The Creative & Digital Industries in Leeds 2011 Sector Assessment

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1 The Creative & Digital Industries in Leeds 2011 Sector Assessment Report authors: Michael Canning & Dan Kudla I moved to Leeds from London for a lifestyle change, Leeds has a good design and creative community but doesn't have the congestion, pollution, high prices and stress that come with a daily commute into London. I can enjoy the vibrant cosmopolitan qualities that Leeds centre has to offer whilst living in the countryside, my quality of life has already improved greatly. Online survey response

2 Executive Summary This report has been prepared by Michael Canning and Dan Kudla from the Economic Development Team on behalf of the Creative Leeds group 1 and Leeds City Council. The aim of the project is to provide an up to date assessment of the direct and indirect economic impact of this key sector for the Leeds economy. This information will be used by the Creative Leeds group to help them consider shared and/or revised initiatives. For the purposes of this report the current Department of Culture Media & Sport (DCMS) definition has been used. This definition includes the following industries: advertising architecture art and antiques crafts design designer fashion film and video interactive leisure music the performing arts television & radio software publishing software & computer services In 2004 a report by Professor Calvin Taylor, The Creative Industries in Leeds: An Initial Economic Impact Assessment established a baseline which illustrated the importance of the sector to the local economy. According to official statistics between 2005 and 2009 the number of businesses in Leeds in the sector rose from 1,131 to 1,522 (CASE IDBR). Some sub sectors such as software, computer games & electronic publishing grew rapidly whilst others, such as music, visual & performing arts or publishing, have declined. However, according to ABI data business numbers increased from 1,345 to 1,624, an increase of over 20%. The primary research informing this report identified 1497 individual companies and freelancers operating in Leeds through analysis of the directories, in house database and an online survey. There were over 600 responses to the bespoke online survey which yielded 458 responses suitable for analysis. Of particular interest are the 177 respondents who were not VAT registered (currently turnover above 73,000). 70% of the responses were from micro businesses, 21% from small businesses (11 49 employees) 7% from medium businesses ( employees) and just 2% from large businesses (200+ employees). By taking information that we know is consistent from our survey and data we can extrapolate this across other companies and employees then it is possible to calculate the real size of the creative sector is for the city of Leeds. 1 The Creative Leeds Key Agencies Group was formed by Leeds College of Art in 2009 with the aim of bringing together the main economic, arts and cultural organisations involved in supporting the development of the creative industries in Leeds. The following organisations have participated in the group: Leeds College of Art, Leeds City Council: Economic Policy & Programmes, Business & Enterprise, Leeds City Region, Leeds Initiative: Cultural Partnership, Leeds Art Partnership, Leeds Media, Leeds Chamber of Commerce, Locate in Leeds, Marketing Leeds, Screen Yorkshire, Arts Council Yorkshire 2

3 48% of all our respondents 166 said that they were not VAT registered. Using the latest ABI data which includes all VAT registered companies we can therefore assume that the real picture of companies in Leeds is at least double the official figures. If we build this back up then we expect that there are approx 3,380 companies operating in the creative sector in Leeds. This is also true with regard to the number of employees working in creative industries across the City. Through primary our research there are significantly more than we would have otherwise assumed. In summary through desk based research and an online survey, the study found: There are nearly 3,400 creative businesses in Leeds There are up to 30,000 people working in creative industries across the City 70% of creative businesses in Leeds are micro and a further 21% are small Consistent with previous research specialised clusters are present such as the TV and radio businesses centred on ITV Yorkshire s studios in 3 and 11, where there is a cluster of advertising/design/web agencies around Holbeck Urban Village. Areas such as advertising, design, music, performing/visual arts and software/computer services had particularly significant operations nationally and internationally. According to the survey the creative businesses consider the most important factors affecting their business to be quality of life, all round cost considerations and networking, with the availability of networking opportunities being particularly relevant to many businesses across the sector. Other factors seen as particularly important are transport links and the availability of local skilled workers. 2.0 Introduction The term creative and digital industries includes a wide range of activities including art, advertising, architecture, design, music, fashion, publishing, computer games and software development, the performing arts, film, TV and radio. A common factor across this sector is an emphasis on the talent and creativity of the people involved with these businesses. Many creative businesses are therefore highly innovative with significant growth potential. The UK s creative and digital industries are an important component of the economy, constituting a greater percentage of GDP than in any other country (Technology Strategy Board, 2009). In 2008 the total GVA of the sector was estimated at 59.1 billion, accounting for 5.6% of national GVA. Employment in 2010 was just under 2.3 million people, accounting for 7.8% of all employment and over 182,000 businesses. Employment in the sector has grown rapidly in recent years, from 1.6 million to 2 million between 1997 and 2007, highlighting the potential in the creative industries for the country s economic future. Within the sector, software, computer games and electronic publishing had the largest number of employees in 2010 (over 600,000), whilst music and visual/performing arts contained the largest number of self employed people, in excess of 200,000. Whilst the total number of registered businesses, according to central government s Inter 3

