Creative Industries Leadership Group: working group reports and Ministerial response – March 2022

How can we increase the resilience of the creative industries sector?: CILG Creative Resilience Working Group Report and Recommendations

Written and edited in February 2022

by Dougal Perman, Chris Hunt, Brian Coane and Rachael Brown

Introduction

Culture is at the heart of life. Culture is how we live, learn and love. Culture fosters creativity. Creativity drives our progress. Making things, doing new things, doing things differently; creativity moves us forward. The faces, spaces and places stimulating and facilitating creativity forge invention and innovation. Without culture we have no reason for being. Through creativity and culture we learn, communicate, understand, share, solve problems, produce, travel and have fun. The creative industries are the lifeblood of the cultural economy. The cultural economy is at the heart of our national economy. We need to keep our heart healthy, resilient from threats such as pandemics, political upheaval and international trade negotiations.

The creative industries sector feels more fragile and vulnerable than we want it to be. Creative industries are an economic driver. They attract people to live and work in places, connect communities and join trade routes between industry sectors. Scotland has considerable cultural capital; enriched by the creative industries. Through a suite of strategic interventions — presented in this paper as recommendations — we can enhance and exploit our cultural capital’s potential and yield a significant return on investment.

Creative industries’ resilience was tested by the Covid-19 pandemic, which caused significant disruption. It also created opportunities. Flexibility, access to nature, problem solving and an innovative mindset have become more valuable than rigorous structure, office blocks, project management and business as usual. No one saw the pandemic coming; no one was ready. The effect on the creative industries has been varied. Live music, the performing arts and cultural events have been decimated. Studio and office-based businesses have been disturbed. Advertising, television, radio, film and publishing have adapted and continued largely undeterred. Computer games, animation, composition, craft making and writing have thrived. What will happen to Scotland’s creative industries if there is another one in the near future? What if we are faced with another threat such as prolonged disruption to telecoms or power? What do we do when the wolf comes to the door? Perhaps we start by making sure we are not afraid of the wolves that come to call.

In March 2021 the co-chairs of the Creative Industries Leadership Group at the time, Fiona Hyslop MSP, then the Cabinet Secretary for the Culture, Economy and Fair Work, and Leith Agency partner Brian Coane, commissioned two working groups. One of the groups consisted of Dougal Perman (as working group chair), Chris Hunt, Brian Coane and Rachael Brown and was tasked with answering the question: “How can we increase the resilience of the creative industries sector?”

This report answers the question by making recommendations and provides some context from our research and discussion work.

Investment

Before defining resilience, assessing value, establishing context and making our recommendations, we want to frame creative industries funding. Often funding for the sector is described as support. We think this connotes weakness and an inability to exist or operate — far less thrive — without such support. If we always think in terms of support then we will miss opportunities, undervalue our worth and fail to realise our potential.

Instead of thinking about support, its needs and cycle of self-perpetuation, we must talk of investment, its return and springboard to success. The words investment and support are both ways of describing types of funding but whereas the former has connotations of entrepreneurialism, growth and ambition, the latter — whether fairly or not — puts us in the mind of subsistence, idleness and apathy. If we always consider cultural and creative endeavours in need of support rather than investment, we won’t take them seriously and they won’t be prioritised. Let’s consider two start-up businesses seeking advice from government agencies.

Eilidh and Fraser are in their mid-twenties, working class, university educated, intelligent, ambitious young people. Both approach the government about their new business ventures. Fraser studied Brewing and Distilling at Heriot-Watt and wants to build a new whisky distillery and create a new brand to sell in Scotland and abroad. Eilidh studied Textile Design at Duncan of Jordanstone and wants to start a fashion business, making and marketing new designs internationally. Both are intelligent, business-savvy and ambitious. Fraser’s proposition is seen as a high-growth venture with significant potential in the lucrative whisky niche of the food and drink industry which can attract significant investment. Eilidh’s proposition is seen as an arts project that might be eligible for some funding support but is too “high risk” to be a serious investment opportunity.

