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ALL THE WORLD’S A STAGEGROWING BRITAIN’S CREATIVE INDUSTRIES

AUGUST 2016

All the world’s a stage: growing Britain’s creative industries2

The UK is home to world-leading businesses across the range of sub-sectors that make up the creative industries – and demand for them is growing. Exports from the sector compare favourably with other, sometimes more high-profile industries, and contribute a substantial amount to the UK economy. Additionally, the internationalisation of our creative industries is helping to drive up our reputation as a hub of culture and innovation, so helping to bolster our soft power overseas.

As the UK carves out a new international role following the vote to leave the EU, it is vital that our creative industries continue to make a positive economic and social impact on the world stage. The EU is an important market for the sector, and it will continue to be in the future. Meanwhile, there are clear opportunities elsewhere, with global demand for creative goods and services on the rise, as developments in infrastructure and digital technology offer greater access to creative content, habits change, and a growing global middle class has the disposable income to spend more on a wider range of products and services.

As new opportunities open up in both established and emerging markets, the UK’s creative industries are in an enviable position. But in order to harness the full potential of the sector, government and business need to take steps to improve support for their international ambitions. These include:

• The need for the creative industries international strategy and export programmes to be driven by bodies with specialist sectoral expertise

• More and improved diplomatic support for the sector from the government

• Ongoing backing for efforts to improve statistical data available for the sector and its exports

• A greater emphasis from across business on the value of sharing best practice in exports and internationalisation.

EXECUTIVE SUMMARY

All the world’s a stage: growing Britain’s creative industries 3

Back in April 2015 David Cameron declared that:

“I’m always saying we’ve got to export more as a country. Gogglebox is going to be exported all over the world. This is going to be a great winner for Britain.”

And so it has proved. As of 2016, the Gogglebox format has been exported to 31 territories across the globe. While the majority of these are in Europe, with 24 countries purchasing the product, sales have also been made further afield, including in Mongolia, South Korea, and Argentina.

This success is not limited to Gogglebox. The GVA of the creative industries increased by 37.5% between 2008 and 2014, more than any other Blue Book sector.1 Turning to international growth, in the five years from 2009 to 2014 the value of exports from the UK’s creative services rose by over 48% while the amount exported in 2014 alone reached £19.8bn, or 9.0% of all UK service exports.

Of this, our IT, software, and computer services industries make up almost 45%. This is followed by exports of services from the film, TV, video, radio and photography sector, accounting for just under a quarter of revenue. Service exports of our publishers have also seen considerable growth, increasing by 62.8% between 2013 and 2014.2 Meanwhile, according to ONS sources, the UK’s advertising services yield greater export value than insurance or construction services, and more than twice as much as either accounting and auditing or recruitment.3 Service exports of our publishers have also seen considerable growth, increasing by 62.8% between 2013 and 2014.4

The creative industries clearly have an extensive economic footprint, but their value reaches far beyond this, helping to shape the UK’s global brand and our cultural influence. In an international market for tourism, education and investment,

they are a vital ingredient in the mix. Burberry, for instance, is consistently ranked as one of the top international brands,5 while the world’s fastest swimsuits, worn by dozens of winning athletes, are designed here in the UK.6

Our musicians have fan bases reaching to far-flung corners of the globe, with five of the top ten best-selling international albums of 2015 delivered by UK artists.7 Meanwhile, the UK is a top investment destination for overseas games companies, and for film and TV production. Warner Bros, for instance, have recently bought out Traveller’s Tales, the makers of LEGO Star Wars,8 while Disney’s rebooted Star Wars franchise and spin-off productions have made Pinewood Studios their long-term home.9

These are just some of the examples which demonstrate our status as a world-leader in the creative industries and which help influence our soft power, and positive perceptions of the UK. This is supported by data from sources such as Portland Communication’s 2016 Soft Power 30 Report, placing the UK 2nd in the world for cultural influence, on the basis of metrics such as the number of international tourists, the number of films appearing in major film festivals, and the size of the country’s music market.10 It is also evident from survey data such as the GfK Anholt Nations Brand Index 2015 which sees the UK ranked 3rd out of 50 countries for “interesting and exciting contemporary culture,” and 4th for both “vibrant city life and urban attractions,” and “creative, cutting edge ideas & new ways of thinking.” 11 Meanwhile, the MasterCard Global Destination Cities Index ranks London as the top destination city for international travellers, with 18.82 million visitors in 2015.12 Given the UK’s recent vote to leave the European Union, the role of the creative industries in portraying the country to the rest of the world – and helping to ensure that this positive image overseas is maintained – will be more important than ever.