4 departmental Business Register (IDBR) figures was 2,100,400, it is anticipated that this is an underestimate of the true total, due to the presence in the sector of many small firms and freelancers that are not included within the IDBR framework. In terms of numbers employed, 1,283,800 were directly employed in the creative and digital industries, whilst a further 994,700 were employed in creative roles in other industries. Figure 1 below indicates the employment figures across the various sub sectors. With overall gross value added (GVA) from the sector at 5.6%, software, computer games & electronic publishing provided the greatest contribution, at 2.5% of total national GVA, following by publishing, with 1%. Figure 1: Creative employment, Great Britain (DCMS, 2010) In the Creative Britain report the creative industries are recognised as an area of the economy in which the UK has considerable strengths and a head start on many other countries. Economically, the rise in incomes and aspirations in some developing nations, and consequent increase in demand for creative products and services, represents a considerable opportunity for UK creative businesses to capitalise on the country s position as a global creative hub. 2.1 Leeds as a creative hub Leeds, as the regional commercial capital, is a significant city in the UK in terms of its GVA contribution and employment. Yorkshire Forward s econometric model gives indicative figures of current GVA contribution for Leeds of over 1.5 billion. The calculation of 4

5 productivity for the digital and new media sector (DCMS definition of the creative and digital industries, but also incorporating electronics, telecommunications and printing) in 2009 was 53,305 per full time employee (FTE). Research by Calvin Taylor in 2004 found Leeds to be a major regional hub for the creative and digital industries, containing 1,100 businesses with 12,000 employees, 2,000 selfemployed practitioners and constituting 22% of the total employment in the sector for Yorkshire & the Humber. Accounting for around 3% of both total employment and wealth generation in the city, the sector was a small, but significant component of the city s wider economy, with audio visual businesses constituting the largest share (45%) of employees, and visual arts (44%) the largest share of self employed. The sector in Leeds was also characterised by the presence of small (16.2%), medium (2.6%) and large (0.9%) enterprises at levels higher than the national average, and micro businesses forming a lower proportion than nationally (80.3% as opposed to 87.8%). The study found that although the sector had grown rapidly historically, there had been very little employment growth in the years leading up to In 2007 a Core City study estimated that Leeds had the highest creative industry employment outside of London as a share of the total, at 19,840. This was 4.9% of total employment compared to Bristol 12,070 (5.3%) and Manchester 15,090 (4.9%). Although using different sources to the Taylor study, this could suggest a growth in the sector up to this date. A 2006 report by Creative Yorkshire concluded that at the time the sector did not perceive the city to have mobilised its creative and cultural resources in an effective way to create a strong identity, and that this had contributed to a sector perceived as relatively marginal. However, Leeds was felt to benefit from the availability of skills, transport links and a strong creative scene, giving further opportunities, based around major investments in facilities and potential for improved networking. 2.2 Challenges facing the sector in the UK Despite the considerable potential of the sector, and its high rates of growth in recent years, the continuing vitality of the creative and digital industries should not be taken for granted with a number of challenging issues facing the sector as a whole. International competition Whilst increasing international demand for creative products and services represents an opportunity, the increasingly interconnected nature of the global economy, plus the growth of economies in developing countries has also led to increased competition in the creative and digital industries. Certain sub sectors, such as the computer games industry, face particularly strong competition, due to tax subsidies provided by some national governments. Such challenges ensure the need for UK companies to be innovative and competitive to retain their positions and for appropriate skills and business support provision to be available (BERR, 2009). Differential rates of growth within the sector 5

6 Although frequently portrayed as a high growth sector, rates of turnover and business survival vary considerably between sub sectors. Some high growth companies, largely in sub sectors such as software, computer games & electronic publishing, accounted for virtually all of the growth between 1995 and 2005 (see Figure 2). High growth firms accounted for 7.5% of creative industry firms in 2009 (NESTA, 2009), as opposed to 6% of all firms nationally. However, these figures mask the fact that there are considerable numbers of firms in long term decline in the sector, particularly those which were established prior to 1995, in sub sectors such music and the performing arts. This is also reflected in the rates of employment growth in the sector pre recession, with the high growth start up firms accounting for all net employment growth, whilst established firms reduced total employment between 1995 and 2005 by 120,000. In particular, software, computer games and electronic publishing has accounted for significant employment growth, accounting for 250,000 of the total employment growth in the sector of 290,000 between 1997 and Figure 2: Total turnover growth for start ups and established businesses, for the period (Frontier Economics, 2007) Common barriers to growth A recent Work Foundation study (2010) found that many companies struggle to expand past the 300k to 400k turnover bands. Common barriers include conscious limitation, a lack of sufficient technical skills and leadership and low labour productivity. In order to combat these issues, stronger networks, positioning within developed creative clusters and business support tailored specifically to creative businesses are recommended remedies. The provision of business support and access to finance in particular are issues that are key to the sector, with many areas of the creative industries experiencing particular difficulties with obtaining finance (BIS & DCMS, 2011). Those involved in the creation of creative content, particularly in software, publishing, video, film & photography and radio & TV businesses were particularly likely to face rejections for finance. Reasons include higher risk profiles associated with creative businesses, and a misalignment of interests between 6

