The potential impact of Brexit on the creative industries, tourism and the digital single market Contents

3Direct EU Funding

55.As well as securing investment from companies using the country as a gateway to the European Single Market, the UK receives appreciable direct EU funding, which benefits among others the creative, cultural and tourism industries.

56.Since concluding our evidence, for example, we have already seen how one such source of funding has now dried up owing to Brexit: UK cities cannot now participate in the European Capital of Culture programme, which benefitted Glasgow in 1990 and Liverpool in 2008.

Creative Europe

57.To an overwhelming extent, the evidence submitted from organisations within the creative industries called for the UK to maintain participation in the Creative Europe funding programme. The Publishers Association, the Museums Association, the British Council and PACT all emphasised the benefits that membership of Creative Europe has brought to the UK.

58.Creative Europe Desk UK (the information and promotion office for Creative Europe in the UK) outlined the operation of the system:

Creative Europe was established by the European Commission in 2014. It builds on two previous programmes: MEDIA, supporting the audio-visual industry, and the Culture Programme supporting cultural and creative sectors. The current round has a budget of €1.46 billion over seven years (2014- 2020).64

59.Their evidence added that in many sectors British projects are disproportionately successful in applying for funding and that demand from other EU organisations to work in partnership means that “the UK has been involved in 44% of projects.”65 They reported that the outcome of the referendum had not curtailed applications from UK-based projects or dampened enthusiasm for cross–border partnerships.66 In addition they provided an overview of the funding UK organisations had received:

Between 2014 and 2016, Creative Europe supported 283 UK cultural and creative organisations and audiovisual companies, as well as the cinema distribution of 115 UK films in other European countries. With grants totalling €57 million, this meant the UK benefited from 11% of the entire €520 million Creative Europe budget allocated in this period.67

60.The Art Fund, an organisation which provides grants to museums and galleries across the UK, illustrated the significance of partnership working in its written evidence:

As well as offering essential funds to enable the development of projects, Creative Europe encourages museums and galleries to share their skills, ideas and talent across the EU through its partnership requirement for funding. For instance, the Sharing a World of Inclusion project included collaboration between 11 EU partners.68

61.The Museums Association, however, said that partnership working had been disrupted by the outcome of the referendum:

UK partners in joint projects have been asked to leave or to cease taking a leadership role in projects that would otherwise have benefited the cultural and tourism sectors in the UK.69

Economic impact

62.Witnesses to the inquiry were keen to demonstrate that securing funding from Creative Europe has been a catalyst for unlocking further private investment in projects. Creative Europe Desk UK said that the funding has enabled beneficiaries to secure substantial additional investment:

Creative Europe funding has proved critical in helping to secure additional investment for over half (52%) of MEDIA beneficiaries and over two thirds (68%) of Culture beneficiaries. [ … ]

Based on the co-financing figures provided by the Executive Agency, Creative Europe’s Culture sub-programme beneficiaries were estimated to leverage match-funding worth 114% of the amount of their Creative Europe grant: an additional €17.2 million. MEDIA sub-programme beneficiaries in the UK were able to leverage match-funding worth five times the amount of their Creative Europe grant from 2014 -2016. This amounted to €108m of additional funding.70

Future arrangements

63.In oral evidence, Sir Peter Bazalgette described the impact that Creative Europe funding can have in relation to the arts and outlined the broad decisions that will have to be made by the Government. He highlighted the fact that EU membership is not a pre-requisite of participation in Creative Europe:

Creative Europe brought £11 million into arts and cultural organisations in 2014–15, which in the shape of things may sound like a small amount of money; in the arts world that is a large amount of money and it does a very, very large amount of good. Creative Europe can have countries that are not in the EU taking funds from it. Are we going to stay subscribing to Creative Europe or are we going to leave that system and are we going to replace the money?71

64.Citing the examples of Iceland and Norway as nations outside the EU, both the Art Fund and the National Museum Directors’ Council urged the Government to retain membership of Creative Europe.72 Equity, however, noted in its evidence that there had been limitations to the extent of participation in Creative Europe for some nations outside the EU:

