Can the Creative Industries help to grow the UK economy?
The creative industries – comprising television, films, music, games and the arts – are a material force within the UK economy and a source of comparative advantage vis-à-vis some other developed economies. They comprise nearly 3% of UK Gross Value Added, and over 10% of the exports of UK services. The current government believes they can make an important contribution to the future growth of the UK economy.
At a recent Royal Television Society event, a panel of distinguished speakers – Diane Coyle (Deputy Chair, BBC Trust), Lord Burns (Chairman of Channel 4, and Santander) and Sir Martin Sorrell (CEO of WPP) – debated this issue. The answers were refreshingly different, as were the ways they tackled the question. Coyle and Burns focused on the UK, Sorrell on the global economy.
Burns summarised the lessons he’s learnt from four UK recessions: it would take a long time to recover in the UK, longer than in the US; there could be a surprise shock that would act as a catalyst; and there will need some stimulus measures to bring the Eurozone out of its current situation (in what could be a ‘lost decade in Europe’ in Sorrell’s words). Nevertheless, he felt the UK creative industries were in good shape, growing faster than the UK as a whole.
Coyle combined short-term pessimism for economic prospects with long-term optimism. She asked how UK creative organisations can compete with larger-scale competitors in the global economy, particularly those from the US. Partnerships would be one of the answers. And how can incumbents survive and thrive in the volatility and uncertainty of the current economic environment?
Growth requires innovation and investment, spurred by new entrants with reference to the thinking of her former colleague Paul Geroski (see Geroski, Paul (2003). The evolution of new markets. Oxford University Press.). We should encourage waves of new entrants, and then expect a period of shake-out when some fail, after which we see the creation of norms and standards and then consolidation. She argued that the BBC has an important role to play in the growth of UK plc, for example through its investment in R&D, training and contribution to partnerships. And for all of the policy measures under debate – the scope of copyright protection, net neutrality and investment in broadband infrastructure to name but a few – it’s vital that there is support and safeguards in place to ensure that consumers can access great UK content. In this environment the development of legislation should be based on two important watchwords - principles and flexibility.
Sorrell captured the polarisation of the global economy, reflecting the global business he leads, and perhaps his own global perspective. Companies face the challenge of maintaining share in ‘planet no growth’ (of the developed world), whilst trying to shift capital and attention to growth opportunities in the emerging and developing world. Much of this commentary chimed with our own ‘New Normal’ narrative. Sorrell would have liked WPP to have made a bigger shift to digital and to emerging markets (both of which comprise a third of WPP global revenues). He sees boards being both cautious and confident, reflecting their balance sheets and the economic uncertainty. Often they’re grinding away on costs, but not thinking big enough on the growth agenda (where there are no limits); finance and procurement directors are often more powerful than marketing directors.
He cautioned the UK creative industries against complacency. They shouldn’t assume that emerging economies want to consume UK-based creative content; he sees increasing growth of domestic creative markets, for example in India and China.
The audience raised the importance of the following factors in helping the creative industries grow:
- Investment in training as the foundation for success in the creative industries, and the worry that it’s likely to be the first activity that is cut in a recession.
- Tax breaks for the TV production sector.
- Patent ownership. One attendee asked why the UK has one of the lowest patent ownership statistics of the developed world, citing the positive causation between a country’s number of patents and economic growth (see here for a discussion of this topic). This may explain recent efforts to encourage more patent ownership.
- The power of harnessing data effectively (through analytics and visualisation) in helping consumers reach outcomes that matter to them, and products and services they really value. Sorrell saw considerable potential in this activity.
Bringing this all together I felt that the creative industries can contribute to the UK growth agenda if they: (a) look to emerging markets for consumer demand, rebalancing their portfolios; (b) understand where their content travels well and where it doesn’t (for example, because there are differences in culture or because there is a preference for domestic creative talent/output); (c) make the case for policy support that will stimulate investment and innovation; and (d) can make the transition to digital profitably– and using the power of analytics quickly.
Can individuals in the UK creative industries think and act differently, avoiding the pitfall of assuming that what’s worked in the past works well now in the polarised global economy we live in? All in all, it’s time for the creative industries to do what they do best – being creative, in this case about growth.
Contact: David Lancefield | +44 (0)20 7213 2263