Culture is future » Financing and economic models


The Royal baby won’t be the only to boost the British economy


The Arts Council England has commissioned an independent report conducted by the Centre for Economics and Business Research (CEBR). It represents one of the first comprehensive studies to determine the contribution of the arts and culture to the modern economy on a national (and regional) scale.

The key findings include:

-       Arts and culture make up 0.4% of GDP, a significant return on the less than 0.1% of government spending invested in the sector

-       Arts and culture is a sector of significant scale with a turnover of £12.4 billion and a GVA of £5.9 billion in 2011.

-       Arts and culture generate more per pound invested than the health, wholesale and retail, and professional and business services sectors.  

-       The arts and culture sector provides 0.45% of total UK employment and 0.48% of total employment in England.

-       At least £856 million per annum of spending by tourists visiting the UK can be attributed directly to arts and culture

-       The economic contribution of the arts and cultural sector has grown since 2008, despite the UK economy as a whole remaining below its output level before the global financial crisis.

Exploring the role of the arts and culture in underpinning the commercial creative industries, the study suggests that public funding of the arts and culture can play a vital role in encouraging creative innovation. Where the private sector is reluctant to invest in risky projects without a certain end point and pay off, public funding provides the support for creative organisations to explore the potential of new ideas that can continue in startling, unthought-of directions.

According to the Arts Council, the aim of the survey is summarized by: "We fund arts and culture because they have the power to nurture and inspire us, to ask questions and pose challenges, whether as a society or as individuals. The contribution culture makes to our quality of life and its ability to fire our imaginations always comes first. It is also right to consider all the benefits that investment in the arts and culture can bring, particularly at a time when there is severe pressure on public finances, so that we can argue for the most effective use of that contribution."

Macroeconomic impacts of arts and culture

The arts and culture industry’s average contribution to the UK’s constituent national and regional economies is 0.4% (of regional GVA). But, while the London arts and culture industry makes a larger contribution to the London economy than the equivalent contribution to any other region at 0.57% (of London GVA), it has the smallest regional multiplier impact. This means the London economy is unable to fully supply the needs of its arts and culture industry, meaning that more of its inputs must be sourced from outside the region, reducing the multiplier effects realized within the region itself.

Spillover impacts through tourism

The analysis of the spillover impact of arts and culture industry through tourism revealed that overall, 10 million inbound visits to the UK involved engagement with the arts and culture, representing 32% of all visits to the UK and 42% of all inbound tourism‐related expenditure, amounting to £7.6 billion. In 2011, visitors arriving on holiday in the UK in 2011 spent £38 million, engaging only with arts and culture.

The role of the arts and culture in supporting commercial creative industries

Commercial creative industries (as recently defined by Nesta) are estimated to provide nearly 5% of UK employment, 10% of UK GDP and 11% of the UK’s service exports. Arts and culture play a significant role in supporting these industries.

The evidence from the primary research demonstrates the apparent breadth of the links between the arts and cultural sector and the commercial creative industries. The commercial creative industries are, moreover, estimated to account for over 26% of the arts and culture industry’s supply chain. Organisations in regular receipt of Arts Council funding are estimated to have commissioned 27 913 new works from 14 758 artists in the UK during financial year 2011‐12.

Similarly, public funding of arts and culture can play a vital role in encouraging creative innovation, overcoming private sector reluctance to invest in risky projects. Such challenging, innovative work can, in some cases, go on to great commercial success, as in the case of War Horse. Inspired by puppetry on show at Battersea Arts Centre, this National Theatre production went on to win numerous awards at home and abroad, have sell‐out runs on Broadway and in Toronto, inspire a hit film and is currently touring Australia and Germany.

Investment in arts and culture as a catalyst for economic regeneration

There are many case studies looking at the regeneration effects of arts and culture, their institutions and events. However, they are usually not assessed in any systematic way, meaning that more careful data collection in the future on individual projects in the arts and culture would make it easier to assess their contribution to regeneration.

Local investment in arts and culture can be expected to vitalise local commercial creative endeavour, helping to rebalance economies that have seen traditional industry decline. For example, during 2008, Liverpool’s year as European Capital of Culture, the number of creative businesses there increased by 8%. Similar increases were observed in the context of the Turner Contemporary Gallery in Margate and the Newcastle‐Gates head cultural development project.

Local amenities, including in arts and culture, can be reflected in ‘willingness‐to‐pay’ to live in a certain locality which, in turn, is reflected in local house prices. Based on a measure of ‘cultural density’ developed for this study, a positive correlation exists between house prices and cultural density. With statistical techniques the study finds that being located in an area with twice the average level of cultural density could be associated with an average £26,817 increment on the value of housing.

Furthermore, evidence from the primary research suggests that the regeneration benefits of investment in arts and culture can be bigger when these investments are related to a specific geographical area. Most of the arts and cultural organisations interviewed make particular efforts to connect with their local area.

Guillaume Pfister

Read the report of the Centre for Economics and Business Research