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A £200 million programme to develop the UK's Creative Clusters

Competitive funds should be set up to develop creative clusters across the UK. In England – the focus of this post – a fund of £100 million should be set up using Regional Growth Fund money to grow creative clusters, building on existing local strengths and meeting local needs. Similar funds should be set up in Northern Ireland, Scotland and Wales.

The Government should, in parallel, set up a targeted £100 million demonstrator programme to support ultra high-speed broadband adoption in these clusters, on the basis that these neighbourhoods are best placed to be the earliest to exploit these speeds. (This compares, for example, with the £43 billion that government is planning to spend on HS2). Adopters would be tracked, with the advent of any benefits acting as a trigger for consideration of wider spread roll out.

The creative economy will play a defining role in the UK economy’s future, but its geography is highly uneven. For the nation to fully capitalise on its creative assets we need to encourage burgeoning creative clusters outside of London and the South East. These funds would allow local areas to develop their creative economies in ways that are specific to their strengths and needs.

Why do we want to rebalance the creative economy?

In recent years the creative economy workforce – defined as those working in the creative industries plus those in creative jobs outside the creative industries – has been growing three times more rapidly than the UK workforce as a whole.

In the two years to 2013, the number of creative jobs grew on average by 3.6 per cent per year. Our calculations in the Manifesto for the Creative Economy suggested that the creative economy now accounts for around 10 per cent of Gross Value Added.

Creative jobs in the future will become even more important. Our new research with Mike Osborne and Carl Frey from Oxford University shows that creative jobs are far more likely than others to thrive in the face of pervasive robot technologies.

In other new research, we are exploring how a number of creative occupations are associated with higher levels of wellbeing and life satisfaction, an important consideration as UK citizens strive for more rounded and balanced lives.

But developments like these pose a thorny problem for policymakers charged with promoting growth and wellbeing in the UK as a whole: namely, the creative economy is heavily concentrated in and around London (even though the supply of talent is more evenly spread).

We see this in the statistics, where London and the South East account for 43 per cent of the UK’s creative economy workforce. What’s more, this is not simply explained by the larger size of their local economies. Even allowing for the concentration of jobs more generally in the South of England, the creative economy is unevenly distributed, more so than any other sector except Agriculture and Finance and Insurance.

That this should be the case is not surprising, considering the importance of knowledge sharing and informal networking, on the one hand, and local demand on the other, for creative businesses. Yet, research suggests there are creative clusters peppered throughout the country. How can policymakers help these grow?

How much money will be available for the fund and where will it come from?

We propose that £100 million should be ring-fenced from the Regional Growth Fund (RGF) in England and made available on a competitive basis over 3 years. This sum is below what the RGF should be spending in total on the creative economy, given its economic importance.[1]

This funding pot could involve, say, ten clusters being supported to tune of £10 million each,[2] large enough to make a real difference, and consistent with the amount spent per project by the RGF to date.[3] This approach will make it easier for SMEs and micro-businesses to benefit from RGF money.

Funding would be on a matched basis which should bring in new funds into the creative economy from private sector sources, and other stakeholders such as the Local Growth Fund, Arts Council England, European Smart Specialisation funding (RIS3) (see below), and the Research Councils.

We would anticipate a strong demand from regions for this funding, with for example 22 out of 50 LEP submissions referring to creative industries in their strategy plans.

What would be the objectives of the fund? How would bids be evaluated?

Bids would be evaluated by the Department for Business Innovation and Skills (BIS) with advisory input provided by the Department for Culture, Media and Sport (DCMS), independent practitioners and members of the government-industry Creative Industries Council. They would be assessed on the evidence that they would grow the creative economy and on whether they have secured matched funding commitments.

Specifically, successful bids would need to set out:

Who would be eligible to apply?

Consortia of Local Enterprise Partnerships, development agencies like Creative England, local government, creative businesses, technology companies and entrepreneurs would be invited to apply for funding.

It is expected that the funding would, in general, support existing clusters, in line with the recognition by the Creative Industries Council that policymakers can only support creative clusters effectively if they build on a region’s existing strengths. Creative economy businesses falling outside the formal scope of the creative industries would also be encouraged to join consortia.

The fund would support locations outside London and the South East of England – some at an earlier stage of cluster development and others that are more established but would benefit from targeted interventions to scale. Bids from London and the South East would be eligible if they involve collaborations with clusters in the rest of the country.

What should the money be spent on?

Funds should not be prescriptively allocated in Whitehall, as needs vary from place to place. That is, bids should focus support and investments on local creative economy development opportunities and needs.

These could in principle cover skills, digital infrastructure, research & development, knowledge exchange, access to finance and entrepreneurship, export and investment promotion, networking and business mentoring schemes.