This is a misconception. Why is that? In actual fact, both Eilidh and Fraser have good ideas and valuable business propositions. Fraser’s is actually a high-risk venture. The start-up costs are very high. They include building capital (the distillery buildings), plant machinery (the stills and all other distillation equipment), stringent hygiene requirements to protect the fermentation process, a lengthy, detailed, methodical research and development phase and a long production life cycle with three-to-five years before any product is ready and at least eight years before a premium commodity is ready to take to market.

Eilidh’s venture is an attractive investment opportunity. She has low start-up costs; limited space requirements, a laptop, drawing board, fabric samples and a professional sewing machine. Her research and development phase is short, agile and iterative and a quick turnaround from idea through production and distribution to market. She is building a brand, creating original IP, utilising digital technologies and immediately selling internationally and domestically. On an ongoing basis this venture also provides flexible jobs and work for multiple freelancers and training for diverse demographics with varied skill sets within each product cycle.

Further considerations to the investment opportunities should include attention to the benefits of the types of enterprise which, in addition to economic benefit, meets social, community (the “20 Minute Neighbourhood”), net zero, resilience and local ownership, and equality, diversity and inclusion goals.

Let’s update the language, reframe the thinking and reveal the compelling business cases presented by the creative industries.

Resilience

We started with the dictionary definition of resilience: toughness and the ability to recover quickly from difficulties and, as a physical property, elasticity. We considered what this means to the creative industries in Scotland:

• The sector in Scotland can feel more fragile than most of us would like it to be.
• Any successful business or enterprise needs to be able to be resilient to be successful as there will always be challenges and in the creative industries the lifecycle of projects is relatively short.
• Resilience could cover sectors or areas that have thrived in the pandemic as well as those that have not.
• It applies to larger businesses as well as smaller operators.

In thinking about the notion of “toughness” — the capacity to recover quickly — we want to focus on how to build that capacity. As such we will concentrate on two things:

1. Identifying weaknesses across the creative industries ecosystem.

2. Determine actions required to increase resilience in the future.

Value

Determining and appreciating creative value and cultural capital is vital in understanding how to nature the cultural economy in Scotland, make it stronger and grow it; in respect to economic value, social value (leaders, workforce and communities) and environmental value (sustainability, innovation and best practice). Current measurement methods rely on Standard Industrial Classification (SIC) codes. SIC codes are a problematic and inaccurate way of measuring the value of creative industries, and the wider cultural economy, because many of the businesses operating as key cogs in the machine are categorised with other codes, outwith the creative industries sector. For example, a small grassroots music venue that is a stepping stone on the touring circuit and a hub for the creative community may be categorised as a public house and therefore not counted in the music industry, or creative industries.

SIC codes don’t capture data from freelance professionals either so there are big pieces missing from the puzzle. The freelance workforce is essential to creative industries. Freelance individuals generate a lot of economic activity by themselves, and multiple freelancers also work for micro businesses and SMEs. Without the flexibility, scalability and versatility of the creative freelancers, the creative industries sector would not function.

Creative industries is an interesting sector in which to explore value because cultural capital is connected to other forms of capital. For example, it is linked to natural capital (cultural activities need space in which to happen), related to social capital (one’s social capital can increase as a result of cultural engagement), stimulates financial capital (attracting people to visit, live and work in its locality) and empowers human capital (benefitting wellness and health, showcasing leadership and facilitating effective education). Various government and non-government bodies, trade associations, unions and academics estimate the value to the economy of creative industries, but this is near impossible to do with any acceptable level of accuracy when using the SIC code system. There are also multiple bottom lines to take into account: economic, cultural, social and environmental.

In considering how we measure resilience, we keep coming back to the concept of value. Value in the creative industries is both tangible and intangible. There is measurable financial capital in intellectual property, physical and digital products and services. Some of the intangible assets such as brand value, reputation and positive association also have cultural capital. And creative industries value should always be considered in a triangular triple bottom line model: economic, social and environmental — with creativity at the heart of all three.

