertainty for firms that rely so heavily on copyright for their business models. Ultimately firms need to be able to monetise their creative ideas and content so that they can reinvest in new creative material and employ the next generation of artists.

9. The fact that this sea change has hit the creative industries at the same time as one of the worst economic downturns in recent history has inevitably made it harder for creative firms to invest for the future, and more necessary for the firms to be able to scale up and reach international audiences and customers.

Targeted Government Support should Focus on Skills, Innovation and Incentives

10. During a period of such economic turbulence and change for the creative industries we believe it is vital for the Government to make targeted interventions that will help UK creative firms compete internationally, attract global investors to the UK, and contribute to the private sector led recovery.

11. Our 2010 Blueprint highlighted six factors which would be critical to the success of the UK’s creative industries, which remain as relevant today:

Ensuring regulation and competition policy are fit for purpose.

Delivering skills to meet the many and varied roles in the creative industries.

Ensuring the ability to derive value from intellectual property.

Delivering a competitive tax framework.

Ensuring access to finance for creative companies.

Encouraging investment in infrastructure to support new business models.

12. The CBI recognises that the Government has placed more importance on the creative economy in the last two years, and the establishment of the Creative Industries Council is an indication of this support. In specific areas, too, the Government has shown its willingness to support creative sectors.

The continuation of the film tax credit and its proposed extension to TV drama, video games and animation, for example, should enable UK firms to compete more effectively with international competitors in France and Canada in particular. By levelling the playing field in tax terms the UK is better able to attract productions to the UK on the basis of quality.

The Government has also recognised that with rapidly changing digital technology the future success of the creative industries relies on school leavers being able to programme computers as well as use their applications. The current reform of the school ICT curriculum should go a long way to addressing this barrier.

13. The CBI’s most recent report, ‘Playing our strongest hand’2 focuses on the need for an industrial strategy to unlock growth in the UK economy, highlighting the creative industries as one of seven sectors where the UK already has a strength to champion for further and long-term growth. This report sets out an action plan to target support at the creative industries, focusing on skills, innovation and incentives.

Skills

(a)Push ahead with reforms to school ICT and ensure sufficient teacher training courses are in place to successfully roll out the new curriculum and deliver digital skills, alongside art training, that the UK’s creative industries need.

(b)Ensure the Employer Ownership pilot works for smaller companies, helping to widen the uptake of apprenticeships in craft skills required to underpin areas such as fashion and film.

(c)Promote SME collaboration on skills, strengthening collaborative models such as the Apprenticeship Training Agencies (ATAs).

Innovation

(a)Provide a certain and robust copyright regime so that those prepared to invest in creative content development can achieve sustainable returns and are best placed to tackle piracy; this includes avoiding extensive new copyright exceptions where licensing models are used successfully.

(b)Deliver world-class digital infrastructure through which the UK’s creative industries can continue to produce high quality content, by ensuring broadband provision keeps up with international competition and that planning reforms make progress on the ground.

(c)Make sure EU data protection proposals do not inhibit advertisers, maintaining the industry’s ability to innovate and invest in creative content, while providing effective privacy.

Incentives

(a)Target access to finance for small firms that rely on intangible assets by working with the creative industries to tackle what can be perceived as a risky business.

(b)Ensure introduction of corporation tax relief is internationally competitive with regimes offering similar relief, both in level of support and scope of activities.

(c)Use competition policy appropriately by using up-to-date and flexible market definitions in this sector, reflecting the myriad routes to market and allowing the sector to respond quickly to new opportunities to grow.

14. The CBI would like to see the Creative Industries Council take a strong role in making this action plan happen. Only if all parts of Government and industry work together on this agenda will the UK’s creative sectors be in a stronger position to compete internationally and turn their creative edge into competitive advantage.

November 2012