7 businesses and finance providers, due to a lack of financial and leadership skills in many creative businesses. It is believed that such rejections have a marked effect upon business growth in the sector. The economic downturn The sector has been affected badly by the economic downturn over the past few years, largely due to its high proportion of small businesses, which have far less capacity to absorb external financial shocks (Work Foundation, 2010). Many firms with a business facing role have been affected, with advertising and related firms (e.g. PR, marketing) affected particularly badly (suffering a 13% business failure rate). It has been suggested that cities with a higher reliance upon financial and business services in their local economies will see a corresponding impact upon local creative industries, due to strong links between the two sectors (LGID, 2009). Many cultural industries have been more dependent upon public spending, with recent Government spending reductions likely to have a lasting impact upon growth and employment in the short term. Figure 3 gives employment figures for a selection of sub sectors (by SIC 2007 codes) between 2008 and 2010, indicating the extent to which the recession has resulted in job losses in many areas of the creative and digital industries. Figure 3: Jobs in some creative industries and sectors over the recession 2008 Q2 to 2010 Q2 (Work Foundation, 2010) 2. Figure 4 forecasts how the recession may impact on national employment in the creative and digital industries. It anticipated that 2008 levels of employment in the sector may not be reached again until Note: *SIC = 2007 Standard Industrial Classification. ** closest match to DCMS definition of the creative industries using the 2007 SIC codes. Creative industries excluded are: specialised design and architectural services (data not yet available) and fashion, other design, antiques, and crafts (no industrial classification exists). Source: Office for National Statistics, Work Foundation estimates. 7

8 Figure 4: Total employment in creative industries in Great Britain (Experian, 2009 reprinted in Work Foundation, 2010). Convergence One of the most important ongoing trends within many areas of the creative and digital industries is that of convergence, with the rate of technological change and innovation meaning an ever increasing blurring between different media platforms (particularly the web and other forms of digital media). This causes challenges both for those trying to classify firms within the sector and also for the firms themselves, who have to innovate and adapt to new platforms in order to remain competitive, or else see their existing business models eroded over time. Developments such as file compression and expanded broadband internet provision have profoundly altered the revenue models for both the music and film sectors. While digitalisation has enabled a distinct levelling of the playing field in terms of production costs and expansion of distribution opportunities there are aesthetic issues and audience/customer expectations that have come increasingly into play for the music and film sectors. Consequently, the Work Foundation (2010) notes that constant proactiveness is needed to maximise opportunities from emerging technologies and platforms in future. This increasingly rapid pace of change within creative content has led to calls for intellectual property laws to be changed. The establishment of a digital copyright exchange could have the potential to drastically speed up the process of licensing and protecting content. As well as buying and selling licenses such an exchange could allow the UK creative and digital industries to build upon the country s existing competitive advantage in creative content. Digitalisation The process of digitalisation has progressed rapidly in recent years, as customers and service users have quickly embraced concepts such as e commerce. As the capabilities of computing power and data storage have increased internet bandwidth has had to grow quickly to cope 8

9 with increasing demand. This has resulted in increased opportunities for many creative and digital industries businesses, with the internet in particular creating new relationships between content creators, service providers and audiences. The enhancements available through emerging digital technologies and services have also given rise to opportunities for new types of work and leisure spaces, with the creation of creative hubs in a number of UK cities typical of this. It has also been noted that the spread of digitalisation is leading to the democratisation of many cultural pursuits previously seen as elitist, with the Arts Council England (2010) noting that the digital revolution has led to new platforms on which art can be created, debated and shared. The huge expansion in recent years of digital content and platforms, and the resultant increased pressure upon the UK s communications infrastructure, has led the government to devise its Digital Britain strategy (Technology Strategy Board, 2009). This set out plans to secure the UK s position as a leading digital economy. Skills The projected growth and importance of this sector to the UK economy places increasing demands on the availability of the right skills to remain internationally competitive. A 2011 report by the Alliance for Sector Skills Councils highlighted the atypical nature of the sector in relation to others with a strong start up culture, very high proportions of workers with skill sets above level 4 and a labour market consisting of a few large firms and large numbers of sole traders and freelancers. The report identifies a wide range of areas in which better skills provision is needed, some generic and some specific to particular sub sectors. The availability of a skilled graduate labour force is of particularly important to many sections of the creative and digital industries, with a study commissioned by Graduates Yorkshire (2007) identifying the creative and digital industries as being knowledge intensive sectors of the economy with a particular requirement for graduate talent. A major study by the Creative Graduates Creative Futures Partnership (2010) surveyed 3,500 graduates who qualified in creative and digital disciplines between 2002 and 2004, in an effort to plot career patterns and to determine how many graduates gained employment in the sector. The study found that the majority (78%) had worked in the creative industries, and most were still working in creative occupations when surveyed between 2008 and Three quarters were also in full time, paid positions. Half the respondents worked in their main job for organisations comprising 10 or fewer workers, reflecting the large number of SMEs in the sector. The study also found that 48% of respondents were engaged in portfolio work, meaning they were principally engaged in more than one work activity. This ranged from people combining one main form of paid employment with additional self employment to those who balanced 2, 3 or even 4 different activities. This trend reflects the importance of portfolio working across many creative disciplines. Also characteristic of the sector and prevalent in the survey responses was the practice of unpaid internships, work experience and volunteering, with 42% of respondents having undertaken this, and 23% still employed in this manner. 9