Resilience is a valuable attribute. Resilience capacity is increased by rising value. But in the creative industries there is partly a problem with undervaluing work and the market and partly a problem with knowing where the value is. For example, freelancers make a massive contribution to the cultural economy but their turnover and income is not counted by the same mechanisms that measure companies. We need to discover unvalued and undervalued assets in the creative industries ecosystem and uncover the hidden value that has been overlooked, and we need to celebrate and invest in success.

Our research showed that if resilience means helping people and businesses to not just survive hand-to-mouth but even to thrive in the face of adversity, then a priority must be given to people who work continuously to develop themselves and their ventures — and do not solely exist from one funding award to another. The exception here would be if the operation is a dedicated government organisation, in which case they should be handled differently. Creative industry producers who are resilient must be considered and valued as such, nurtured and helped to grow.

Context

Sixteen constituent sub-sectors, each with its own sub-sectors, web of clients and suppliers and nuanced business niches, the creative industries has a unique ecosystem; arguably complicated, especially to outsiders. Over the history of the Creative Industries Leadership Group, including its time as the Creative Industries Advisory Group, we have encountered people from government departments, politicians and practitioners in other industry sectors, who don’t understand the way the creative industries work.

Fundamentally, though, everyone working in the creative industries sector is trying to do the same as any business in any industry sector: make and do things then sell those products and services for less than they cost to create.

Many businesses in the creative industries have turnovers, and profits, which appear to fluctuate wildly when viewed as part of a twelve month annual accounting cycle — and have been called volatile by some. But actually this is because creative industry work is project based (a film production, a book, an album, a show, a tour, an exhibition, a campaign, etc.) and those projects may span several months or several years. Project based, rather than annual, accounting is no different to other industry sectors such as construction or life sciences, of course.

Perhaps because of this perception that the creative industries have different business models and are complicated, in addition to the language of support rather than opportunity, grants rather than investment, running a creative operation can be challenging. The essential yet fragile nature of the freelance workforce further adds to the challenge.

Over the course of our research, from June 2021 to January 2022, our observations indicate that nowhere within the current funding framework is there support for operational costs, apart from Creative Scotland’s Regularly Funded Organisations, some enterprise agency funding or banks, who focus traditionally on large scale employment models. This is fine for project work of an artistic nature, and rightly focuses on artistic development for public benefit, but leaves a gap for creative producers and cultural organisations within the creative industries sub-sectors leading to a fragility which is not comparable to other places or countries outside Scotland. The result of this approach to project funding can enhance those who are already successful but leave out those who are not and so impacts negatively on equality, diversity and inclusion goals.

Further, whilst there are admirable efforts in young people employment schemes, such as Kickstart, there is a notable gap for the over 40s which never arose during the course of the research. For a 40-year-old with financial burdens, and with new retirement ages creeping up, approximately 25–30 years of work awaits. That's akin to working from 1950 to 1975–1980 amid similarly vast change.

We are aware that these observations have been made in the absence of an understanding of what the new framework will be to replace the current Creative Scotland RFO and Open Project Funding (OPF) models, though we were made aware of the potential for change in those models, and of new management goals at Scottish Enterprise and new plans at SoSE. We noted a distinct difference in handling of grants versus investment, which informed our thinking for the Investment section above.

Observations also indicated that sectors within creative industries are handled and funded differently. Comparable, verifiable data sets would help inform investment decisions. A fresh perspective may benefit the approach to investment funding as a growth stimulus. This may require a change in internal mindset and “office culture” from managing enquiries to driving enquiries. So, if a sector is not strongly represented, rather than a reactive approach it should be a proactive “why” approach; e.g. if opera, ballet, classical music and theatre didn’t exist everyone would ask why, but in other creative industry sectors, absence is simply seen as an example of market failure and is a saving — or even a relief — which is a negative approach on the part of that sub-sector.

Recommendations

Based on the consultations we have had, reading we have done and discussions we have conducted through the course of our research, we make the following recommendations for the Scottish Government, its public agencies and the creative industries. The top three are our priority recommendations.

