WHY THE CREATIVE INDUSTRIES MATTER TO BIRMINGHAM: AN ANALYSIS OF THE CITY S CREATIVE ECONOMY

WHY THE CREATIVE INDUSTRIES MATTER TO BIRMINGHAM: AN ANALYSIS OF THE CITY S CREATIVE ECONOMY Creative Birmingham Partnership Board Final Report January 2010 www.bop.co.uk

CONTENTS 1 EXECUTIVE SUMMARY...1 1.1 Findings: Economic Impacts... 1 1.2 Wider Impacts... 2 1.3 Recommendations: Businesses... 3 1.4 Recommendations: Identity and Place... 3 2 INTRODUCTION...6 2.1 The Creative Sector... 6 3 REVIEW OF EARLIER REPORTS...8 3.1 National Trends... 8 3.2 City and Regional Trends: Birmingham reports... 9 3.3 City and Regional Trends: West Midlands reports... 10 3.4 Screen, Image and Sound... 11 3.5 Impact of the Recession... 12 4 DATA ANALYSIS FINDINGS... 13 4.1 Data Evidence Toolkit... 13 4.2 Creative Business Numbers... 14 4.3 Creative Employment Numbers... 16 4.4 Gross Value Added... 17 4.5 Location of Birmingham s Creative Businesses... 19 4.6 Creative Industries Share of the Whole Economy... 20 4.7 Creative Business and Employment Numbers by Size Band... 21 4.8 Micro Firms... 22 5 WIDER COMPARISONS... 24 5.1 Other Sectors of Birmingham s Economy... 24 5.2 Birmingham and the West Midlands Region... 24 5.3 Birmingham and the English Core Cities... 25 5.4 Experian s National Business Database... 27 5.5 Creative Industries and Innovation... 29 6 PLACE-MAKING AND IDENTITY... 30 6.1 Glasgow... 31 6.2 Dortmund... 32 6.3 Philadelphia... 33 6.4 Observations... 34 7 SUMMARY OF PHONE SURVEY OF BUSINESSES... 35 7.1 Type and Location of Business... 35 7.2 Employment and Financial Performance... 36 7.3 Birmingham... 36 8 FOCUS GROUP AND INTERVIEWS... 38 8.1 Observations... 39 BOP Consulting 2010 (www.bop.co.uk) i

9 RECOMMENDATIONS... 40 9.1 Recommendations: Businesses... 40 9.2 Recommendations: Identity and Place... 40 10 APPENDIX 1: METHODOLOGY... 42 10.1 Business Size Bands... 42 10.2 Sources of Data... 42 11 APPENDIX 2: TABLE OF DET WEIGHTINGS... 44 12 APPENDIX 3: CREATIVE BUSINESS CONSULTEES... 46 BOP Consulting 2010 (www.bop.co.uk) ii