All the world’s a stage: growing Britain’s creative industries

1 Surging global demand for the UK’s creative goods and services is driving big wins for the country and the economy

4

CASE STUDY: GOGGLEBOX

Gogglebox in demand worldwideGogglebox is a factual entertainment series on Channel 4, featuring couples, families, and friends across Britain as they catch up on their favourite British television programmes.

The series first aired in the UK in March 2013 with an audience of 732,000. As of 2015 it has taken a prime time Friday night slot; is generating approximately 5.8 million viewers per episode; and is one of Channel 4’s top performing shows, winning a BAFTA in 2014, and two National Television Awards in 2015 and 2016.

The popularity of the UK version has been a key selling point for the production company, Studio Lambert, to export the programme format to international buyers.

Value of UK creative services exports grew by

48% between 2009-14

2009

£13.3bn2014

£19.8bn

5All the world’s a stage: growing Britain’s creative industries

global albums of 2015 came from British artists

5of top 10

2 The international opportunity is set to grow so the creative industries can afford to be ambitious

Worth £11.4bn, and in receipt of 57.3% of all creative services exports, the EU is an important market for the creative industries, and it will continue to be in future.13 But the UK’s reputation as a leader in the sector means that we are in a formidable position to take advantage of international opportunities, with global demand for creative industries on the rise. International trade in creative products, for instance, more than doubled from 2002 to a record $624bn in 2011, with the average annual growth rate during that period 8.8%.14 Meanwhile, there are clear opportunities to export to markets outside the EU, with domestic consumption of creative products growing in developing economies across Asia, Latin America and Africa, as well as in developed ones, as the table below shows.

This demand has been boosted by rising real incomes in industrialised countries, while the real prices of many of these products has also fallen over time. It is also reflective of modern lifestyles linked increasingly to social networking, innovation, connectivity, style, status, brands, and cultural experiences,15 as exemplified in the case study opposite.

Developments in infrastructure and digital technology are also driving consumer demand, offering access to a growing range of creative content through a broader array of devices and channels, such as video on demand, podcasts, and streaming. This means that the creative industries have the chance to reach a mass market for the first time in some countries. In India, for instance, the number of smartphone users is rapidly growing, and tipped to more than treble, from a base of 76 million in 2013 to 279 million by 2018, as the table below shows.16

Exhibit 2: Top 20 Countries by number of smartphone users (millions) over time

2013 2014 2015 2016 2017 2018

1 China 436.1 519.7 574.2 624.7 672.1 704.1

2 US 143.9 165.3 184.2 198.5 211.5 220

3 India 76 123.3 167.9 204.1 243.8 279.2

4 Japan 40.5 50.8 57.4 61.2 63.9 65.5

5 Russia 35.8 49 58.2 65.1 71.9 76.4

6 Brazil 27.1 38.8 48.6 58.5 66.6 71.9

7 Indonesia 27.4 38.3 52.2 69.4 86.6 103

8 Germany 29.6 36.4 44.5 50.8 56.1 59.2

9 UK 33.2 36.4 39.4 42.4 44.9 46.4

10 South Korea 29.3 32.8 33.9 34.5 35.1 35.6

11 Mexico 22.9 28.7 34.2 39.4 44.7 49.9

12 France 21 26.7 32.9 37.8 41.5 43.7

13 Italy 19.5 24.1 28.6 32.2 33.7 37

14 Turkey 15.3 22.6 27.8 32.4 37.2 40.7

15 Spain 18.9 22 25 26.9 28.4 29.5

16 Philippines 14.8 20 24.8 29.7 34.8 39.4

17 Nigeria 15.9 19.5 23.1 26.8 30.5 34

18 Canada 15.2 17.8 20 21.7 23 23.9

19 Thailand 14.4 17.5 20.4 22.8 25 26.8

20 Vietnam 12.4 16.6 20.7 24.6 28.6 32

Source: eMarketer, December 2014. Available at http://www.emarketer.com/Article/2-Billion-Consumers-Worldwide-Smartphones-by-2016/1011694

Exhibit 1: Value and shares of creative goods ($), imports, annual 2003 – 2012*

2003 2012

1 Developed economies: America 79,309 102,876

2 EU27 93,291 139,304

3 Developing economies: Latin America 6,379 17,945

4 Developing economies: Africa 1,830 5,112

5 Developing economies: Asia 31,144 96,794

*US dollars at current prices and current exchange rates in millionsSource: http://unctadstat.unctad.org/wds/TableViewer/tableView.aspx


CASE STUDY: REES BRADLEY HEPBURN AND YOUNG BRITISH DESIGNERS

Rees Bradley Hepburn and Young British Designers leverage digital tech to access the US market British fashion is recognised across the globe for being innovative and original, fuelled by some of the best educational establishments. At the same time online retailing has grown significantly and is universally forecast to continue to do so. Young British Designers (YBD) was launched in 2010 to take advantage of this, as the first – and still the only – fashion destination focusing purely on promoting and selling the wares of emerging British Designers online.