Support from this flagship fund could in time become a kitemark for other funders, such as Creative England and Arts Council England, helping to coordinate funding more effectively.[4]

A programme to support adoption of ultra-high speed broadband in creative clusters

In addition to supporting creative clusters through using RGF money, the government should invest an equivalent amount to support their take up of ultra-high speed broadband.

By 2015, 95 per cent of the UK population will have access to ‘fibre to the cabinet’ (FTTC) broadband, averaging speeds of 41 Mbps. Virgin’s cable network offers even higher speeds to the 50 per cent of country it reaches. However, a number of countries, particularly in East Asia, have built out ‘fibre to the premise’ (FTTP) networks which can deliver speeds of 1 Gbps or more. Some argue that the government should intervene to encourage nationwide FTTP in the UK.

A major challenge in making this case is that there is limited evidence on the benefits of FTTP over FTTC – though this may conceivably be because it is too early to expect such benefits to have materialised. Given the nature of the investments – that is, they are large and irreversible (the costs cannot be recovered once the investment is installed) – and the fast-changing nature of the technologies – emerging copper-based alternatives to fibre already promise speeds of 700 Mbps and over – the government has an important ‘watching brief’: it must at all times monitor whether the market is providing the quality and speed of broadband necessary to enable wider social and economic benefits, or whether there is a case for market intervention.

In fulfilling this brief, government should explore the potential for ultra-high speed technologies to make a real difference to areas with high growth potential. It is already spending £100 million on improving take up of superfast broadband in UK cities through the SuperConnected Cities programme. There may be significant value in using public funds to ensure that a critical mass of FTTP or other ultra-high speed technologies is built into creative clusters.

Not least because such clusters are likely to be home to the first businesses that are able to capitalise on the benefits of ultra-high speeds. As such, they can act as a leading indicator – or a ‘whistle on the kettle’ – for those benefits. (And as an R&D intervention it should be easier to negotiate the state aid issues). If they start to demonstrate returns from gigabit speeds, it may be time to consider a wider rollout.

The location of the demonstrators will involve trade-offs, balancing the existing availability of FTTP, the likelihood that the local companies will be substantial users of bandwidth, and the importance of SMEs in the local population. This last point is important because in most parts of the UK very high bandwidths are available to companies, but at a cost which is more justifiable for larger companies.

Importantly, such experiments can have benefits quite aside from any consequent government action. If, say, FTTP is demonstrated to have value to creative clusters, then this might prompt greater take-up by companies in the UK and greater deployment by telecommunications companies, without any further intervention.

Conclusion

The creative economy is central to the UK’s future economic growth, but for the benefits to be enjoyed more evenly we need to overcome regional growth barriers and promote creative clusters outside London and the South East.

The new funds we propose will empower regional and local partnerships to develop their creative activity in a way that is specific to their strengths and needs.



[1] If we scale the total amounts allocated to the RGF to date (£2.9 billion over 5 years) by the size of the UK creative economy’s share of the total UK workforce (roughly 9 per cent) we estimate that ~ £150m would have to be allocated to the sector over the remaining 3 year life course of the RGF.

[2] The amounts we are considering are not out of line with the budgets for existing programmes to develop skills (e.g. Open Channels), improve access to finance (e.g. Abertay Games Prototype Fund), improve knowledge exchange across sectors (Digital R&D fund for the Arts, AHRC Knowledge Exchange Hubs).

[3] The average spend for projects funded by the Regional Growth Fund between 2011-2014 was £7 million.

[4] The ‘Creative Innovation System’ on page 50 of the Manifesto for the Creative Economy illustrates the seemingly bewildering range of organisations working to support the UK’s creative economy.

The cartogram featured above plots the geography of the size of GB's creative industries, but it blows up a place’s size proportionately to the concentration of jobs in creative industries in that area compared to the share of creative industry jobs in the UK economy.

Author

George Windsor

George Windsor

George Windsor

Senior Policy Researcher

George was a Senior Policy Researcher in the Creative and Digital Economy team.

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Juan Mateos-Garcia

Juan Mateos-Garcia

Juan Mateos-Garcia

Director of Innovation Mapping

Juan leads a team of data scientists, developers, visualisers and innovation experts who use new datasets, analytics methods and visualisation tools to inform innovation policy.

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Hasan Bakhshi

Hasan Bakhshi

Hasan Bakhshi

Centre Director, Creative Industries Policy and Evidence Centre (PEC); and Executive Director, Creative Economy and Data Analytics, Nesta

Hasan oversees Nesta's creative economy policy, research and practical work.

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John Davies

John Davies

John Davies

Economic Research Fellow, Creative Economy & Data Analytics

John is a research fellow focusing on the digital and creative economy. He is interested in the interface of economics, digital technology and data.

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