1. Collect meaningful economic data from the creative industries.

SIC codes don’t provide accurate or useful data for the sector. To solve the problem with SIC codes, we propose creating new codes for each creative industry sector, drawing up a representative list of companies in each one, collecting top line financial data from each company on a regular basis, aggregating the information by sector and using the output information to accurately estimate the size and scale of the creative industries and each of the fourteen constituent sectors. By having this information, the government, its agencies and industry practitioners can better make the case for interventions such as funding and legislation.

From our discussions with Scottish Enterprise, we understand that a similar approach was taken for the life sciences industry sector in Scotland. To bypass the SIC code issues, new codes were define and financial data was collected to provide an accurate economic understanding of the sector.

As part of this recommendation, all agencies should ensure they have the same topline data too including identical lists of what constitutes the creative industries sector as defined by the Scottish Government, and adopting the same data and taxonomy agreed on, and provided by, the sector.

2. Establish and empower specialist network hubs to connect and interact with creative industry operators.

Regional creative advice, development and support networks like XpoNorth, Creative Dundee, Creative Edinburgh, Creative Stirling, the Creative Entrepreneurs Club and, outwith Scotland, Creative Cardiff, provide excellent means of communicating with creative industries businesses and individual practitioners in their areas. From our experience and observation we consider groups like these to be efficiently run, successful at reaching creatives in their locality and flexible enough to understand the nuanced needs of their clients. Funding network hub organisations like these and looking for opportunities to establish new networks in other parts of Scotland is strategic and fosters good relationships with geographically diverse creative industries operators.

We note that these have received funding, but our research suggests that they are held back by a lack of resources — in particular uncertainty of funding and workload for a small number of individuals. Network hubs should be funded based on the economic, social and environmental capital that they generate through the value of their networks and the impact of their strategic interventions. Research should be undertaken to understand the value that is created by them and the unrealised potential for growth.

3. Create specialist agile departments in public agencies to support and develop high value creative industry sectors.

Through our research we have identified Scottish Screen as an excellent example of an efficient entity that serves its sector — the screen industries, especially film and TV — well and is praised by public sector and industry alike with notable success. Although Scottish Screen is a department of Creative Scotland, it ostensibly operates as an autonomous body. It has a well-defined purpose and clearly articulated strategy. The same model will work for other creative industry sectors, especially music, fashion and textiles and writing and publishing. Through our discussions we know there is growing support and demand for transforming the highly-regarded music department in Creative Scotland into a “Music Scotland” with a similar operating model to Scottish Screen.

4. Change the language and reform funding; investment not support.

We need to reposition funding as investment rather than support and think in terms of triple bottom line return on investment. Investment will fund research and development and creation of new products and IP which will have international and domestic markets and employ local people from diverse backgrounds. The returns include increased economic activity plus social and environmental benefits.

Industry and government want the same thing: prosperity. Collaborative strategic language is required by both private and public sectors. We demonstrate an example of how reframing the language repositions the opportunity in the Investment section of this paper. Not all businesses and individual industry practitioners use or understand “public sector speak” language, especially when it comes to economics.

The creative industries sector needs to believe in itself. We need to be confident of our worth and value, ability and potential and demonstrate this mindset in the language we use. Public agencies need to be able to translate between the codified language of government and the pragmatic language of industry. Language should not be a barrier to opportunity nor an obstacle inhibiting growth.

Sometimes less money distributed more simply has a greater impact. Support mechanisms devised and deployed by Creative Scotland, EventScotland and the enterprise agencies during the Covid-19 pandemic were simpler and more efficient than funding in normal times. The results of these streamlined financial interventions were stabilisation for businesses and affording them the breathing space to take a step back and make strategic decisions.

5. Value the freelance workforce properly by understanding its nuances and supporting people, not employment or business categories.

The term freelancer does not capture the complicated, flexible and versatile creative workforce. There are sole traders, self-employed people channelling their work through limited companies, partnerships and nano and micro-enterprises that employ several people and contract other freelancers and so on. Financial and in-kind support offered to creative practitioners should be flexible enough to accommodate “freelancers” operating in a number of business structures.