Since its inception YBD has discovered, mentored, and launched some 250 emerging British designers. With support from Midlands-based advertising agency Rees Bradley Hepburn Ltd (RBH), the two organisations have leveraged trends around the creation, distribution and consumption of content, via an increasing number of channels.

YBD achieved a top ten position in the Cision/Daily Telegraph analysis of the most influential fashion blogs on Twitter; has developed a second online Facebook shop; and has created a brand largely through exploitation of social media, with 19,000 Twitter followers, 14,500 Facebook followers, 11,500 Pinterest Followers, and 4,000 Instagram followers. This is all having an impact, with both China and US engagement up 25% year over year, equating to an 8% increase in sales over the same period.

Angel Gibbons, Director at RBH commented:

“As a creative marketing agency we are always looking at ways that social engagement and technology can work together to amplify a brand’s message and target consumers. Our partnership with YBD has resulted in a significant focus and successful business return on reaching new markets and their wealth of consumers looking for the ‘new’ luxury fashion brands.”

7All the world’s a stage: growing Britain’s creative industries

Opportunities in the creative industries are visible across a range of sub-sectors and regions. The North American video games market, for example, generated approximately $24.05bn in total games revenue in 2015, and the mobile market is expected to grow 51% year over year.17 Meanwhile, as the below chart shows, the American motion picture and sound recording industries are projected to grow by more than a third in the next decade, to around $350,000m at the very least. As this is a sector that has often outstripped GDP growth, the real value is likely to be greater.

Exhibit 3: Indicative GVA projection of USA’s broadcasting, motion picture, and sound recording industries ($m)

200

250

300

350

400

202520242023202220212020201920182017201620152014

US$M

Source: EY, in combination with US Department of Commerce – Bureau of Economic Analysis (Industry data), Oxford Economics (GDP forecast)

“ By 2030 two-thirds of the global middle class will be residents of the Asia-Pacific region.”

Elsewhere a growing Asian middle class is emerging, with the cash flow to spend more on cultural and creative industries.

With some estimates putting the number of middle class consumers at 109 million, well ahead of the 92 million adults forming part of the American middle class, China is the embodiment of this trend.18 Music streaming services are now used by 66% of Chinese consumers, for example, and 57% of China’s middle class attend live music performances, compared with 51% of the total US population.19 As Exhibit 4 shows, the prospects for continued expansion are good, as the number of middle class consumers is predicted to rise,20 while strong economic growth and changing attitudes among younger age groups combine to produce a rush of consumers.



The movement is also clear in lesser-considered markets such as Nigeria, in which a third of the population comprises 15 to 34 year olds,21 while GDP growth is strong, averaging 5.7% respectively from 2010 to 2014. Nigeria already has the largest population, economy, and consumer market on the continent. Looking ahead, it is expected to see the world’s second fastest-growing middle class, with the number of households in this category set to rise from around 10 million in 2015 to nearly 15 million in 2030.22

Consequently, UK-based independent record company, Beggars Group, is now licensing for the first time in Nigeria, as well as in countries such as Angola and Uganda.23 More broadly regional platforms like the Kleek, a pan-African music service, are also starting to develop, while global offerings such as Apple Music, Deezer, and iTunes are coming on-stream in more and more countries.24

But while global demand is increasing, so too is competition from overseas. Some countries have long-positioned themselves as a home for the creative industries. In 2001, for example, Australia was one of the first countries to offer foreign film productions a tax rebate. After being refreshed to include tax incentives of 30% back for post-production, digital, and visual effects, and up to 40% for qualifying feature films, these have had a palpable effect. Foreign film activity last year generated a record A$418m (US$300m) expenditure, more than double the A$204m of the previous year,25 and Australia has attracted productions ranging from Sir Ridley Scott’s next instalment in the Alien franchise, Alien:Covenant, to Marvel Studios’ Thor: Ragnarok. These are expected to bring more than A$300m in offshore investment and over 3000 jobs.26

Exhibit 4: Projected number of middle-class adults (millions) by region

0 2000 4000 6000

Middle East and North AfricaSub-Saharan AfricaAsia-PacificCentral and South AmericaEuropeNorth America

