REPORT MARCH OF THE MODERN MAKERS AN INDUSTRIAL STRATEGY FOR THE CREATIVE INDUSTRIES Will Straw and Nigel Warner February 2014 © IPPR 2014 Institute for Public Policy Research MARCH OF THE MODERN MAKERS An industrial strategy for the creative industries Will Straw and Nigel Warner February 2014 i ABOUT THE AUTHORS Will Straw is associate director for climate change, energy and transport at IPPR. He leads the organisation’s wider work on industrial policy. Nigel Warner is a freelance writer and political consultant, and an associate fellow at IPPR. He previously served as a government adviser on policy for the media and creative industries. ACKNOWLEDGMENTS The authors would like to thank Patrick Barwise, Peter Bazalgette, Roz Cochrane- Gough, Alan Davey, Jim Farmery, Gidon Freeman, Thomas Gault, Helen Goodman MP, Philip Jenner, David Wheeldon and Richard Mollet for their comments on a draft of the report. We are also grateful to our colleagues at IPPR Graeme Cooke, Tony Dolphin, Tim Finch and Nick Pearce for their comments and support throughout the project. All of the views contained in this report are those of the authors, and any errors remain ours alone. Thanks to the BPI, NBCUniversal, Premier League, Viacom and Sky for their kind sponsorship of this project and guidance throughout. We are also thankful to Creative England and BPI for their help organising two respective roundtable discussions in Salford and London. We would like to thank all the participants of the four roundtable discussions that we convened, particularly Dinah Caine, Baroness Bonham-Carter, Bill Bush, Therese Coffey MP, Torin Douglas, James Heath, Adam Minns, Ian Moss, Will Page and Mitchell Simmons. Finally, thank you very much to Jimmy Aldridge for his research assistance and logistical support throughout the course of the project. ABOUT IPPR IPPR, the Institute for Public Policy Research, is the UK’s leading progressive thinktank. We are an independent charitable organisation with more than 40 staff members, paid interns and visiting fellows. Our main office is in London, with IPPR North, IPPR’s dedicated thinktank for the North of England, operating out of offices in Newcastle and Manchester. The purpose of our work is to assist all those who want to create a society where every citizen lives a decent and fulfilled life, in reciprocal relationships with the people they care about. We believe that a society of this sort cannot be legislated for or guaranteed by the state. And it certainly won’t be achieved by markets alone. It requires people to act together and take responsibility for themselves and each other. IPPR 4th Floor, 14 Buckingham Street London WC2N 6DF T: +44 (0)20 7470 6100 E: [email protected] www.ippr.org Registered charity no. 800065 This paper was first published in February 2014. © 2014 The contents and opinions expressed in this paper are those of the authors only. ii IPPR | March of the modern makers: An industrial strategy for the creative industries CONTENTS Executive summary ............................................................................1 Developing an industrial strategy ......................................................2 Recommendations ...........................................................................5 Introduction .........................................................................................7 Methodology ....................................................................................7 Structure of the report ......................................................................7 1. The success and comparative advantage of Britain’s creative industries ..............................................................................8 1.1 The march of the modern makers ...............................................9 1.2 The ‘global race’ for creative content ........................................13 1.3 Good but unpredictable jobs across the sector .........................16 2. The case for an industrial strategy for the creative industries ....18 2.1 The return of industrial policy ....................................................18 2.2 Why the creative industries? .....................................................20 3. Good, but could do better ............................................................23 3.1 Investment in creative companies and content ..........................23 3.2 Skills and workforce development ............................................28 3.3 UK infrastructure in the digital age ............................................30 3.4 Regional centres of excellence and creative hubs .......................33 3.5 The UK’s comparative advantage in global markets ..................36 3.6 Summary .................................................................................40 4. A 10-point plan for the creative industries ..................................41 4.1 The creative industries are serious business..............................42 4.2 Support investment in creative companies and content ............44 4.3 Develop an employer-led approach to skills and workforce development ..................................................................51 4.4 Ensure that UK infrastructure is equipped for the digital age .....52 4.5 Nurture regional centres of excellence and creative hubs ..........54 4.6 Build on the UK’s comparative advantage in global markets for creative content.........................................................................57 References ........................................................................................59 EXECUTIVE SUMMARY Creativity and the arts have always been an important part of our country’s culture and democracy, but in recent years the UK’s creative industries have become an increasingly significant part of our economy and labour market as well. They are now a major comparative advantage for the UK. Indeed, the creative industries are growing faster than almost any other sector of the economy. The aim of this report is to highlight where particular strength and comparative advantage lies within this broad sector, and how a more co- ordinated and concerted approach to government policy could maximise those strengths. According to new government data, the growth of the creative sector’s gross value added (GVA) in 2012 was, at 9.4 per cent, nearly six times faster than that of the rest of the economy. This growth is broad-based among all the related sub-sectors (see definition below), but since emerging from the recession in 2009 advertising and marketing, film and TV, and design have performed particularly strongly. In so far as there is a ‘march of the makers’ in the UK, the creative industries are those modern makers. These promising figures follow a period of considerable upheaval for many sub-sectors, involving major disruption to the revenue and investment mix of those parts of the creative industries that have been most affected by the transition to digital production and distribution. Music, film, television content and advertising were particularly badly affected. Sales of physical products like CDs, DVDs and computer games have rapidly declined, with revenues only gradually being replaced by broad growth in digital sales. These trends were exacerbated by the recession, since these sectors tend to be reliant on a combination of disposable income and discretionary corporate budgets for advertising. Defining the creative industries As defined by the government, the ‘creative industries’ includes nine broad sub-sectors: advertising and marketing; architecture; crafts; design (including fashion); film, TV, video, radio and photography; IT, software and computer services; publishing; museums, galleries and libraries; and music, performing and visual arts. Within this list is a group of sub-sectors that face specific challenges and opportunities relating to the proliferation of digital technology – particularly those sectors that tend to be technologically aided in the creative process, and that have higher levels of digital output. While these factors can exponentially increase the prospects for sales revenue, they also 1 BOXED TEXT CONTINUED expose those creative sub-sectors to the problems associated with product reproduction at zero marginal cost. We have tended to focus on these sectors in this report, but believe that the broad thrust of our recommendations will support all sub-sectors in the creative industries. Alongside their rapid growth in domestic sales, the UK’s creative industries show strong signs that they are winning the global race for creative content. Between 2009 and 2011, exports of the creative industry’s services grew by 16.1 per cent, compared to 11.5 per cent for UK service exports overall. From Americans watching Downton Abbey, to Asians listening to Adele, to Africans tuning into the Premier League, British content is global. However, competition from overseas is becoming increasingly intense. Countries with more effective industrial policies are quick to steal a march on us, as, for example, Canada has done in the video games sector in recent years, through an aggressive set of tax incentives. Creative enterprises are important sources of employment: one in 12 jobs in the UK are either in the creative industries or in ‘creative’ jobs in other sectors. Jobs in film and TV, design, IT, software and computing, and publishing are growing particularly rapidly. The fact that the sector is growing means that there are opportunities for people with a range of different skills. However,