Access to finance for the creative industries and a call to define the “public service remit”

Last week, John Newbegin of Creative England organised a unique conference bringing creative industries and finance people together to talk about what they could do together. This week, BIS and DCMS published a really disappointing report on the issues surrounding access to finance for creative companies which did little but demonstrate its own ignorance of the subject.

The “Nice Idea, Nice Little Earner”  conference brought together representatives of private investment companies, banks, trusts, VCs and Angel investors gathered together alongside a broad mixture of creative industries policy-makers. Although the combination was a little bit like oil and water, there was a sense of possibility in the air which gave rise to some optimism.

The key themes to emerge from the discussion were around how to increase “business capacity” in creative industries practitioners. The value of private sector mentors working with publicly funded entities seems clear, but how to gather good quality mentors with relevant experience is more challenging. Alongside this, increasing access to finance and creating “investment ready” businesses and organisations was a major concern. It was clear that the expertise on both the finance and the creative sides of the table had some way to go to find a common language. Whether in describing the technicalities of particular investment instruments or their philosophy of investment, the private sector has an education and  translation task on its hands if this dialogue is to deepen. Equally, discerning the value potential and being clear about how to take a commercial route that could deliver a real return in both creative companies and cultural organisations clearly also requires crisper definition.

This optimism was in stark contrast to a document commissioned and published this week by the DCMS and BIS called Access to Finance for Creative Industry Businesses by Dr Stuart Fraser of Warwick Business School. The report seems to suggest that creative industries may suffer from a greater lack of access to finance than some other sectors but that this is mostly because it is more risky. It also seems to suggest that they don’t bother looking for finance as much as other sectors.  It is a  disappointing and under-researched piece of work. Most of the focus is on a so called “longitudinal econometric” survey of UK SMEs in the creative industries. It is singular in its failure to address any of the complicated issues in the investment cycles required in the development of intellectual property and in the commercial structures that value intellectual property rights. The report seems  woefully small-scale in its ambition for businesses, it suggests that most funding for creative industries is likely to be loan or debt financing, overdraft facilities or indeed forms of hire purchase. Very little attention is paid to private equity investment and yet the general perception in the industry is that this is where the real growth and value will come from. The report also places a curious emphasis on architectural practices, seemingly because most of the creative industries businesses covered by the Small Business Survey that the report’s evidence is mostly drawn from, were in fact architects’ practices. A missed opportunity by no doubt demoralised BIS and DCMS here. Let’s hope that this poor piece of work does not infect the appetite for a closer public private partnership which seems to be, by necessity growing in the creative and cultural industries in the UK right now and in the private sector too.

And more needs to be done. Just as in the academic world where there is increasing pressure to draw up with more clarity the distinctions between pure and applied research,  we need to be able to do a better job of articulating the separation and identification of  what we might call the subsidised arts and the commercialisable arts,  The cultural sector needs to articulate more clearly that which serves a public service remit and that which does not.  It’s not because there is no support for pure research or the subsidised arts (although it’s getting harder to fight against  the growing political pressure to make everything pay directly for itself),  it’s simply that with resources  now under such pressure, greater clarification is required of which activities and programmes come under which headings.

Obviously big players like the Tate and British Museum have resolved this fairly successfully, but there is no UK national articulated definition of the public service remit for cultural institutions and subsidised arts organisations. There needs to be one.  Aside from the obvious motivation on the part of some curators to retain a degree of obscurity here, how can we expect the private investment community to explore commercial opportunities with cultural organisations if they can’t determine what is on offer and what is ring-fenced for the public good?  We need to analyse quite carefully which aspects of education and public access need to be separated out and preserved and which do not.

There is a new landscape of public support developing with new and old players offering a possibility of some kind of continuum,  from the AHRC’s commitment to four new Creative Hubs and a Centre for Copyright and IP Research in the Digital Age, to the Technology Strategy Board’s ictomorrow digital testbed platform, its digital and creative industries programmes and the possibility of a Digital and Creative Industries Technology Innovation Centre, through to the Arts Council’s imminent Innovation Fund and other contributions from NESTA, Creative England and the BFI. The key to making these different interventions successful is the extent to which they are coordinated, differentiated from one another and ultimately are successful in encouraging private investment.  It’s not very joined up yet and it would not be unfair to ask how these different bodies intend to collaborate and how practitioners in the field should distinguish between their different programmes.

The government continues its regular efforts to try to get industry segments to “speak with one voice” through such entities as the newly convened but vaguely agenda’d Creative Industries Council. Meanwhile, perhaps a necessarily smaller group of policy makers and public funders might collaborate to sharpen the focus of new investment and support vehicles for creative industries by convening with the private investment community and collaborating on the shape of programmes going forward to make sure they speak with one voice too.

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One response to “Access to finance for the creative industries and a call to define the “public service remit”

  1. As regards the Fraser/DCMS/BIS report, I am baffled as to how, after all this time, can we still be commissioning research on “access to finance” from consultants who evidently know so little about the music business, or the film business, or the games business, or the arts, or indeed any species of creative enterprise. This report is commercially ignorant, methodologically dubious and lacking in any recognisable awareness of business context, sector understanding, vision or ambition.

    In part at least this must surely reflect a failure in the briefing process, as well, perhaps, as lack of corporate (departmental) memory. There is no reference to relevant earlier work commissioned by the DCMS including relevant strands of the last government’s CEP programme, nor to work commissioned by the European Commission, nor to KEA’s work for Nantes Metropole which includes UK insights. This is worrying. There is more than enough expertise around to prevent officials from wasting resources in this way.

    More generally, as Jeremy says in this blogpost, there is actually a great deal happening across the length and breadth of the arts, media and creative economy sector, some of it encouraging. Lack of “joined-upness” is certainly an issue however. There are also some rather big questions about the continuing appropriateness of analogue era institutions, including funding bodies, for an age in which so many of the old boundaries are dissolving.

    But the biggest issue, to return to the beginning, is the availability of risk capital and finance generally, of which the yawning, continuing gulf in understanding betweeen the creative community, broadly defined, and the investment community, broadly defined, is a dominant feature.

    On this last point the “Nice Idea, Nice Little Earner” conference at Badminton House, to which Jeremy refers, exposed this gap in a startling but wholly productive manner, demonstrating just how much “missionary” work has to be done – from both directions – to bridge the gap if the UK is to continue to be competitive in the global creative economy of the future.

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