Switzerland lost all access to funding schemes in 2014 after imposing restrictions on EU citizen mobility and while Norway pays into and can access schemes, they have no say in their development.73

65.The then Secretary of State said that the Government is “looking carefully at the areas in which it is important that we continue membership” but did not commit to continued membership or a timeframe for a decision.74 Ms Bradley did say, however, said that she would “not expect our membership or otherwise of the EU to result in a reduction, necessarily, of funding from Creative Europe.”75 Writing to the Committee subsequently, she clarified her remarks, stating clearly that continued participation would be subject to negotiation with the EU.76

Conclusion

66.The tone of the then Secretary of State’s comments implied that there is good reason to believe that the UK will seek to participate in Creative Europe post Brexit. Ms Bradley’s optimism may, however, have been the consequence of misapprehension as to the origin of the programme and the Government’s later correspondence underlined that that the UK’s negotiations with the European Commission will determine our future involvement in Creative Europe.

67.The ability to utilise Creative Europe to secure additional sources of funding, combined with the freedom it gives to British organisations to lead projects with partners from across the EU (and outside the EU), means that there are clear incentives to maintain our participation.

68.If the UK were to depart Creative Europe, this would represent a significant blow to the performing arts, museums, galleries, publishing and many other sectors in the creative industries. The limitations of participation experienced by other non-EU members illustrates that reaching agreement may not be straightforward but, equally, neither the UK nor EU member states will benefit from the UK’s departure.

69.As the Government seeks to build a new and unique relationship with the EU, it should commit to making it an objective of negotiations to secure the UK’s ongoing participation in Creative Europe.

Additional EU funding streams

70.The Government has sought to provide assurance that the broad range of funding sources available across all sectors will not simply disappear when the UK exits the EU. DCMS told us that all European Structural and Investment Funds (ESIFs) projects

signed or with funding agreements in place before the Autumn Statement, would be fully funded, even when those projects continued beyond the UK’s departure from the EU.

In October 2016, this guarantee was extended to ESIF projects signed after the Autumn Statement and continuing after the UK has left the EU. The Chancellor was clear that funding for these projects would be honoured by the Government, if they met the following conditions: that they were good value for money and in line with domestic strategic priorities.

It was also announced in August 2016 that, where competitive bid funding was awarded directly from the Commission to UK bodies before exit (covering funds including Creative Europe), the Treasury would underwrite the payment of such awards, even when specific projects continue beyond the UK’s departure from the EU.77

71.Equity’s written evidence explained why the Government’s guarantee is of such significance to the creative industries and tourism:

Across the creative sector, 46% of UK bids for European funding are accepted, second only to Germany. The UK also receives 24% of all European Research Council grants. 1.5-2% of £258bn European Structural and Investment Funds for the period 2014–2020 will go to the cultural sector and in the period 2014–2020 The European Social Fund and the European Regional Development Fund will invest £8.66bn across the UK—targeting disadvantaged areas in particular.78

Regional investment

72.The Creative Industries Federation’s 2016 Annual Report emphasised the broad nature of EU funding mechanisms. Building on the commentary provided by Equity, the Federation highlighted the regional significance of these various sources of funding:

The European Regional Development Fund has helped to rebalance the discrepancy between capital and regional funding—investing in cultural projects including Sage Gateshead, Manchester’s HOME and Falmouth University.79

73.Cornwall Council’s written evidence said it was “vitally important” for employment within the creative industries in Cornwall and the Isles of Scilly to replace “even a proportion” of EU funding.80 Its submission outlined the relationship between funding streams that may not be specifically dedicated to the creative industries and the development of a creative workforce within the local area:

EU investment has been critical in enabling the evolution of a University campus at Falmouth, enabling a growth in arts graduates who have been able to stay in Cornwall and provide innovative business start ups and development. There is a fear in the cultural sector that any withdrawal from the pace of investment will once again lead to a ‘brain drain’, with all the consequent impacts that would have.81