2030

2020

2009

Source: IEMS; Kharas and Gertz, 2010 Available at http://www.brookings.edu/~/media/research/files/papers/2010/3/china%20middle%20class%20kharas/03_china_middle_class_kharas.pdf

70%Competition to be the world’s leading hub for creative industries is mounting, with the number of creative businesses in Berlin growing by 70% in the last decade

10 All the world’s a stage: growing Britain’s creative industries

70%All the world’s a stage: growing Britain’s creative industries 11

Now, emerging markets like China are also starting to jostle for position, and may provide further competition in the long-term. In its 12th Five Year Plan (2011), for instance, the Chinese government for the first time stated a desire to develop the country’s cultural and creative industries into a ‘pillar industry.’ These are designated sectors which contribute at least 5% to the mainland’s annual gross domestic product. Meanwhile, the Ministry of Finance is reported to have invested heavily in the culture, sports and media sectors and has stated its target is to triple revenue from the creative industries by 2020. Evolving cultural sectors, like digital publications and mobile multimedia, are cited as key areas of focus, as is the construction of 50,000 cinema screens in rural areas, and the development of television and radio networks to ensure reach is near total.27 Chinese firms have also sought to strengthen their content creation and creative IP portfolios through purchase of ‘big ticket’ US franchises. Wanda Group’s takeover of US studio Legendary Pictures,28 for instance, brings the Jurassic World and Warcraft franchises within their stable.

Moreover, while the UK, and in particular London, is currently known the world-over for the strength of its creative and tech companies, together employing more people than financial services and banking, and contributing 10.7 % of total GVA in London, this could change.29 The capital has recently dropped out of the top ten best European cities for investing in property, and new hubs are emerging elsewhere. In Berlin, for example, the number of companies in creative industries grew by 70% during the period 2000-2012, while turnover increased by 68%.30 London has clearly succeeded in the past couple of decades in attracting a creative workforce, made up in part by non-UK talent with the knowledge and insight to help create and market products for their home countries. But the rising cost of housing and potential changes to immigration rules as a result of the recent referendum are now a major concern for British creative businesses operating here. Access to the best of European talent and ease of mobility across the EU will be important elements in helping support the ongoing competitiveness of the creative industries. Significant disruption to this could damage London’s standing as a global creative powerhouse.

3 Business and government must work in tandem to take advantage of global opportunities

Across business as a whole the government intends to more than double exports to £1 trillion by 2020, while together industry and government have devised three major targets specific to the creative sector:

• To double creative industries services exports by 2020 to £31bn

• To double the number of creative industries companies that export from 7,500 companies in 2013/14 to 15,000 per year by 2020

• To increase the UK’s share of the global market for inbound foreign direct investment (FDI) in creative industries by 50 percent by 2020.31

To help ensure that creative industries can meet these ambitious targets, take full advantage of the changing global landscape, and stay one step ahead of the competition, government and business should work together to support a series of targeted interventions.

RECOMMENDATION 1

Creative Industries international strategy and exports programmes should be driven by bodies with specialist sectoral expertise.

CBI members have welcomed the appointments of a new CEO of UK Trade and Investment (UKTI) and Managing Director, Trade, who have spent considerable time working for international companies. This reflects an increasing focus in UKTI on harnessing the expertise of the private sector, with a range of private partners involved in the delivery of UKTI contracts in the UK and overseas. Building on this, many CBI members believe that more can be done to improve the commercial awareness of UKTI staff through the development of innovative partnerships with the private sector.

This sentiment is especially prevalent in the creative industries, which may in part be driven by the nature of this group of organisations. The creative industries are an unusually fragmented sector, consisting of a relatively large base of small to medium sized businesses, with a concentration at the smaller end of the scale. Across sub-sectors there is considerable variation in the frequency of high growth firms, with software, computer games, and electronic publishing companies making up 45% of all high-growth creative businesses.32 Meanwhile, business models also vary hugely. In film for instance, productions are categorised by special purpose companies set up to deliver a specific project, but backed by those with more corporate memory, such as film sales agents, who act as the primary exporters. Elsewhere, the pace of change across many industries is moving at a phenomenal rate. Continuous experimentation with business models and innovation in the sector means that, unless you are fully embedded in it, it can be difficult to keep up.


Finally, unsurprisingly, given the range of sub-sectors that make up the creative industries, each has strengths across varying global regions, with 6 in 10 exports from architect firms, for instance, going to Asia, compared to just 8% of exports from IT, software and computer services, as the table below shows.