6. Champion leadership and success in the creative industries.

Let’s tell success stories. We need to celebrate what we are good at much more. Whether it is humility, lack of confidence or lack of awareness, the creative industries does not value and appreciate excellence in its output, productivity, leaders and creative workforce enough. Supporting award ceremonies for the arts and business communities, stimulating positive media coverage and promoting best practice case studies will inspire, inform and incentivise more creative output and can thus stimulate economic growth.

Whilst funding and grants should not be core to a businesses survival, investment on a triaged and scaled approach. such as SE and HIE deliver, has proven successful via models like XpoNorth, meaning operational costs for creative industries operations, and particularly how to manage creative industries enterprises and networks, should be considered differently to applications from creatives, including artists, themselves.

7. Compel government-funded organisations to buy from creative businesses and individuals in their sectors.

Who are the state-funded buyers in the creative industries? In a similar manner to the regulatory requirements of public sector broadcasters to buy from independent television and radio production companies, government-funded organisations like museums and galleries, national performing companies and heritage institutions could be required to buy products and services from operators in their sectors. This compulsion could extend to key regions where applicable, e.g. if there is a local option available to explore then that should happen. If the local supplier is small scale, then investment pathways should be available to scale up to meet the demands of the contract. This practice occurs in other sectors, like manufacturing.

8. Nurture the talent pool; train and take care of tomorrow’s creatives.

Music, art and drama teaching in schools is in crisis. Scotland’s position as a creative nation is fragile, yet many of Scotland’s creative industries outputs are our most world-famous exports. Without proper investment in creative industries (which includes the arts) teaching and training in schools and colleges, there will be a serious talent shortage soon. If that happens, access to learning and studying culture and all forms of creativity becomes a position of privilege. Creative industry disciplines must be valued in schools and further education with the same mission-lead approach as the promotion of STEM subjects. Old fashioned distinctions between arts versus sciences or creativity versus technology are nonsensical and unhelpful. They are two sides of the same coin. The furnaces of our creative industries must be fueled by a constant supply of creative talent.

Taking care of our creative talent must be holistic. We must look after the people working in the creative industries sector. Business support and skills development initiatives should encompass mental health and physical health as well as work skills and business acumen. Through state interventions and as creative industries communities, we must empower creative people to take care of themselves and each other in order to be healthy, happy and able to realise their full potential.

9. Ensure digital inclusion is nationwide and genuine.

Superfast broadband, 4G and 5G coverage in Scotland is still not where it should be. The playing field is far from level. Shifting trends to remote working and hybrid policies by businesses, regarding splitting time between home and their premises, make proper internet access vital. Businesses and creative individuals who are not served well by good internet, which is especially true in rural communities including many of Scotland’s islands, are disadvantaged compared to counterparts in well-served areas such as most large towns and cities. Superfast broadband, whether wired or mobile, must be a fundamental right available to all.

Research Methodology

The CILG’s Creative Resilience Working Group drew on its combined creative industries experience and knowledge. Our perspectives bring together individuals, and private businesses from micro, to SME and large enterprises. We consulted extensively across the private and public sectors and drew on a variety of relevant research materials (both pre-pandemic and research projects and reports conducted during the pandemic). We drew on this mixture of existing and original research to make recommendations which we consider to be appropriate to the context of the creative industries, ethically sound and practical to deliver.

Our research methodology was consultation and desk work. We attempted to conduct a survey and had ambitions for industry sector-wide mapping and a detailed SWOT analysis, but we did not have the resources to do those things properly and so decided they would be better done in government-funded follow-up work. The CILG should be consulted on the design and scope of any such work.

Working Group

This work was conducted by a voluntary working group which is a subset of a voluntary industry leadership group. While we undertook this work willingly and in good faith, we have invested a considerable amount of time and effort into this project. Cumulatively the group has spent many days on preparation, meetings, reading, analysis, writing, editing and reporting. Had this work been commissioned and conducted by a research agency, we estimate the value to be around £30,000.

We do not make this point as a complaint, but rather as an observation and note of caution to consider in the future: it is vitally important to involve and consult with the private sector when it comes to researching and informing public policy on resilience. The freedom and agility of a working group has many benefits. However, doing such work should not compromise the resilience of those undertaking it.