Creative funding and tourism

74.The creative industries and inbound tourism are in many cases interlinked. The Museums Association said in written evidence that the loss of EU funding would affect “museum projects as well as undermining local tourism initiatives.”82 The importance of the relationship between EU funding and tourism was emphasised by UKinbound which described the importance of EU funding in driving partnerships and private investment:

Many Destination Management Companies have benefitted in recent years from EU funding. [ … ] By its very nature, EU funding necessitates collaboration between Member States and is therefore extremely relevant in developing tourism business between EU partners. Uncertainty about the future of this funding will be extremely damaging for Destinations—particularly as it is often a catalyst for private sector funding which may otherwise not be forthcoming.83

75.The Art Fund provided a specific example of where EU regional development funds had been central in securing wider investment for a creative project designed to drive tourism:

We are concerned that [ … ] cultural successes such as HOME in Manchester, Sage in Gateshead and the Museum of Liverpool that also received EU funding, could not have been completed without the contribution of EU funds, and fear that the future development of the arts and museums sector could be inhibited by the loss of access to these funds. Sharon Granville, the Executive Director, collections and estate at National Museums Liverpool said “the Museum of Liverpool benefited from more than £10m in investment from the European Regional Development Fund (ERDF). It was this funding that unlocked the rest of the £70m funding package. It would be impossible for us to deliver that today with the triple whammy of the loss of the ERDF and Regional Development Agency funding, and the uncertainty in the regional corporate sector that exists post-Brexit.84

Mapping EU funding

76.The wide variety of funding sources was underlined by the Association of Leading Visitor Attractions which noted that the Common Agricultural Policy-funded Rural Development Programme “includes £20m specifically targeted toward rural tourism promotion.”85 Discussing the example of the Sage centre in Gateshead, John Kampfner of the Creative Industries Federation emphasised the fact that funding that supports creative projects would not necessarily be classified and recorded as arts funding:

To cite one example, the Sage in Gateshead was constructed using nearly £6 million [£5.6 million] of ERDF funding that was used to detoxify the land before construction. That would not come into any arts reckoning. It is not something one would imagine DCMS or the Arts Council or anyone else would keep figures on.86

77.Explaining the challenge this presents in terms of understanding what the total sum of EU investment is, and where it originates from, Equity said in their written evidence that “DCMS and DExEU should undertake a thorough mapping exercise of existing European funding streams for cultural organisations.”87

Conclusion

78.A key component of access to EU funding has been its importance as a catalyst to unlock other forms of funding, whether public or private. The Chancellor’s assurance that structural funding will be maintained is welcome, but the government would need to provide long–term certainty as to the nature of public investment in tourism and creative projects. Furthermore, the Government’s guarantee does not address concerns that EU partners do not currently wish to partner with UK organisations such as museums. Consequently, British institutions are already missing out on funding.

79.The Government should publish a map of all EU funding streams that support tourism and creative projects, whether dedicated to this specific purpose or not. This mapping exercise should:

In addition, the Treasury and DDCMS should illustrate how ‘value for money’ will be measured in any assessment of those EU funds that will be honoured by the Government’s guarantee.


65 Creative Europe Desk update p 2

66 Creative Europe Desk update p 1–2

67 Creative Europe Desk update p 1

68 IOB 078 para 6.4

69 IOB 095 para 7

70 Additional submission p 2-3

71 Q4

72 IOB 078 para 6.4, IOB 096 para 5.4

73 IOB 011 p 3

75 Q126

76 Letter from Rt Hon Karen Bradley MP, then Secretary of State for Digital, Culture, Media & Sport, to Damian Collins MP, Chair of the Digital, Culture, Media & Sport Committee, 25 October 2017

77 IOB 122 p 6

78 IOB 011 p 3

80 IOB 014 p 3

81 IOB 014 p 1

82 IOB 095 p 4

83 IOB 006 p3

84 IOB 078 para 6.6

85 IOB 081 para 2.5

86 Q5

87 IOB 011 p 3




24 January 2018