10 3.0 Methodology For the purposes of this research the Department for Culture, Media & Sport (DCMS) definition of the creative industries was used. This definition includes the following sub sectors advertising, architecture, arts and antique markets, crafts, design, designer fashion, film, video and photography, software, computer games and electronic publishing, music and the visual and performing arts, publishing, television and radio. This was used as it is the only comparable measure we have to other cities. Each of these sub sectors is made up of a number of economic activities as defined by the national Standard Industrial Classification (SIC 2003). This is an international standard that is adopted in the UK which is revised periodically. Without use of the standard it would not be possible to analyse key national datasets for economic data such as the Annual Business Inquiry (ABI), this has now been superseded. It is important to understand that these are sample surveys for estimates below the regional level they should be treated with caution. We also need to use the survey data to try and uncover the wider picture of the sector including areas that are not picked up by official data. We can do this by taking information that we know is consistent from our survey and data information and extrapolate this across other companies and employees. The figure will then be a proxy for the sector but one that we will be confident in using. The data and analysis in this section of the report has been gathered using three approaches: 1. Analysis of existing datasets CASE (Culture and Sport Evidence programme) is a led by DCMS. As part of this programme, the DCMS compile figures for numbers of culture, sport and heritage businesses across regions and local authority areas, utilising Office for National Statistics IDBR data and classified by SIC 2003 code 3. The Annual Business Inquiry (ABI) is an annual survey conducted by the Office of National Statistics, which provides financial and employment information through sample data of businesses to produce information by sector and geographical area. Employment figures are classified by SIC code. It should be noted that IDBR data only includes businesses registered for VAT or running a PAYE scheme. Until 2008 the ABI was used as the main source for subregional estimates of employee jobs by industry. The ABI data is on the standard industrial classification (SIC) 2003 basis and the data is available for The BETA Model (Benchmarked Enterprise Trend Analytics) is a statistical package used by Leeds City Council, and other public sector organisations and partnerships, which can analyse rates of business growth and other trends. Its primary data source of information is collected by business telephone directories (e.g. Yellow Pages or Thompson Local). BETA uses the SIC1992. Information such as address, postcode and approximate employee numbers are provided, with information resubmitted on a quarterly basis. 3 It should be noted that IDBR data only includes businesses registered for VAT or running a PAYE scheme. 10

11 2. Project database A database was established for the project by collating of existing directories, in house sources. 3. Online survey To address some of the deficiencies of existing datasets and in order to gain access to local, up to date economic data primary research was undertaken. A bespoke online survey was developed and conducted in early The survey yielded 653 responses. The numbers were screened for postcodes from outside the Leeds district. This appeared to indicate a high level of interest from Halifax, Huddersfield, York, Hull and Sheffield. Data was also screened to eliminate duplications and unintelligible entries. The final usable and filtered number of entries was Main findings 4.1 Existing datasets DCMS CASE data Table 1 illustrates the overall numbers of businesses for some of the components of the creative and digital industries between 2005 and Notable are the high numbers of software based companies, arts based and advertising organisations. Overall numbers are examined further in relation to other data in figure 10. Also of note is the high rate of growth shown by the figures over the course of the four year period, with the number of companies in the sector rising from 1,131 to 1,522. This is by no means uniform, with sectors such as software, computer games & electronic publishing growing rapidly whilst others, such as music, visual & performing arts or publishing, having experienced a decline. Table 1: IDBR data for creative & digital in Leeds Metropolitan District from the CASE programme (DCMS, 2010) Figure 4 presents the distribution of the creative and digital industries sub sectors used by CASE, indicating particularly high proportions of firms in software, computer games & electronic publishing, with music and the visual & performing arts and advertising also constituting significant numbers. In addition to the composition data given in figure 4 the CASE dataset also records 635 new starts in the creative bracket between 2006 and

