Yesterday’s Autumn Statement will probably best be remembered for the impact it will make to the housing market. However, the Chancellor also announced a range of measures to support the growth of small and medium sized businesses and a serious of initiatives designed to make a small to redress the economic balance between London and the North of England. There was also a tiny sweetener in there for the creative industries, via the introduction of a tax credit for Children’s Television and Orchestras.
With 99% of businesses employing less than 100 people, yesterday’s pledge of £400m to extend government-backed venture capital funds to invest in fast growing SMEs is great news. We know that the creative industries, which are largely constituted of small businesses, contribute over £71.4 billion a year to the economy and have been growing at a faster rate than most other industry sectors since the financial crisis – by quite some margin.
However, whilst the UK has traditionally been very good at commercialising the ideas that these businesses generate, it has often been less successful at building creative businesses of an international scale compared to other countries such as the United States, for example. There are a number of reasons for this - creative businesses continue to face substantial problems accessing growth finance, the size of our domestic market limits our ability to scale, we have substantial skills shortages, a limited appetite for “risk” and our financial institutions are still finding it difficult to get their heads around valuing and leveraging against intangible assets.
What often happens in the UK creative scene is that companies who achieve early success are acquired by a large international player rather than building sustainable businesses here in the UK. Google’s recent acquisition of the artificial intelligence start-up, Deepmind, is a case in point.
For those creative businesses that don’t get acquired by the big multinationals, a lack of growth-finance usually leads them down the uncertain path of project-based finance which can bring with it limitations on a business’s ability to grow in size and ambition.
It is therefore crucial that businesses in the creative industries get their fair share of this new government support so that we can address this lack of international scale and develop the world-leading creative businesses of the future here in the UK.
During the Autumn Statement, the Chancellor also announced an extension to the Funding for Lending Scheme (FLS) for use under the Enterprise Finance Guarantee (EFG) initiative. The EFG is, in principle, a great way for small creative businesses to access debt finance for growth as it is aimed at sectors which are disproportionately turned down for normal commercial loans due to a lack of physical collateral.
With the government guaranteeing up to 75% of a loan, we hope that banks will be incentivised to step outside their comfort zone and recognise the crucial importance of lending to businesses built upon Intellectual Property and other intangible assets. The British Business Bank, which the Chancellor today announced is being expanded, can play a leading role in this space. Crucially however, financiers, financial institutions and policy makers need to step outside their comfort zone and invest for the long term in IP.
As an organisation that is committed to building the economy across the English regions, we were pleased to hear about the proposed Sovereign Wealth Fund for the North. This proposal has the potential to unlock significant regional capital for growth so that cities like Manchester, Liverpool, Sheffield, Leeds and Newcastle can invest in the skills and infrastructure they need to the ensure that creative businesses in their areas - which are driving a great deal of jobs and growth - can continue to go from strength to strength.
Finally, the UK has a fantastic history of producing high quality world renowned children’s television. However, investment in original programming has fallen by over 97% in the last decade, from £65m in 2002 to £2m in 2011. Today’s announcement looks set to safeguard our fantastic heritage in this area for future generations, add value right across the supply chain, support small independent production companies and stimulate inward investment.
During his Autumn Statement, the Chancellor proclaimed that the UK’s creative industries are in the midst a new ‘Golden Age’. Indeed, creativity is the hot ticket investment and an economic driver that has put the UK on the world stage. Hopefully the measures announced today, on small business finance initiatives, on regional devolution and on fiscal incentives, will go a significant way towards securing the long-term future of that Golden Age for years to come.
Caroline Norbury will be discussing 'The Business of Creativity' at The Watershed in Bristol tonight. For more information head here.
- Creative Industries
- Creative England