Since 2020 the sector has faced a series of crises, first Covid and now an even more uncertain future related to the cost of living. Michelle Wright considers how the arts can help.
According to a recent report from Mindshare - Reality Check: Going for Broke? – financial concerns are near universal in the UK with 90% of people worried about the rising cost of living. Only 16% are confident they can ride the crisis out with minimal changes to their everyday life.
To some extent, Cultural Recovery Funds protected the arts sector during the pandemic but now we have to contend with a series of interdependencies which make the future seem very tough. These include:
• Inflation - The impact of very high inflation with the need to meet higher staff pay demands and the rising costs of goods and services. According to Pro Bono Economics, charities will need to spend an additional £2bn on wages in 2024 to address inflation, an increase of nearly 10% since 2021.
• Energy – Like all sectors, the arts will need to meet much higher energy costs with no certainty of any subsidy beyond April 2023.
• Audiences and trading – Audiences have been slow to return post-Covid and now with less disposable income, attendance at shows or exhibitions will be out of reach for many, as will discretionary spend on meals and drinks.
• Standstill funding – In real terms, even for organisations in receipt of public funding, the impact of standstill funding and a competitive funding environment will start to bite. Soaring additional costs has led Creative Scotland to say that even maintaining standstill funding is increasingly unviable.
• Decline in philanthropy - An inevitable short-term decline in fundraising and philanthropic giving follows any global downturn, as donors themselves face financial difficulties. While some Trusts and Foundations – such as the Hobson charity – are increasing support and flexibility to focus on the cost-of-living crisis, this draws funding away from artistic activity.
For arts and cultural organisations, this perfect storm of issues will have a significant impact on potential sustainability and survival. There is no magic money tree, nor can we expect further government intervention. Organisations will need to think laterally about both costs and income.
Are there any silver linings?
From a Cost of Living Enquiry being developed via Arts Fundraising & Philanthropy, we can see there are some clear priority areas for fundraisers.
• Prioritisation within inflation – High inflation is likely to continue until at least 2024. As New Philanthropy Capital says in their Confronting the cost of living crisis report, inflationary pay rises are unlikely to be affordable, so priority will need to be given to those on the lowest salaries, temporary staff and freelancers, alongside investing in mental health and well-being.
It is very likely that high staff turnover will be a common feature next year, which might lead to positive restructures, adaptation of roles and efficiencies. Staff turnover may be reducible through non-pay policies such as increasing flexible working.
• Energy – The uncertainty over whether energy support will be extended beyond April 2023 is creating crippling anxiety. The arts needs to be part of the lobbying force to extend. It should also work to galvanise collective purchasing power using methods such as the approach used by Utility Aid, setting up collective purchasing baskets across the voluntary sector with the National Charity Tender and the Wholesale Alliance. This purchasing power guarantees competitive rates on gas and electricity contracts. There are also options for free energy audits to review contracts.
• Audiences and trading – The changing habits and behaviours from audiences continues. The key aim should be to keep price rises reasonable or to embrace dynamic pricing, while rewarding both audience and donor loyalty. The fail-safes of reputation, great service and quality must come the fore. If people do venture out, the experience needs to be excellent. It needs to sparkle.
• Continuing to invest in fundraising – It’s challenging to hold our nerve but the only way to prevent a fundraising slowdown is to strengthen donor engagement, cultivation and solicitation, as well as to work in partnership. Donors need to hear from you on bad days as well as good.
And we need to take care of costs as well as income. A key gripe of the Treasury is that the charity sector doesn’t take advantage of existing tax breaks such as Theatre Tax relief or Gift Aid where an estimated £560m goes unclaimed each year. Support to enable smaller organisations to take advantage of these will be essential.
• Support from funders – According to ACEVO, organisations should be forming partnerships and alliances to coordinate efforts, share costs, skills and expertise, maximise income and, ultimately, deliver better services.
Funders such as Esmée Fairbairn are acknowledging cost-of-living pressures for existing grantees with 10% increases. Any support from funders to help organisation build back reserves will be highly welcomed.
And finally, perhaps the UK can benefit from schemes that have been implemented in mainland Europe such as the Kulturpass which gives young people €200 to access culture, with the twin aims of encouraging young adults to experience live culture and drop stay-at-home pandemic habits.
Art to help out anyone?
With thanks to our Cost of Living Enquiry group: Fiona Daborn, Lucy Furneaux, Emily Hicks, Andrew Higgins, Camilla Johns, Ashton Mullins, Anna Snell and Jo Warmington.
We welcome all views as we develop our recommendations: email@example.com.
This article is part of a series on the theme Fundraising for the Future, contributed by Arts Fundraising & Philanthropy.