12 Figure 5: % composition of creative and digital industries in Leeds Metropolitan District by sub sector from 2009 CASE IDBR data (DCMS, 2010) ABI data Employment Figure 5 gives employment figure breakdowns by DCMS creative industries sub sectors (consisting of groups of relevant SIC 2003 codes for both 2004 and 2008), whilst figure 6 shows percentage change in each sub sector over the 4 year period. A number of sectors, such as publishing, have shown a marked increase in employment, whilst many others, such as. advertising and radio & TV have shown significant decline. Overall, the ABI figures show a decrease in creative and digital industries employment in the creative industries from 13,249 to 12,286 between 2004 and 2008, a decrease of over 7%, 12

13 Figure 6: %employment change in sub sectors in Leeds Metropolitan District according to ABI Businesses When calculating the above trends based upon business numbers, figure 7 indicates that overall numbers increased significantly between 2004 and 2008, particularly in sub sectors such as software, computer games & electronic publishing and TV & radio. Only two sub sectors (video, film & photography and music, performing & visual arts) registered a decline in overall business numbers. Overall, business numbers increased from 1,345 to 1,624 an increase of 20.7%. This is in stark contrast to the picture presented by employment figures, suggesting many of the businesses being created are likely to be small in size and not major employers. 13

14 Figure 7: Number of creative and digital industries businesses in Leeds Metropolitan District by sub sector, according to ABI data Whilst ABI is useful in estimating figures for numbers of registered businesses and employees, it is important to acknowledge it is based on a stratified sample with a smaller sampling proportion for smaller businesses. Consequently, it is important to consider this caveat when dealing with sectors such as the creative and digital industries, which contains a large proportion of these small businesses BETA Model data Using BETA, Figure 8 shows the number of businesses recorded in creative industry SIC 1992 codes, with multipliers applied to the data to reflect the proportions of businesses in certain SIC codes which are perceived by DCMS to be creative. As of Jan 2011, BETA identified a total of 1,204 creative businesses in Leeds, obtained by applying DCMS multipliers to 2,811 businesses from SIC codes likely to contain creative businesses. 14

15 Figure 8: Numbers of creative businesses by sub sector as identified by BETA. BETA can also be used to display proportions of creative and digital industries sub sectors, based upon SIC codes in its accompanying database (with the DCMS multipliers as used in ABI data applied to calculate the proportion of businesses in each SIC code which are likely to be creative ). However, the much smaller sample size of businesses used means some of the sectors appear far smaller, whilst a tendency for some sectors to utilise the directories more than others also has the potential to skew results. Figure 9 shows the sub sector composition as plotted by the BETA model. Using this dataset, advertising and music and visual/performing arts constitute the largest number of entries. BETA is useful in that many of the smaller scale businesses not VAT registered (and consequently not reflected in ABI figures) are picked up due to their inclusion in telephone directories. It is also has the benefit of having data up to January 2011 far more up to date than most other datasets. However, due to its reliance on the older SIC 1992 codes (which do not recognise many codes developed in later SICs, such as publishing/reproduction of sound recording, or reproduction of computer media) and the way the DCMS multipliers overlook many potential creative businesses in some sub sectors (e.g. designer fashion in particular), it is likely there are areas of the creative and digital industries which BETA does not pick up. 15

16 Figure 9: Composition of sub sectors within the wider creative and digital industries sector in Leeds Metropolitan District in 2011 according to BETA Model data 4.2 Estimating the size and shape of the creative and digital industries in Leeds Whilst existing datasets, such as ABI, BETA and CASE are all useful to give an insight into approximate numbers of businesses and composition of the creative and digital industries, they are by no means definitive, based upon samples with varying degrees of inaccuracy or excluding certain elements of the sector (for example, there are around 25,000 ABI businesses in Leeds, against an aggregated total figure of 45,000). Consequently, it was necessary to carry out further research in an attempt to identify all individual businesses possible, compiled from a desktop study (see section 3) combining entries from the various directories, in house database and online survey. Although by no means conclusive, this can give a more detailed insight into the size and makeup of the sector than the preceding datasets in section Comparison between datasets on sector composition Figure 11 depicts the number of businesses by creative and digital industries sub sector for the ABI, CASE and BETA datasets (with the full figures in Table 3). Evidently, some of these proportions correlate reasonably well across the board, such as architecture or TV and radio. The figures demonstrate the variance by which the makeup of the creative and digital industries can be viewed, and the general difficulty in accurately defining the profile of the sector. 16