1 EXECUTIVE SUMMARY Cities live or die by their creativity Charles Leadbeater 1 The current recession has posed severe challenges for Birmingham. Two of the city s economic pillars, manufacturing and financial services, have been hit hard, while public spending faces tough constraints over the next few years. In this climate, it is important that policy-makers are able to use the resources they control wisely. This report sets out the case for building on the start Birmingham has made in developing its creative economy. The city started to be seriously interested in the creative industries relatively recently, but it is making some progress. It has a wide range of creative and cultural organisations, from high-profile performing arts companies, including the Birmingham Royal Ballet and the CBSO to established media firms like Maverick to award-winning design agencies such as Clusta and Substrakt, accounting for a significant slice of the city s employment and business numbers. Public-sector bodies involved in this sector have developed strong working relationships with each other, which bodes well for future co-operation. The creative businesses we spoke to in the course of this research were cautiously optimistic about their prospects over the next few years, and the image of Birmingham was perceived to be improving, suggesting the efforts of those who play a role in championing the city, such as Marketing Birmingham, are bearing fruit. However, much remains to be done. Birmingham City Council now needs to use its influence to ensure that business support agencies continue to focus on creative industries so that the good start that has been made is not wasted, and that the economic and cultural benefits the creative industries bring, not just in their own right, but to the wider economy and the city, are sustained. This is of particular relevance given the uncertainties around the powers of regional and local governance structures after the general election. 1.1 Findings: Economic Impacts We found that the creative industries 2 have become an important part of Birmingham s economy in recent years. They account for around 20,000 jobs four per cent of the city s workforce. The 3,450 creative businesses make up ten per cent of the city s total number of firms. Business numbers have grown by almost 20 per cent since 2003. Creative industries employ more people than either construction or the manufacture, sale and repair of cars, and similar numbers to the legal, accountancy and management consultancy professions combined. 1 Blackaby, A. (2009) Create or die, business guru Charles Leadbeater tells Birmingham bosses, Birmingham Post, 21 Sept 2 Advertising; Architecture; Arts and Antiques; Crafts; Design; Designer Fashion; Video, Film and Photography; Music and the Visual & Performing Arts; Publishing; Software, Computer Games and Electronic Publishing; Radio and TV BOP Consulting 2010 (www.bop.co.uk) 1

93 per cent of creative firms in the city are micro-businesses, employing ten or fewer people. The creative industries produce more than 660m of GVA. More detailed analysis of the employment figures indicates that what growth there has been in Birmingham is concentrated in micro-businesses (those with ten or fewer staff) in the Audio-visual and Visual Arts & Design fields. In all, micro businesses account for 93 per cent of all creative firms, and a third of creative jobs. Birmingham s dominant economic role in its region means that its creative industries are a central part of the wider competitiveness of the West Midlands. However, BOP s research suggests that the creative industries in the city are finding themselves under pressure. This is partly a consequence of wider (indeed global) trends in the sector associated with the transformation of business models by the internet and digital revolutions, but it may also reflect issues in Birmingham itself. Our analysis suggests that although the city is home to a wide variety of creative industries a faint echo of the city of a thousand trades the city s performance is solid rather than spectacular when compared with the other English core cities. 1.2 Wider Impacts The creative industries effects extend beyond these direct economic impacts. The increasing importance of design, advertising and branding for almost all products and services means that the creative industries are a key source of innovation for firms in other parts of the economy: NESTA has found a positive link between spending on creative services and product innovation, while other research has suggested that creative industries are important transmitters of innovation along supply chains. Any innovation strategy needs to take these wider impacts of the creative industries into account. The creative industries also have much to contribute to some of the city s goals around culture and place-making. Richard Florida and other academics have argued that, in the modern knowledge economy, place is an increasingly important factor in attracting inward investment, as firms need to go to locations in which their workers will feel comfortable and stimulated. The creative industries are a key part of such an environment. Building up the creative industries presence in Birmingham is an explicit goal of the Big City Plan. There are a number of city-centre clusters of creative industries, in buildings like the Custard Factory and Fazeley Studios. However, these are sometimes islands of creativity. Parts of the city, notably Digbeth, lack the soft infrastructure bars, cafes, and transport links that can allow creative workers to have a wider impact on their neighbourhood in the way that has happened in the Jewellery Quarter. Planning, design, regeneration and the arts need to be more joined up to allow this to happen. The absence of a cashpoint in the vicinity of the Custard Factory was cited as an example of a failure of such thinking if people on a night out in Digbeth find they have to go to the city centre to take out cash, they are less likely to return there that evening. Comments made during the interviews we conducted suggested that, despite some improvement, Birmingham still has a relatively poor image, and that this is as much an issue for residents as for outsiders. Birmingham s creative and cultural sector has a low profile among locals, but this is undeserved: one interviewee, born and bred in Liverpool, said that he thought there was more going on in Birmingham than in his home city. Making the city s people more aware of Birmingham s own strengths could help improve the negative perceptions of the city, and act as a basis for changing its image in Britain more BOP Consulting 2010 (www.bop.co.uk) 2

