New research highlights economic and ‘spillover’ impact of subsidised arts

The wider arts and culture sector contributed £19.1 billion of Gross Value Added (GVA) to the economy in 2023, with £1.35 billion stemming from publicly funded organisations, according to a new report.

The analysis published today (18 April) found that in 2023, Arts Council England National Portfolio Organisations accounted for 7% of the sector’s GVA, equivalent to £1.35 billion – 17% higher than in 2019 – and 11% of employment, supporting 28,000 jobs.

But beyond the direct economic impact, the report found that government investment in the arts plays “a catalytic role” in the sector by reducing barriers to participation, fostering early-stage artistic talent and providing the infrastructure for experimentation, collaboration and professional growth.

Spillover effects

Carried out by the Centre for Economics and Business Research (Cebr) and funded by ACE, the study aimed to examine ‘spillover’ effects between the publicly funded arts and culture sector and its non-publicly funded counterparts.

Spillovers include attracting investment, creating regional economic impacts, fostering cross-sector collaborations, stimulating innovation and expanding audience engagement through digital technologies.

Cebr said the challenge of quantifying these effects has previously prevented economists from analysing how they impact arts and culture institutions as, unlike direct economic contributions, they manifest in less tangible areas such as knowledge transfer, skills development, increased consumer demand and shifts in industry practices.

Focusing on qualitative research sourced from 12 publicly funded and non-publicly funded cultural organisations, as well as additional case studies from 11 organisations, the report collects evidence of impact across nine defined spillover effects, grouped into three categories: industry, network and knowledge.

‘A catalytic role’

Cebr defined the spillovers under investigation as: stimulating private and foreign investment; innovation and digital technology; improved business culture and entrepreneurship; boosting economic impact of clusters and regions; health and well-being; creating an attractive ecosystem, creative milieu and city branding; strengthening the UK’s artistic talent pipeline and labour market; bolstering cross-border and cross-sector collaboration and testing new forms of organisation and structure.

Examining how public funding attracts private and international investment into the arts and culture sector, the report cited the government’s capital investment of £26.4 million for the National Theatre, which it says resulted in the venue increasing its annual private fundraising by nearly 40% to £28 million in a single financial year.

Meanwhile, in analysing how public-funded arts and culture organisations can provide business support, training and access to valuable resources, the report cited Bristol cinema and creative technology centre Watershed, which offers ongoing support to a core community of creative businesses.

In 2023/24, the businesses involved in Watershed’s Pervasive Media Studio had a combined turnover of more than £6.3 million and leveraged over £3.1 million in funding.

Over the last five years, the report says programme participants generated nearly 650 jobs and saw an average 44% increase in turnover, with 95% survival rates, compared with the regional average of 77%.

Cebr said its analysis reveals a “complex ecosystem of interactions” between the publicly funded and wider arts sectors, as well as broader links to the UK economy.

“As the UK navigates evolving challenges in productivity, labour market participation and place-based inequality, these findings reinforce the economic value of continued public investment in arts and culture,” said Cebr.

‘A virtuous circle of growth’

ACE chair Nicholas Serota said the findings demonstrate that public funding “sustains innovation” and “triggers a virtuous circle of growth” in the cultural and creative industries, but warned that “growth can no longer be taken for granted”.

“Strains on public and private funding and cost inflation are pushing many organisations to a tipping point, and we call on the government and local authorities to continue and enhance their investment in this national success story,” said Serota.

The actress Cynthia Erivo, a RADA graduate who performed in both subsidised and commercial theatre before starring in films such as Wicked added, “I am a direct example of what Arts Council funding can result in. We have sadly begun to believe that art is not important and does not contribute financially or commercially in the long run, this is a fallacy.”

“I started in places of training that required funding that have helped me to get where I am. The lead in a film that spans far and wide that brings people to the cinemas with over $700 million gross as well as concerts and shows.

“There are more people like me waiting to be found, if we don’t have the help of arts funding, in the long run, we lose. In more ways than one.”