17 Figure 10: Comparison between datasets of creative industries sub sectors in Leeds Metropolitan District using ABI, CASE and BETA data. Table 3: Comparison of business numbers over the 3 datasets The 2011 desktop research During the study period 1497 separate companies and freelancers operating in Leeds were found through analysis of the directories, in house database and online survey (see Figure 11). This represents around 3% to 3.3% of the total of the city s businesses in the range of 45,000 50,000 total number of businesses. This is close to the IDBR (CASE) measurement of 1131 businesses in 2009, although as the two datasets have differing sources with IDBR not picking up many freelancers and other small businesses, a direct comparison cannot be made. However, as the desktop survey itself is based upon directories, a limited database of contacts and a survey, it is not likely to be fully comprehensive, and it is probable that more businesses exist in the creative and digital industries sector in Leeds. Due to greater ability in detecting the small and micro enterprises which form a cornerstone of the creative and digital industries, the research can demonstrate that the sector is considerably larger than conventional business recording methods, based upon VAT registration, indicate. 17

18 Advertising Architecture & Engineering Art Retail & Antiques Crafts Design Designer Fashion Film, photography and video Interactive Leisure Software Business type Music Performing & Visual Arts Publishing Software & Computer Services Television & Radio Figure 11: Number of known creative businesses (by sub sector) in Leeds from amalgamation of desktop study and online survey Figure 11, above, combines the figures from the 2011 research, in order to give an estimate of known businesses in the creative and digital industries. Whilst the figures have their limitations, due to the nature of their sources, these are useful in providing indications of known businesses in Leeds by sub sector (see Appendix B for percentage composition of each sub sector). Difficulties were encountered in compiling the numbers, as a significant number of creative businesses engage in activities across a number of sub sectors, one of the key factors that make it difficult to quantify the creative sector as a whole. One example of this is the multidisciplinary nature of many agencies and freelancers in areas such as design and advertising, with services carried out straddling the DCMS categories and leading many of the businesses in the table being categorised at the discretion of the project team. The overall number (1497) exceeds the 1098 businesses identified in Taylor s 2004 report, meaning it is quite possible that the sector has grown since this point. However, as the sources of data are different, this cannot be conclusively verified. Compared to the 2004 report, large numbers of businesses were identified in similar fields (e.g. advertising, architecture, music and software & computer services), and the figures also indicate that large numbers of small enterprises exist in categories such as music, film, photography & video or the performing & visual arts which are not being picked up by the conventional sources of business statistics. 4.3 Results from the online survey In total, 647 responses were received to the online survey. Following data cleansing and removal of duplicate responses, those from outside the creative industries and those not in the Leeds Metropolitan District, 458 responses were available for analysis. Robust numbers 18

19 of responses were received in some occupational categories, whilst others received only a few. Responses are liable to have been affected not only by composition of the sector in Leeds, but also by both the ability for the survey to reach businesses through their sector networks, and the inclination of businesses to respond. With 87% indicating that the postcode given in the survey was their businesses main workplace, yielding a wide range of useful data on the composition, sizes, employment, turnover, registration statuses and locations of businesses in the sector, in addition to invaluable opinions and perspectives Respondents numbers and composition Figure 12: Breakdown of responses by sub sector to the online survey As Figure 12 shows, the largest response came from the performing and visual arts sector, followed by advertising, film/photography/video, design and software. This may be due in part to the strong networks prevalent in these fields, and their widespread use of online networks in particular. The lowest responses were designer fashion, interactive leisure software and art retail/antiques followed by architecture. A detailed breakdown of the proportions of respondents from each sub sector is included in Appendix B, along with a breakdown of all forms of business which responded. The overall match of proportions of known creative businesses and freelance workers in Leeds to the respondents (as indicated in matched columns in Figure 13), indicates responses from sizeable proportions of the overall known numbers in some sub sectors. Whilst not an exact match it shows the strength and legitimacy of the database in terms of the numbers of respondents to the survey. Notable points are: 19

20 a) The greater number of respondents in performing and visual arts than those known. b) The small number of respondents from the known number of architecture/engineering and music based businesses c) Sizeable proportions of actual respondents against the known in sub sectors like advertising, design, film, photography & video, software & computer services and TV & radio CDI businesses from desktop survey CDI businesses responding to survey 50 0 Art Retail & Antiques Advertising Architecture & Engineering Crafts Design Designer Fashion Film, photography and video Interactive Leisure Software Music Performing & Visual Arts Publishing Software & Computer Services Television & Radio CDI subsectors Figure 13: Comparison of online survey respondents to known creative businesses by sub sector in Leeds Metropolitan District Size of businesses The study also sought employment information from the questionnaire respondents and determined the following business size profile using BERR definitions. The responses from micro businesses dominated the survey making up 70%, with 239 respondents represented in this category (see Figure 14). Small businesses (11 49 employees) made 21% of the total, while medium businesses ( employees) made 7% and large businesses (200+ employees) only represented 2% of the total. This correlated with the understanding of the creative sector from previous studies, identifying the micro business size as being the dominant in the sector, with a comparatively very small number of large firms. However, the findings also echo the Taylor study, which found Leeds hosted more small, medium and large enterprises than the national average. 20