widely. As Leadbeater argues in his newspaper interview, the really important thing is to have a distinctive story about where you come from and what you re particularly good at to create lasting change you need to connect with what is rooted in your culture. 1.3 Recommendations: Businesses Our recommendations fall into two categories, one stemming from the economic analysis, the other from the concerns about Birmingham s image. We will look at the economic data first. Given that public sector organisations are facing an extended period of financial constraint, there is a need for greater coordination and integration of future funding streams, and for a greater focus on the areas of relative strength. Our data findings suggest that it is micro firms, especially in the Audio-visual and Visual Art & Design fields, that have done best. They have been performing well, at least until the credit crunch and recession hit, and are well-suited to the current internet-driven trend for project- and partnership-based collaborations in business. The Business Support for Creative Industries (BSCI) scheme often helped firms of this size and type. This suggests support for micro-businesses should remain a priority for Birmingham. However, this is not the only option. There are two other areas that the partners might wish to consider. These are riskier strategies, but may be a necessary part of a broad strategy to support the creative sector as a whole. The partners might want to target the more dynamic micro- and small businesses to grow and become the successful SMEs of the future. Detailed recommendations on policies and structures to do this fall outside the scope of this report, but initiatives in this area that have had some success usually focus on mentoring, help with business strategies, assessing financial readiness and encouraging and funding innovative activity. Agencies might also focus their efforts more on attracting inward creative investment. Given that the vast majority of Birmingham s creative firms are homegrown and very small, it may be that only firms from outside the city are capable of the kind of impact that would galvanise the creative sector to reach new levels. This might take the form either of a large employer or of smaller but high-profile organisations with the potential to act as catalysts. Channel Four s 4 Innovation for the Public (4iP) Fund, for instance, has set up its first commissioning hub in Birmingham. 1.4 Recommendations: Identity and Place Many of the concerns expressed in our consultations revolved around the image of the city in one form or another. The city and region have undertaken several studies and initiatives in the last few years, but there is now a need for the city council, its partners and the creative industries to work together much more closely to realise some of their shared ambitions for changing the profile of the city and regenerating parts of the city centre. In this, the council will be able to build on the strong relationships that already exist between public-sector organisations like Screen West Midlands, Arts Council WM, Business Link, the Learning and Skills Council, Advantage West Midlands and the universities. Such co- BOP Consulting 2010 (www.bop.co.uk) 3

operation will place demands on all sides much of this work is fairly mundane: extending networks and appropriate support structures, for instance. Birmingham City Council and its partners need to take a more strategic view and work with the creative sector to develop a clear message about what the city stands for. This needs to reflect the city s distinctive strengths. Birmingham is a young, ethnically diverse city, yet its cultural offer tends to emphasise more traditional art forms, often aimed at business travellers. There was a strong sense in the interviews and focus group that Birmingham is selling itself short, and not making the most of the assets it does have. Delivery of services should be left more to the creative sector itself. Developing a more joined-up sense of the city including tackling the gap that is perceived to exist between the council s arts department and planning and regeneration will help make the city more attractive to its own residents. There can be internal benefits to such place-making work. Birmingham s population has low skills levels by national standards. The growth in student numbers (notably in Eastside, at BCU) offers an opportunity to start to remedy this, but graduate retention is a key issue. The creative industries are an important part of making the city more attractive to such people. This in turn can be used as a platform on which the city can build to engage people outside the city. Evidence from other cities points to the importance of sustained cross-departmental and multi-agency working in support of a long-term vision. At this more strategic level, Birmingham needs to narrow its focus to try and do a few things well. This leads us to suggest the council and its partners could focus on working with the creative industries in two areas in particular: Festivals and events. These are a good way to show the great and growing diversity of the city s people and cultural life and to raise the profile of artistic activity. Birmingham City Council has recently commissioned a festivals strategy for 2008-2012, but it could involve the creative industries much more in deciding which events to support and in their delivery, to more accurately reflect the grassroots creative strengths of the city. As an example of what could be done to raise the profile of the city outside Birmingham, the council might consider the possibility of a Best of Birmingham week, to be held in London (or in other large cities). This would involve both the big cultural organisations and the creative industries in presenting a series of linked concerts, performances and showcases celebrating the creative work being done in Birmingham. Digbeth/Eastside. This area is promoted as a creative hub just outside the city centre witness the recent Digital District plan yet to an outsider s eyes it appears shabby and uninviting. The wider ambitions for Eastside are unlikely to be realised if Digbeth fails to achieve its full potential. Public bodies need to sit down with those creative industries that have established themselves in the neighbourhood to explore ways in which the infrastructure of the area can be improved to join up creative activity and build a buzzy neighbourhood. Digital, music and youth hubs have all been proposed for Digbeth; the council and its partners need to decide whether and how fast to progress these ideas. BOP Consulting 2010 (www.bop.co.uk) 4

