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Nervous businesses predict a downturn in their arts investment as the recession starts to bite.

The credit crunch could lead to a collapse in business sponsorship of the arts, according to the latest survey of arts investment trends by Arts & Business (A&B). The research reveals that more than 40% of companies anticipate that the current financial climate will have a ‘negative’ or ‘extremely negative’ impact on their future support for the arts. Those who sponsor the arts primarily for marketing reasons are among the most pessimistic, as are businesses that invested less than £5k in the arts last year. Sponsorship in the South West and North East of England appears to be most at risk from the forthcoming economic downturn, with more than 60% of respondents in those areas expecting the credit crunch to have a negative impact on their involvement with the arts. Of all the business sectors surveyed, the legal sector was found to be the most alarmed by the impact of the credit crunch, with almost three-quarters of respondents planning to cut their arts budgets.

Up to 150 arts sponsors from different market sectors and from across the UK responded to the survey, which was conducted in August and analysed last month, just before the collapse of Lehman Brothers and the subsequent international banking crisis. Questions were asked about sponsorship priorities, how they have changed in the past year and how they are likely to change in the future, in particular as a consequence of the credit crunch. The report concludes that the confidence of businesses investing in the cultural sector in the economic downturn is shaken, particularly when looking beyond 2008, though some businesses recognise the importance of continued investment in order to raise their company’s profile and create a competitive advantage.

The short-term picture for arts sponsorship is little changed from previous years, with 82% of respondents expecting their investment in the arts this year to be equal to or greater than last year. But according to the report, a drop in investment is expected to follow the general economic context with a 12 to 18-month time lag, mirroring the pattern of the last recession: “According to A&B’s historical data, business investment in the early 90s suffered as a result of the recession, though it only started decreasing a year after the substantial drop of GDP in 1990–91… As the recession catches up with businesses and their consequent partnerships with the arts, the climate is expected to remain quite dire, depending always on the duration and depth of the credit crunch.” Business investment in the cultural sector may start picking up once the economic climate starts showing clear signs of improvement, but, based on previous experience, it could continue to decline for as much as two years after GDP starts to recover.
A spokesperson for A&B said that “many respondents… believe there is a clear value of sponsoring the arts and investing in culture, regardless of external factors such as an economic downturn”, but emphasised the need for “the arts to act fast and provide the private sector with greater returns for their investment”. Commenting on the economic downturn, Kim Skildum-Reid, co-author of ‘The Sponsorship Seeker’s Toolkit’, said, “I think it is inevitable that many, if not most, sponsors will be making some changes and rationalising their portfolios over the next few months… It’s not going to be impossible to thrive in the next couple of years, but it won’t be easy.”