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Home / Clients / Blog / The UK creative and cultural economy: before, during and after COVID-19
Jo Wright
Jo Wright • 13 Nov 2020
Partner, Vice Chair

The UK creative and cultural economy: before, during and after COVID-19

  • Economic Development and Public Policy

The United Kingdom has a long history and global reputation as a creative nation. It has produced some of the most critically-acclaimed, commercially-successful and internationally-influential artists, brands, cultural organisations and creative output – from Hamlet to Harry Potter; the BBC to The Beatles. Its regulatory and intellectual property frameworks are well-established and world leading. It is a net exporter in cultural products, services and content to the rest of the world.

The creative and cultural industries are central to many national, regional and local policies and strategies. Their economic value, social impact and contribution to place-making and regeneration are reflected in national initiatives such as the Cultural Investment Fund, Future High Streets Fund, Towns Fund and, most recently, the £1.57 billion Culture Recovery Fund intended to protect cultural, arts and heritage organisations in the context of COVID-19.

Primary statutory responsibility for arts, culture and creative industries in England rests with the Department for Digital, Culture, Media and Sport (DCMS) – along with some aspects of the media throughout the UK (e.g. broadcasting, internet). However, within the UK political and legislative context, arts, culture and economic development are ‘devolved matters’, meaning that the legal powers and responsibilities for setting policy and administering funding for many aspects of culture outside England rest with the devolved governments of Scotland, Wales and Northern Ireland.

Recognising their considerable, collective economic contribution and shared characteristics, the UK Government first formally mapped and defined the ‘creative industries’ at the turn of the 21st Century. In doing so, a diverse group of cultural and commercial activities – including traditional art forms (e.g. craft, literature, music, performance, visual art), technology-enabled ‘new media’ (e.g. TV, radio, film, video, games) and creative services (e.g. architecture, advertising, design, designer fashion, software development and publishing) – were brought together under a single sector definition as: “those industries which have their origin in individual creativity, skill and talent and which have potential for wealth and job creation through the generation and exploitation of intellectual property”. While the sector’s precise scope, based upon Standard Industrial Classification (SIC) codes, has evolved over time, this core definition has remained.

In recent years, DCMS has introduced further sector definitions including the ‘cultural industries’ – essentially a subset of creative industries SIC codes, albeit with subtly different terminology and groupings: arts; film, TV and music; radio; photography; crafts; museums and galleries; library and archives; cultural education; and operation of historical sites and similar visitor attractions. In Let’s Create, it’s current 10-year strategy, Arts Council England defines culture as “all those areas of activity associated with the artforms and organisations in which (it) invests: collections, combined arts, dance, libraries, literature, museums, music, theatre and the visual arts.”

The creative industries sector has been one of the fastest growing in the UK in recent years, with GVA growth of 43.2% in real terms between 2010-18 – more than twice that of the economy as a whole. Between 2017-2018 the increase was 7.4% – more than five times that of the wider economy. According to DCMS estimates, the sector contributed more than £111 billion in gross value added (GVA) to the economy in 2018 – nearly 6% of total UK GVA. It accounted for more than 2 million jobs in 2018 – 6.2% of the total UK workforce. Employment in the sector increased by nearly 31% from 2011 to 2018 – three times the growth rate of employment in the UK overall. It is characterised by high proportions of sole traders and micro-businesses with relatively few large companies, particularly outside London.

The sector is highly diverse, not just in its make-up, activities and outputs, but in their relative economic and social impact:
• The largest subsector in 2018 by both GVA (£45bn) and employment (733,000) was IT, software and computer services. This subsector comprises ‘intrinsically digital’ activities such as the development and publishing of software, apps & computer games.’
• The next four largest subsectors (Film, TV, video, radio and photography; Advertising and marketing; Publishing; and Music, performing and visual arts) contributed nearly £60bn annual GVA between them and employed nearly a million people. Although more mature, these industries have nonetheless experienced significant growth, in large part driven (but also fundamentally challenged and disrupted) by developments in digital technologies.
• Museums, galleries and libraries made a smaller direct GVA contribution and have seen lower growth, but they are unquestionably vital to supporting the visitor economy and deliver many other societal benefits. A 2.5% decline in employment in the subsector from 2010-18 can largely be attributed to the economic pressures of prolonged austerity, reduced levels of funding and investment and, consequently, of staffing and activity. It has accentuated the importance of diversifying income sources and creating more commercial, sustainable business models.

And then came COVID-19, the full impact of which will not be known for some time. There are reasons to be confident that the sector will recover, in some form, and return to growth. It is a sector characterised by creativity, innovation, resilience and agility. It is driven, ultimately, by innate human appetites for art, music, dance, drama, literature and other cultural activities. However, the impact of COVID-19 – on the economy, the creative and cultural industries specifically and the public enjoyment of many familiar forms of creativity and culture – has clearly been considerable. Following a period of full ‘lockdown’, where public venues and shared workspaces experienced enforced closure, ongoing restrictions and changes in public attitudes and behaviours continue to take a heavy toll – particularly on those individuals and organisations whose creative practice and business models are based on mass public gatherings, such as live music, theatre, dance, comedy and cinema. Analysis by Oxford Economics (2020) concludes that:
• The creative industries are projecting a combined £74 billion turnover loss over the course of 2020 compared to 2019 (-30%). This is expected to translate into a GVA shortfall of £29 billion compared with 2019.
• In 2020, the creative industries are projecting a 119,000 drop in employment and a further 287,000 job losses among self-employed workers (406,000 jobs at risk in total).
• Within the sector, performing arts is expected to be hardest hit, with theatre potentially losing £3 billion (61%) of its turnover compared to 2019 as a result of cancellations. This does not take account of the future reluctance of audiences to return to venues.
While consumer demand for digital content and services has grown as a result of venue closures and increased leisure time for furloughed workers [e.g. Netflix gets 16 million new sign-ups thanks to lockdown, BBC News 12 April] constraints on the ability of cultural organisations and practitioners to create new content under social-distancing restrictions combined with gaps in skills and experience or effective business models for producing, distributing and monetising digital content, means that increased online demand and output has failed to compensate for loss of revenues from core ‘offline’ activity. Consequently, the Cultural Recovery Fund has been a vital lifeline for many in the sector, without which they would not have remained viable, even in the short-term. Unfortunately, not all will be able to access this lifeline and, for some who have, it may yet prove to be insufficient.

Major challenges remain, particularly for those organisations dependent upon bringing people close together in shared, physical space. When will a return to ‘business as usual’ be safe and permitted? Even then, will it be economically viable? Will audiences be sufficiently confident to return in similar numbers? Will the supply of skilled, experienced staff, freelancers and businesses still be there? We do not yet know the answer to these questions, but we do believe that the collection and evaluation of data and insights, combined with careful interpretation by those with knowledge and experience of this unique and complex sector, will be crucial to shaping the policies and strategies needed to aid the recovery of our vital creative economy and world-leading arts and cultural sector.

British Council – Wider Europe Creative Economy & Policy Grants Scheme

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