Key message The essential message of this report is that the creative industries represent the point at which a number of the key issues for Birmingham the economy, culture, place-making, and graduate retention, among others meet. A successful creative sector will make the city s ambitions for itself in these fields much easier to achieve. At the same time, taking a joined-up view of the issues will enable the likes of the council, Be Birmingham and the business support agencies to help the creative sector flourish. We hope that this report, while acknowledging the challenges the sector faces, demonstrates that continuing support to the creative industries makes sense for Birmingham. BOP Consulting 2010 (www.bop.co.uk) 5

2 INTRODUCTION BOP Consulting was commissioned in May 2009 by the Creative Birmingham Partnership Board to take a fresh look at the creative sector in the city. In particular, we were asked to apply a locally specific weighting for the creative industries to government data, the first time this has been done in Birmingham. The results give a more accurate and nuanced picture of the city s strengths and provide an evidence base for future work. Gauging the size and range of the creative industries is an inexact science, due to their relatively small scale and arguments about definitions. For the purposes of this report, BOP has adopted a version of the Department for Culture, Media and Sport s Data Evidence Toolkit (DET). This is perhaps the most widely used method of assessing the creative industries, and has the advantage of having the weight of a government department behind it. It is the nearest thing to a standard approach for the sector. The methodology is described in more detail in section 4.1. After this introduction, the report begins with a selective literature review before turning to a detailed analysis of data. It then considers place-making and identity, with reference to three comparator cities. After that, it explores the findings of a survey of 150 creative businesses and a series of in-depth interviews with creative businesspeople. This leads us to our recommendations, the final part of the report. 2.1 The Creative Sector The creative industries as a collective entity became the focus of serious government attention in the late 1990s. They were identified as a fast-growing and productive sector of the British economy, constituting a small but significant slice of employment: a recent Work Foundation report estimated that they directly accounted for 1 million jobs in Britain with a further 800,000 people working in creative occupations in non-creative industries 3. As well as being a significant employer in its own right, the creative and cultural sector is also closely linked to the tourism and leisure sectors. It helps brings people (and their spending power) into a locality, so boosting its economy and raising its profile. It also has an important role to play in establishing and confirming the identity and character of a place. This place-shaping aspect may help not just to attract tourists but also to encourage more permanent residents to settle in an area and to feel more attached to their neighbourhood. This idea resonates with Richard Florida s highly influential creative class thesis, which draws attention to the role of culture in attracting workers and investors to an area 4. It should be noted that this report only considers the creative industries. It does not include the considerable proportion of creative professionals (such as designers or advertising people) who work in non-creative businesses, such as manufacturing or financial services. The Labour Force Survey, the source for estimates of the number of such people, is only broken down by government region, not local authority, so we cannot provide an estimate for Birmingham. However, figures from the London region suggest that just over half the creative workforce in the capital is employed in non-creative 3 Work Foundation (2007) Staying ahead: the economic performance of the UK s creative industries, London 4 See e.g. Florida, R. (2002) The Rise of the Creative Class, Basic Books, New York BOP Consulting 2010 (www.bop.co.uk) 6

