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Creating Growth Fishmongers’ Chambers F 020 7645 9501 110 Upper Thames Street How the UK Can Develop World London EC4R 3TW Class Creative Businesses NESTA T 020 7645 9500 (reception) Creating growth Fishmongers’ Chambers F 020 7645 9501 110 Upper Thames Street How the UK can develop world London EC4R 3TW www.nesta.org.uk class creative businesses NESTA Research Report “There’s a growing market for creative businesses who strive to innovate and combine creative excellence with commercial success.” Published April 2006 Printed on recycled content coated paper CI/90 NESTA, the National Endowment Foreword for Science, Technology and the Arts, Innovation increasingly occurs where science, technology and the arts meet. The UK’s creative industries — from advertising agencies to video game is working to transform the UK’s developers — are a significant source of innovation for the UK economy, and have generated millions of pounds in revenue and thousands of new capacity for innovation. We invest in jobs. On one measure, these sectors account for eight per cent of the all stages of the innovation process, UK economy and employ more than a million people in over 110,000 businesses — this means that the creative industries are bigger than backing new ideas and funding the financial services sector. new ventures that stimulate It is welcome that these sectors have received so much attention over entrepreneurship. the last ten years and that they have been promoted and supported by policymakers across the UK. The UK has led the world in its recognition of the importance of the creative industries, and has made a significant NESTA is the single most potent investment in their development. catalyst for innovation in the UK. This report is a commercial analysis of the UK’s creative industries, and considers how well-placed these industries are to seize on the opportunities Our strong evidence base helps of a growing global market. It does not attempt to capture the cultural and social value of these industries. As it indicates, the future commercial to influence policy. Our partnerships potential of these sectors is immense, but so are the challenges that they and networks broker ideas across face. The reason for this is simple: the global competition faced by the UK’s creative businesses has increased alongside the growth in the opportunities sectors, accelerating the process in international markets. of innovation. Our pioneering models This report is published during the Department for Culture, Media and of investment are being adopted by Sport’s Creative Economy Programme, which is examining the key drivers of productivity in the creative industries. This programme represents a organisations throughout the UK. valuable opportunity to ask difficult questions — of national policies, of the forms of investment and support provided by organisations such as NESTA, and of creative businesses themselves. It also requires us to consider the Underpinning our work is the reality of the UK’s creative industries as they are today — both the notable successes and the areas of vulnerability — and to consider the possible fundamental view that successful consequences of any complacency. innovation fuels long-term economic Perhaps most importantly, this requires the UK to be clearer about its and social progress in the UK. It’s an ambitions for the creative industries, particularly its economic and commercial ambitions, and how these ambitions might be realised as essential ingredient of our competitive we look forward to the next ten years. edge in the global marketplace. This report is intended as a positive — but challenging — contribution to this process. Jonathan Kestenbaum Chief Executive, NESTA CREATING GROWTH / INTRODUCTION / PAGE 1 Executive summary The UK’s creative industries are facing increasing international competition In particular, creative businesses and policymakers need to appreciate the The UK has led the The UK has a wealth of creative talent and the creative industries represent scale of the competitive challenges now facing the sectors in the UK. International world in terms of a significant part of our economy. In the past ten years, UK policymakers From film production to design, new international centres for creative competition is have led the world in recognising and supporting the creative industries, business are developing rapidly. These are challenging established developing the and these sectors have been seen as some of the success stories of the businesses, including those based in the UK. UK television exports have being supported economy. A growing international market is there to be won by creative fallen for the second year running (despite an overall increase since 1998). creative industries businesses that are willing and able to innovate. Some UK creative In design, overseas earnings have halved since 2001, while the value of and driven by as a focus for businesses are already exploiting these opportunities, but others need more exports in music, the visual and performing arts in 2003 was down 20 per policies that are help in order to do so. The UK’s creative businesses have the potential for cent from 2000. International competition is being supported and driven by policy, and there outstanding success, but a renewed approach to policy, one which focuses policies that are often more ambitious than those in the UK. There should often more on innovation and growth, is needed in order to ensure the success of these be no room for complacency among policymakers or in the creative has been a rapid sectors for the next ten years. industries themselves. ambitious than growth in initiatives those in the UK The creative industries matter to the UK Three key issues need to be addressed across the UK’s creative industries: across the UK On one measure the creative industries constitute a larger part of the the lack of scale of most businesses; difficulties in accessing markets; economy and employ more people than the financial services sector. and a lack of innovation to cope with and exploit structural changes in The most recent estimates suggest that the creative industries account these industries. for eight per cent of the UK economy — a total of £56.5 billion. Exports by the creative industries contributed £11.6 billion to the UK’s balance of A renewed policy approach needs to have a greater clarity of purpose that trade in 2003. The UK has led the world in terms of developing the creative focuses on commercial growth, in order to seize on the opportunities in industries as a focus for policy, and there has been a rapid growth in international markets and respond to increasing international competition. initiatives across the UK to support the development of creative businesses. More creative businesses need to prioritise commercial growth The global market value of the creative industries increased from $831 Many creative owner-managers take an “organic” approach to the growth of billion in 2000 to $1.3 trillion in 2005. For example, global revenues from their businesses, by adding slowly to their customers and clients through cinema admissions amount to $25 billion, the same size as the market for the distinctiveness of their creative work. However, the purpose of creative computer and video games. Similarly, the world market for mobile music business is to harness and exploit creativity in a commercial context and for is expected to reach $6.4 billion by 2009. commercial ends. Creative businesses in the UK need a greater awareness of business strategy skills and related core skills such as financial planning. Policymakers from across national governments, and not just the traditional advocates for these sectors, need to concentrate on the opportunities and Business support services need to have a deeper understanding of creative challenges facing these industries from an economic point of view. businesses and the markets for creative products and services in order to help firms to develop core skills such as business strategy skills, financial planning The UK’s creative industries need to be better placed to exploit and marketing. Such services will need to tap into the motivations of creative these opportunities entrepreneurs and present business skills in a language and in a form that they Evidence suggests that there are reasons to be concerned about the will respond to. Furthermore, given the range of the support that is available, current performance of these sectors, beyond the variations that result organisations such as NESTA should act as accessible gateways for creative from the normal economic cycle. Over the past few years, employment has businesses that are looking for public investment, support and development, fallen in advertising, design, film production, games development, music and opportunities for networking. and the visual and performing arts. For example, employment in advertising has fallen by more than 20,000 in just three years, from a high in 2001. More of these businesses need to grow into world class businesses that This is a reflection of lower revenues and consolidation in these industries. achieve significant international success and reach. Too many UK creative In design, there has been a 31 per cent fall in turnover since 2000. businesses have been unable to respond effectively and on a scale that Film production spending was nearly a third lower in 2005 than in the ensures their survival and continued growth in the face of international previous year (including international productions filming in the UK). competition. Policy and support initiatives across the UK need to include a The number of people working in games development has fallen by six stronger focus on how these types of businesses might be developed. This is per cent since 2000, despite the continued growth in the market. not about picking winners. Rather, it is about being more responsive to the actual needs and ambitions of individual creative businesses, some of which Policymakers from across the UK need to ensure the development of a stronger do have a strong focus on achieving high growth and international reach.
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