Exhibit 5: % of creative services exports by region (excludes creative goods)

0 20 40 60 80 100

AfricaAustraliaAsiaAmericaEurope

Music, performing and visual arts

Publishing

IT, software and computer services

Film, TV, video, radio and photography

Design: product, graphic and fashion design

Architecture

Advertising and marketing

Source: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/528175/Creative_Industries_2016_Focus_on_Exports_of_Services.pdf

Note: These figures are subject to the data limitations described at Recommendation 3.

This patchwork of characteristics can present difficulties for public sector bodies looking to support the sector as a whole. Businesses report that UKTI’s understanding of the creative industries, and the landscape for them in different markets, can vary greatly and that the specialist knowledge needed to underpin their trade and export is not always detailed enough for the task at hand. At the same time, business awareness of UKTI’s range of services and funding can be low. These often function in isolation of each other, which can mean that industries do not take full advantage of them. Finally, where external organisations are involved, existing processes to engage and deliver funding can be complex, fragmented and lengthy.

“Public sector strategy needs to acknowledge the wide variation between sub-sectors to be effective.”In order to overcome many of the above concerns, while helping to deliver better quality services for less, international strategy and export programmes for the creative industries should be produced in co-ordination with and driven by delivery partners who possess specialist expertise of a sub-sector. In some instances these might be trade association or representative groups, and in others they will be private sector bodies with knowledge of sectoral or country specific markets.


CASE STUDY: FILM LONDON AND UKIE

Film London and Ukie deliver for the games sectorGames London is a new three-year project delivered by Film London and Ukie and backed by the Mayor of London. It has £1.2m funding from the Mayor’s London Enterprise Panel to deliver a wide programme of activity, promoting the games industry to drive significant new flows of inward investment and global trade. This kicked off in April 2016 with the London Games Festival, a ten-day celebration that saw more than 38,000 people attend events across the capital, including in Trafalgar Square, Somerset House and the BFI, as well as the annual EGX Rezzed convention.

A central part of the festival was London’s first-ever Games Finance Market, which saw 500 pitch meetings over three days between UK games developers and potential investors. Of the 25 investors that attended the market, four were new to games altogether, while 10 of the 22 games companies were start-ups working on a first title. Nearly 80% of the studios said they had secured or would potentially secure funding as a result, with one raising over 50% of their total budget at the Finance Market. In total, £800,000 investment was secured at this one event alone, with over £2m of potential further business also put in train.

This is just the first step in a three-year programme that, capitalising on the UK’s successful Video Games Tax Relief, will help games businesses based in London generate £35m in new revenue, adding nearly £10m, as well as creating hundreds of jobs and boosting skills and training. Crucial to this success is the direct involvement of the games industry in setting the strategy and guiding its delivery to ensure maximum impact in reaching investors from across the globe, demonstrating the impact that can be seen when industry expertise is fully leveraged.


For example, the film and television sector already operates on this basis, as the British Film Commission works in partnership with and receives funding from UKTI and the British Film Institute (BFI), with a view to boosting the production of international feature film in the UK.

Where these specialist bodies have proven their ability to offer strategic direction and a return on investment, and are able and willing to share more of the workload, UKTI should then explore the delivery of funding to them, set against a context of mutually agreed long-term objectives, targets and measurement.

This would allow for detailed knowledge of the different sub-sectors of the creative industries to be applied to project delivery, as at the adjacent case study, and export programmes which pay greater consideration to the needs of the end user, and which can be administered more quickly. It would also overcome some of the existing difficulties in reaching out to businesses, while making potential cost savings.

RECOMMENDATION 2

Government’s core role should be focussed on support for strategic diplomatic interventions and providing in-market intelligence.

Many of the creative industries are reliant on the strength of local copyright frameworks, and their effective enforcement. Changes to this can have a massive impact on the industries’ ability to function successfully. For example, the European Commission’s plans to develop a digital single market – including potential changes to copyright law via the introduction of portable content subscriptions, or through policies to extend open-access publishing – will offer opportunities to many creative enterprises, but potential challenges to others. These will need to be handled sensitively if the UK is to maintain and develop its world-leading positions in the creative and knowledge-based sectors. Businesses want the UK government to continue to influence these negotiations irrespective of the recent referendum result, and the CBI has a role to play in conveying the business voice.

Turning to IP more broadly, frameworks around the globe and in key markets for the creative industries, remain very mixed, as Exhibit 6 shows. Each economy’s score is based upon 30 indicators spread across six categories – Patents, Copyrights, Trademarks, Trade Secrets, Enforcement, and International Treaties. A country can score a maximum of 30, and higher scores are indicative of more robust IP systems. The trajectory for IP frameworks in many of these countries is positive, with governments recognising the benefits of robust IP protections, but a number of major economies, like China, India, Brazil and Russia still have ample room to improve.