21 Figure 14: Distribution of company size of respondents using BERR definitions Employment data Respondents to the survey registered a total of 7,330 employees as working at their various workplaces. As demonstrated by figure 15, the vast majority of these (4,505) were full time paid workers, accompanied by a sizeable proportion (1,375) of part time paid workers. However, there were sizeable figures of employment types characteristic of the creative industries, with 657 freelancers recorded, in addition to 688 unpaid volunteers and 105 interns. These findings back up other national studies, which indicate the reliance of the sector upon both freelance workers and interns and unpaid volunteers (many of whom are likely to be young and seeking to forge careers in the industry). Further employment breakdowns by DCMS sub sectors are available in Appendix B, with these revealing that particular sub sectors (such as performing & visual arts, TV & radio, and video, film & photography) are particularly reliant upon unpaid volunteers in their practices. 21

22 Figure 15: Total number of employees across all workplaces Turnover data The question on turnover was divided into separate sections for sole practitioners and larger organisations. The resultant responses were closely matched between the two groups in terms of numbers, with 216 responses from sole practitioners and 198 from companies, partnerships and other organisations, as depicted below in Figures 16 and 17. The sheer breadth of turnover bands highlights the diverse profile of the sector. The vast majority of sole practitioners (180) fell into the lower income bands of below 30,000, with as many as 70 in the lowest income band of 0 5,000. This reflects the lowincome nature of many roles in the creative industries, and helps explain why many practitioners resort to other occupations and activities to supplement their income (the socalled portfolio work touched upon in section 2.1). 22

23 Figure 16: Sole practitioner turnover bands and number of respondents The companies and partnerships responses occupied a very broad range of turnovers, ranging from below 10,000 per annum, all the way up to 10 million or over. Most turned over less than 200,000 per year, with particularly large numbers turning over either less than 10,000. Figure 18 also demonstrates a significant concentration of respondents turning over between 100,000 and 400,000, possibly corresponding with ceiling identified by the Work Foundation s report, beyond which companies struggle to grow, due to reasons including difficulty accessing finance (see section 2.3). 23

24 Figure 17: Companies and partnerships turnover bands and number of respondents Total turnover for business respondents was reported via the system of bandings to measure between 171,620,000 and 246,260,000 whilst turnover for freelances came to between 1,635,000 and 2,635,000. The combined turnover from the sample study for both businesses and freelancers was between 173,255,000 and 248,895,000. Although not a complete profile of all creative businesses in Leeds, this serves to underline the significant economic contribution made by the sector by both large and small businesses Company registration data The figures below in Figure 18 indicate a narrow majority of respondents to the survey question (177) were not VAT registered, whilst a further 15 did not know. This reflects the significant number of low income companies and individuals captured by the survey, falling below the threshold needed to qualify for VAT. The sizeable number (166) of respondents registered for VAT also indicates, however, that there are also a sizeable number of businesses turning over substantial amounts in Leeds. Overall, these figures indicate, particularly when combined with turnover figures from section 4.3.4, that many businesses in the creative and digital industries do not turn over significant enough amounts to be eligible to pay VAT. This implies that the sector is liable to be much larger than measured by business register datasets. Figure 18: VAT status of respondents The question on registration at Companies House (see Fig. 19) indicated that the majority of respondents (188) were registered at Companies House. This indicates that registered 24

25 companies are likely to be the preferred trading body in the sector, even though many are fairly low income operations (with the number of registered companies exceeding respondents registered for VAT). 158 responses for no and 27 for don t know, however, do show there is plenty of variance in terms of setup in the sector. Figure 19: Companies House registration status of respondents Sources of income and main areas of sales activity As indicated in Figure 20 below, the creative industries, and all of its constituent sub sectors, takes the vast majority of its income from commercial activity, with this constituting 84.8% of income for the sector as a whole. Some sectors generated almost all of their income from commercial activity, with architecture (98.2%), software & computer services (93%) and publishing (92.6%) being the strongest examples of this. However, public funding streams such as grants make up a sizeable minority of the sector s overall income, with this being considerably larger in certain sub sectors. This is particularly evident in the case of performing & visual arts, in which as much as 45% of respondents income came from such sources. TV/radio, music and interactive leisure software respondents also reported significant proportions of public funding. Such industries are therefore potentially at risk in the case of cuts in public expenditure relating to their activities. 25