businesses. The DCMS s own estimates for the country as a whole in 2007 5 indicated that just over 40 per cent of creative workers are employed outside the creative sector. This needs to be borne in mind when considering the share of employment taken up by the creative industries: creative workers are embedded in the wider economy as well. In recent years the creative sector has come under considerable competitive pressures. Globalisation has brought new rivals as well as new customers, while the digital and internet revolutions are radically changing the business models on which many of the creative industries are based. National government has begun to recognise these challenges, and has stressed the importance of helping Britain s creative and digital industries to maintain their relatively strong position. The Digital Britain report in particular 6 sets out to increase participation, improve infrastructure and modernise regulation affecting the sector. In its recognition both of the industrial importance of the creative industries (in the words of Lord Carter, the report s author) and its effort to look at issues in the round, not just through a narrowly business-led prism, it provides a template for thinking about the sector s impact on the wider society. This report therefore comes at an opportune time. The economic slowdown is likely to have affected the sector sharply, so Birmingham needs to think about the creative sector s role in, and contribution to, the local economy and the city s character. 5 DCMS (2009) Creative Industries Economic Estimates Statistical Bulletin 2009 6 Accessed at: http://www.culture.gov.uk/images/publications/digitalbritain-finalreport-jun09.pdf BOP Consulting 2010 (www.bop.co.uk) 7

3 REVIEW OF EARLIER REPORTS As part of this project, BOP was asked to carry out a selective literature and data review of national and locally sourced material relating to the creative industries. It should be noted that much of this research has been conducted at the regional (West Midlands) level. Although Birmingham is the largest single local authority within the region, with the biggest economy, not all the trends reported will therefore apply to the city. It should also be noted that much of the data work in these reports predates the recession. In addition, the definitions of the cultural and creative sectors vary from report to report, hence the rather different estimates of their size. 3.1 National Trends The most detailed regular study of trends in the creative industries comes from the Department of Culture, Media and Sport s Creative Industries Economic Estimates bulletins, which are published every year. The DCMS notes that because official classifications do not accurately reflect the structure of the creative industries its figures are estimates not National Statistics. The figures indicate that total creative employment (in other words, those employed in the creative industries and in creative occupations outside the creative industries) totalled almost 2 million in September 2007. Of these, 1.15 million worked in the creative industries themselves. Software and computer games accounted for the largest share of the 2 million: 360,000 jobs. Music, visual and the performing arts businesses employed 220,000 while publishing provided work for 215,000. Creative employment in Great Britain has grown by 26 per cent between 1997 and 2007, slightly faster than the rate of growth seen in the economy as a whole, though much of this growth took place in the late 90s. Two sub-sectors have grown faster than the overall average for creative industries. Design (which includes the small sub-sector of designer fashion) has grown by 62 per cent while jobs in software and computer games have expanded by 69 per cent. Only one sub-sector, publishing, has seen employment numbers fall while video, film and photography has remained virtually static. The number of businesses in the creative industries in the UK (not just Great Britain) has also grown. From 1997 to 2008 the number rose by 39 per cent. However, almost 70 per cent of this growth is the result of a change in the coverage of the Inter-Departmental Business Register in 2008. The largest numbers of businesses are to be found in the software and computer games sector (75,000). Other important sub-sectors were music, visual and performing arts, with 31,200, and advertising, with 13,200. The Work Foundation s Staying Ahead report 7 declared that the UK has probably the largest creative sector in the EU, and relative to GDP probably the largest in the world (p16). It accounts for 7.3 per cent of national GVA and 2.7 per cent of employment on its calculations. However, it noted that although the industries on average had grown faster than the wider economy, there was considerable volatility around the average, with some industries starting to struggle. It observed that the digital and internet revolutions were disrupting business models in film, music and publishing in particular. It also pointed out that some sub-sectors were pro-cyclical: rising with economic good times and declining 7 Work Foundation (2007) Staying ahead: the economic performance of the UK s creative industries, London BOP Consulting 2010 (www.bop.co.uk) 8