With the growing global interest in the development of the creative industries, some markets are becoming increasingly difficult to navigate. For example, China’s State Administration of Radio, Film and Television in 2012 announced a new set of regulations around the import of foreign TV shows, including a ban on their broadcast during prime-time viewing, as well as a rule prohibiting overseas imports from comprising more than 25% of programming each day.33


Exhibit 6: Overall scores for IP frameworks around the world

0 5 10 15 20 25 30

US

Germany

France

Sweden

Singapore

Switzerland

Australia

Japan

South Korea

Italy

New Zealand

Israel

Poland

Canada

Taiwan

Malaysia

Mexico

Colombia

Russia

Chile

China

UAE

Peru

Turkey

South Africa

Ukraine

Brunei

Brazil

Nigeria

Argentina

Ecuador

Indonesia

Algeria

Vietnam

Thailand

India

Venezuela

UK

Source: http://www.theglobalipcenter.com/gipcindex/

Elsewhere, domestic regulations and policy frameworks around immigration can hinder British businesses ability to internationalise. Although North America is the second biggest music market in the world, many of our artists are prevented from performing there due to rules around visa applications. For instance, the American visa process requires applications to be made in person in either Belfast or London, which can result in costly travel and accommodation fees, while frequent delays in the process lead to the cancellation of flights, shows and tours. There is little reciprocity, as the equivalent UK visa process for US musicians entering the UK is far simpler and less costly.34

Businesses are working hard to operate in these sometimes challenging conditions. But there is also a role here for the UK Government to be vociferous in its support for our creative industries. CBI members would like to see government placing a priority on strategic diplomatic efforts to help ensure that our creative industries are better-placed to operate in overseas markets. It must recognise that the creative industries are a strength for the country and lobby proportionately on strategies to help support them. This is all the more important in the context of the recent referendum.

As above, many creative industries would like to see the government prioritise lobbying for greater openness in China, while others want to see it working harder to support the global protection of IP, with more coherent efforts to reduce the sales of counterfeit goods. Above all, this will require a greater willingness among senior government officials to get to grips with the very specific needs of businesses in the creative industries, and to work more closely with industry on their key issues.


While businesses are keen to see export programmes delivered with ‘hands on’ sectoral expertise, CBI members also recognise that Government has a vital role in supporting export and investment in international markets. Our overseas network of embassies, which offer political and economic advice on the local business environment; push for regulatory changes to improve it; invest in capacity building to support the development of a vibrant private sector; and champion the contribution British companies make to economic development, are highly valued.

CBI members – from first-time exporters through to established international companies – have consistently reported that the advice and support our overseas network of ambassadors and UKTI staff provide is critical, particularly in markets where the caché of having a representative of the British Government supporting your business can make all the difference to arranging meetings or winning a contract. As government continues to seek out savings across departmental budgets, businesses want this sharp end of support safeguarded.

RECOMMENDATION 3

Government and business should work together to develop improved data for the sector.

Businesses of all sizes can struggle to get to grips with the many markets now opening up as regards the size of the opportunity. This is a widespread concern across all sectors, with a recent CBI survey revealing that 28% of medium-sized businesses in the UK had difficulty in identifying opportunities overseas.35 Yet firms which overcome concerns about demand uncertainty export at more than double the rate of other exporters.36

The issue is particularly acute in the creative industries sector, due to a severe lack of data. At present, existing government statistics on the creative industries are, for instance, unavailable at a country-by-country level, instead being classified by regions, and absent of any statistics on the export of creative goods. This makes it hard to establish where the biggest growth opportunities lie, and whether emerging markets or more established ones offer the best bet.

Moreover, due to the existing framework of international standard industry codes, (a recurring problem for the sector), the available data often fails to accurately capture the creative industries as we see them today. So, for example, it is almost impossible to separate out data on the commercial music industry from other areas of the performing arts 37 and it fails to recognise games development at all. In film, the huge value of production investment isn’t classified as either inward investment (as there is no tangible investment in IP/property), or a service export, while the definition of exports itself captures only a narrow range of outputs, such as the overseas sales of a given title, rather than exports in VFX or consultancy. From the policy perspective, this means that it is difficult to deliver well-evidenced and tailored initiatives in support of creative businesses, while the true impact of investment is tricky to capture, and even harder to justify.