26 Figure 20: Companies House registration status of respondents Figure 21, below, demonstrates the areas where respondents indicated the majority of their business came from, both for the wider creative industries and individual sub sectors. Overall, most respondents (212) operate primarily in Leeds and the wider Yorkshire area. However, a very significant number have a wider reach, with 115 respondents working largely in the wider UK, and 30 taking most of their business from abroad, both within and outside the EU (see Appendix B for table of full figures). Areas such as advertising, design, music, performing/visual arts and software/computer services had particularly significant operations nationally and internationally, whilst performing/visual arts also had a very strong Leeds and Yorkshire element, showing the presence of both very small, local setups and those with national and international reputations. These results reflect the diverse nature of the creative industries in Leeds, with locally oriented businesses operating alongside many national and international operations, demonstrating the city s expertise in the sector. 26

27 Figure 21: Respondents primary areas of business by sub sector Location Table 3 illustrates the postcode location across Leeds of the businesses and freelancers who responded to the online survey. It shows the particular concentration of creative and digital industries in 1 (city centre), 2 (city centre, Woodhouse), 6 (Beckett Park, Headingley, Hyde Park, Meanwood, Woodhouse), 7 (Chapel Allerton, Chapeltown, Little London, Meanwood, Potternewton, Scott Hall, Sheepscar), 8 (Fearnville, Gipton, Gledhow, Harehills, Oakwood, Roundhay), 9 (Burmantofts, Cross Green, East End Park, Gipton, Harehills, Osmondthorpe, Richmond Hill), 11 (Beeston, Beeston Hill, Cottingley, Holbeck) and 12 (Armley, Farnley, New Farnley, Wortley). Specialised clusters are evident in the table, such as the TV and radio businesses centred on ITV Yorkshire s studios in 3, and 11, where there is a cluster of advertising/design/web agencies around Holbeck Urban Village. However, also interesting to note are the presence of other creative industries in areas far less associated with the sector. Overall, two key patterns emerge. Firstly a pattern of clusters in areas that are well known for hosting creative and digital industries e.g. 11, 1, 2, 6 and 7. This is the case particularly for the performing and visual arts, advertising and design. Secondly a much more diffuse patterning across all of the categories in areas that are much further away from the central business district, with concentrations in some areas such as 16, 17 and

28 Advertising Architecture Art retail and antiques Crafts Design Designer fashion Film, photography & video Interactive leisure software Music Performing and visual arts Publishing Software & computer services TV & radio TOTAL Table 3: Postcode locations of creative and digital industries businesses from online survey 28

29 4.3.8 Views on factors affecting business Figure 22 demonstrates creative businesses consider the most important factors affecting their business to be quality of life, all round cost considerations and networking, with the availability of networking opportunities being particularly relevant to many businesses in the creative and digital industries. Other factors seen as particularly important were transport links and the availability of local skilled workers. As demonstrated by the individual sub sector charts in the Appendix B, many of the opinions in the various sub sectors correspond well with the overall themes, with respondents from all sub sectors viewing quality of life as being a very important factor, along with cost considerations. There were also some variations, with sub sectors such as advertising or software & computer services placing considerably more importance upon the availability of skilled workers than areas such as video/film/photography or design. Figure 22: overall views of respondents on importance of a range of factors affecting their business 29

30 4.4 Comparisons and Recommendations As we have seen above the creative sector encompasses a broader range of industries than the traditional media and communications sector and includes the activities of visual arts, architecture, crafts, design, designer fashion, music and the performing arts as well as film and video production, TV and radio and publishing. As there is no standard industrial classification category for this sector, the data in the table below uses a definition provided by the Department for Culture, Media and Sport (DCMS). This is the only comparable data available to compare us to other cities. According to this data set: In 2008, there were 12,300 employed in creative and digital industries in Leeds, the same as in There are an estimated 1,624 companies in the sector, including major regional media groups, as well as a number of independent advertising agencies with national and international clients. New media businesses involved in internet provision and related activities are expanding and Leeds is renowned as the largest new media city outside of London, particularly for business applications. These companies are connecting the wider region with growing national and international markets. No. of creative and digital businesses 2008 Glasgow 16,000 Birmingham 12,350 Leeds 12,300 Manchester 11,650 Edinburgh 10,650 West Yorkshire 22,300 Leeds City Region 31,550 Yorkshire and the Humber 46,100 Core Cities 65,600 GB 926,850 Source: ABI (Nomis) This comparison data across cities shows Leeds to have a strong sector in terms of other cities and regional figures. Leeds makes up over half of the West Yorkshire sector and more than a third of that of the city region. Only Glasgow has more employees working in the sector and Leeds is comparable with Birmingham in its size and larger than other notable cities such as Manchester and Edinburgh. Therefore we can conclude that outside of London Leeds is the most significant creative industries sector in England, alongside Birmingham. ABI data is also the best comparator for trends over years as it is the most consistent data set across time periods. However this information does show some conflicting results and therefore some caution must be shown when analysing the results. In 2004 (when the last 30