A creative fix
Today the Chancellor has highlighted the creative industries as one of the sectors he wants the UK to become a world leader in.
But what will he actually do? He mentioned the already in train review into Intellectual Property to ‘improve’ the regime, but beyond that there were no specific measures for the sector in the Budget.
His measures on increasing bank credit to small businesses and increasing the allowances for Enterprise Investment Scheme should benefit creative industries businesses seeking both credit and investment, as they will all business.
However there is a perception and knowledge problem here, which the Government should take steps to address. Banks and investors believe creative industries businesses are riskier than other sectors, even as they admit to not knowing much about them.
Our new research shows that this perception is wrong: The survival rate of a creative industries business five years after birth is only 1 per cent lower than the survival rate of businesses in the rest of the economy.
So, to make the increase in bank credit and stimulus to investors work for the creative industries, the Government should embark on a perception changing campaign to get the message over to banks and investors that creative businesses are not riskier than others.
In terms of banks providing credit, they should go further, and in the schemes the Government sets the terms for, like the EFG, they should require banks to take expert advice (from, say, the relevant trade body) before they decide on a loan application from a creative business.
Thirdly the Government should consider how to enable the development of business skills in the creative industries – both by encouraging individuals with a business background into the sector, and encouraging creatives themselves to improve their business skills and contacts. The need for the creative industries and investors to improve their understanding of each other is a two way street.
The Chancellor’s extension of R&D tax credits also holds promise for the creative industries, although the devil is in the detail. He says he has taken advice from James Dyson. Unfortunately, Dyson doesn’t believe in the economic importance of creative industries, declining to include video games, never mind music, film and TV, or fashion, in his pre-election report. The Chancellor says he has gone further than Dyson has recommended. He certainly should, making it clear that UK creative businesses generating IP are eligible for small companies R&D tax credits.
This would enable and reward UK businesses that are generating original, creative ideas, making it easier for them to retain a stake in the IP they create, and return more of the profits to the UK when their IP produces a hit.
The Chancellor says he wants to to support enterprise, exports, manufacturing and investment, to create "a Britain carried aloft by the march of the makers". To achieve this he must ensure that his measures work for the makers of creative IP.