“Lack of data means businesses can struggle to get to grips with market opportunities”


CASE STUDY: NESTA

Innovative use of datasets present an alternative to traditional statistical methodsOfficial datasets often have a problem capturing novelty because they are structured around infrequently updated standard industrial classification (SIC) codes which do not include those industries born or recognised after the codes were agreed. They have a problem capturing complexity because they typically do not measure relationships between businesses, or between businesses and other organisations such as universities or government. As a consequence, it is hard to use these data sources to answer questions of interest for innovation policymakers, such as: What is the situation of new industries and technologies with strong growth potential? How much are we investing in them? What are the direct and indirect (systemic), long term effects of our interventions?

To address these issues, increasingly, researchers are mining the big memory of the web to fill existing innovation data gaps, and answer some of these questions. Nesta’s Arloesiadur[1] (Innovation Tool in Welsh) will involve the creation of a web platform that harnesses the vast memory and interactivity of the internet to measure and understand innovation, and inform policy. Businesses and policymakers are using an expanding arsenal of analytics technologies to manage and create value from this data. These tools can help innovation policymakers whose job is to bolster new ideas and industries that drive growth, supporting the economy as a whole and priority sectors like the creative economy.

[1] For more information see http://www.nesta.org.uk/blog/arloesiadur-innovation-analytics-experiment


International bodies aiming to address these kinds of issues are moving slowly. At UK level, the ONS, with the support of DCMS, is already working on changes to help advance the data. For instance, in future, creative goods, as well as services, will be included in the overall economic estimates for the sector, and businesses are pleased to see this change being made. These efforts must be continued at full pace, with a willingness to look at new and alternative methods of data collection and analysis, such as those outlined in the case study opposite (Nesta).

At present some of the most thorough information is available by virtue of industry-led initiatives. For instance, organisations like UK Music, have developed their own extensive datasets.38 But, while such initiatives are incredibly useful, the end result remains the same – it is not possible to compare the various sectors in the creative industries and their relative value and volume, or to understand the return on investment for many existing initiatives in support of internationalisation. As such, in addition to the development of official statistics, trade associations and industry organisations should aim to take a more cohesive approach to counting and tracking export levels, helping to share best practice and working toward initiatives which can be replicated across sectors.

RECOMMENDATION 4

There is a role for members of the creative industries to adopt and share best practice in exports.

Exporting is resource intensive and small and medium-sized firms can sometimes lack the time and finance to take advantage of exporting opportunities. Data indicates that only 19% of UK SMEs currently export, compared to 25% of EU SMEs.39 This can be exacerbated by a lack of awareness of the resources available to them from organisations such as UKTI or UK Export Finance.

As such, and in the context of the recent referendum result, there is space for trade associations and industry bodies to play a more proactive role in seeking to highlight the benefits of and means to internationalise, in Europe and beyond. Smaller, creative businesses, in particular, can capitalise on their networks to engage those organisations which are difficult to reach.

As shown in the case study overleaf (Omobono), businesses have talked about the importance of speaking to contacts who have experience in going global. For those exporting a creative service, it can be most useful to connect with firms working within services, rather than a company manufacturing or distributing physical products. But these links do not always have to be made with businesses in the same sector, or which are the same size, to be of value. In fact, some firms prefer to work with those outside their own area, in order to ensure that their strategy remains closed to competitors. The CBI is already exploring opportunities to bring businesses together to discuss some of these issues. The recent Global Growth conference in partnership with UKTI gathered more than 120 medium sized companies to come together and discuss topics ranging from export finance to compliance.40 Looking ahead, there is a role for the CBI, and other industry bodies, to further explore how best to leverage our expansive networks of small and medium sized businesses in order to help them connect, share best practice, and so support their ability to internationalise.


CASE STUDY: OMOBONO

Personal networks are helping to drive overseas success for OmobonoOmobono was set up in 2001 to focus on communications for business brands. In the 15 years since it has grown to nearly 80 people across 4 offices in the UK and the USA.

Overseas sales now account for over 60% of total turnover, twice the average for the creative services sector, and the company recently won a Queen’s Award for Enterprise, for outstanding continuous growth in international trade. Much of this has been in North America, where UK creative and technology capabilities are highly valued by clients, offering an edge on more traditional US approaches. This led to the opening of a Chicago office in January 2015. With a turnover of $1m in the first year, the business has got off to a great start.

Tom Kelly, Managing Director of the office, puts this down to business relationships. ‘We’ve had extremely good customer relationships in the US for several years, and our clients were keen to work with us directly over here, as well as recommending us to others. Recommendation has been critical to our success.’

Chairman of Omobono, Francesca Brosan endorses this. “Despite the fact we live in a digital age, meeting and building relationships with people is the key driver of success. Digital tools can augment this – and do, massively – but person to person rapport is critical. Setting up in the US involved us talking to a lot of people we knew, from potential clients to other companies who had established US offices, to the team at UKTI. Of course there’s a lot of information online, but you can’t beat talking through a specific question with someone.”


1 https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/494927/Creative_Industries_EconomicEstimates_-_January_2016.pdf

2 https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/528175/Creative_Industries_2016_Focus_on_Exports_of_Services.pdf

3 http://adassoc.org.uk/publications/advertising-pays-4-export-value-global-impact/


5 http://interbrand.com/best-brands/best-global-brands/2015/ranking/#?listFormat=ls

6 http://www.pentland.com/news/speedo-reveals-team-speedo-its-line-up-of-super-star-swimmers-at-a-global-new-york-launch-event?p=3

7 http://www.ifpi.org/downloads/GMR2016.pdf

8 http://ukie.org.uk/research#Exports

9 http://www.screendaily.com/news/star-wars-spectre-boostpinewood-revenue-to-record-high/5089934.article

10 http://softpower30.portland-communications.com/wp-content/themes/softpower/pdfs/the_soft_power_30.pdf

11 https://www.visitbritain.org/britain%E2%80%99s-image-overseas

12 http://newsroom.mastercard.com/press-releases/london-retains-crown-in-2015-mastercard-global-destinations-cities-index/


14 http://unctad.org/en/pages/newsdetails.aspx?OriginalVersionID=498

15 http://unctad.org/en/pages/newsdetails.aspx?OriginalVersionID=498

16 http://www.emarketer.com/Article/2-Billion-Consumers-Worldwide-Smartphones-by-2016/1011694#sthash.swEjFQNd.dpuf

17 http://fortune.com/2015/01/15/mobile-console-game-revenues-2015/

18 https://www.credit-suisse.com/us/en/about-us/research/research-institute/news-and-videos/articles/news-and-expertise/2015/10/en/global-wealth-in-2015-underlying-trends-remain-positive.html Note: Definition of middle class as with wealth between $50,000 and $500,000

19 http://www.bloomberg.com/news/articles/2016-03-09/here-s-what-china-s-middle-class-really-earn-and-spend

20 http://www.ey.com/Publication/vwLUAssets/ey-cultural-times-2015/$FILE/ey-cultural-times-2015.pdf

21 http://esa.un.org/unpd/wpp/Download/Standard/Population/

22 http://blog.euromonitor.com/2015/09/top-5-emerging-markets-with-the-best-middle-class-potential.html

23 http://www.ifpi.org/downloads/GMR2016.pdf

24 http://www.ifpi.org/downloads/Digital-Music-Report-2014.pdf

25 http://www.ft.com/cms/s/0/f6a206f0-dc33-11e5-9ba8-3abc1e7247e4.html#axzz46xTfb6T2

26 http://foreignminister.gov.au/releases/Pages/2015/jb_mr_151022c.aspx?w=tb1CaGpkPX%2FlS0K%2Bg9ZKEg%3D%3D

27 http://cultureinexternalrelations.eu/wp-content/uploads/2014/05/country-report-China-20.05.2014-bis.pdf

28 http://variety.com/2016/film/news/wanda-legendary-buychina-1201678463/

29 https://www.london.gov.uk/sites/default/files/creative-industries-in-london.pdf

30 http://creativecities.eiu.com/

31 https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/329061/UKTI_Creative_Industries_Action_Plan_AW_Rev_3.0_spreads.pdf

References


32 http://www.theworkfoundation.com/assets/docs/publications/277_a%20creative%20block.pdf

33 http://arstechnica.co.uk/tech-policy/2016/02/chinese-authorities-will-ban-foreign-media-from-publishing-online-in-china/

34 http://www.ukmusic.org/assets/general/HoC_MusiciansDebate_Nov15.pdf

35 http://www.cbi.org.uk/business-issues/trade/insight-and-analysis/best-in-class/

36 http://www.adassoc.org.uk/wp-content/uploads/2014/09/Advertising-Pays-2-How-advertising-can-unlock-UK-growth-potential.pdf

37 http://www.demos.co.uk/files/Risky_business_-_web.pdf?1320841913

38 http://www.ukmusic.org/research/measuring-music-2015/

39 http://www.adassoc.org.uk/wp-content/uploads/2014/09/Advertising-Pays-2-How-advertising-can-unlock-UK-growthpotential.pdf

40 http://www.cbi.org.uk/news/global-growth-conference/


For further information on this report, or for a copy in large text format contact:

Jessica Dickinson Senior policy adviser

T: +44 (0)20 7395 8053E: [email protected]

www.cbi.org.uk

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ACKNOWLEDGEMENTWe acknowledge with thanks the kind contribution of EY in providing valuable data and analytics.

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