sharply in recessions (it mentioned advertising, design, architecture and software as examples). 3.2 City and Regional Trends: Birmingham reports The first full account of the Birmingham creative economic sector was published by Birmingham City Council in 2002. The creative and cultural sector was already receiving increasing recognition nationally as a major contributor to economic and employment growth. The Creative City report 8 established baseline figures for the contribution of the creative sector to Birmingham s GDP, and set out a strategy for maximising sector growth over the coming years. Some of the city s key competitive strengths were highlighted as follows: Six million visitors a year, generating some 750 million a year 40% of all UK conference business Produces 50% of the UK s jewellery and 40% of total employment in the sector Nearly two thirds of all media activity in the West Midlands, 60% of craft organisations, 40% of literature and drama and major broadcasters all operate from the city. The document also recognised that Birmingham had much scope for growth, especially in the screen-based digital media sub-sector, and indentified five areas requiring strategic planning: The creation of small and medium sized companies in these industries to create a real scale of activity on a par with London. The focused development of product innovation and the technical ability to support it within the city The growth of Birmingham as a learning city with an intensive stream of learning directed into these industries, particularly in ICT and business skills To change the city to become a UK focus for international quality creative design and heritage Bridging programmes which offer the opportunity to come into these mainstream industries to individuals and communities who are disadvantaged The report also noted trends that would have implications for the future. It pointed out that an increasing percentage of the creative workforce is self-employed or employed by micro-businesses (less than 10 employees). This presents challenges to the sustainability of the sector, as such businesses may be unable (or unwilling) to develop the training and skills base needed to support the industry. The Creative City report led to a major focus on the creative sector in the city, and ultimately resulted in the Business Support for the Creative Industries (BSCI) programme to foster the development of small creative businesses. 8 Birmingham City Council (2002) Birmingham Creative City: Analysis of Creative Industries in the City of Birmingham BOP Consulting 2010 (www.bop.co.uk) 9

The next major report into the creative industries in Birmingham 9 in 2007 found that the city had a large creative sector, with almost 26,000 jobs in 2005. Three sub-sectors art and antiques, architecture, and software accounted for the bulk of both business and job numbers. However, the trends over time were mixed. While arts and antiques, architecture and music, visual and performing arts had seen employment growth, other sub-sectors were static, while fashion design was in decline. 3.3 City and Regional Trends: West Midlands reports There have been a number of significant studies at the regional level. In 2007, Culture West Midlands (CWM) published Growing the Cultural Economy 10 (looking at data from 2004 to 2005). This analysis was followed in 2009 by Culture & Prosperity: The Economic Role of Culture in the West Midlands 11 from the same organisation, which reviewed data from 2004 to 2007. It included some of the data from the earlier report. Its main findings were that: The level of GVA per employee in the West Midlands cultural sector is significantly higher than has been previously assumed and considerably exceeds the regional average for all economic sectors. Growth in the number of cultural firms based in the region exceeded the national average for the cultural sector and the regional average for all sectors. Employment in the region s cultural sector increased between 2004 and 2007 at a rate that was in line with the average for the cultural sector in England but slightly below the average for the West Midlands economy as a whole. This modest level of growth contrasts with the previous period of high growth between 2003 and 2004, reported in Growing the Cultural Economy in the West Midlands. Growth in the level of turnover within the region s creative industries was significantly higher than the national average for creative industries and the regional average for all sectors, pointing to the growing national importance of the West Midlands as a base for creative industries. According to the 2009 report, turnover in the West Midlands creative industries stood at 7 billion in 2007. This marks a 36 per cent increase since 2004. The level of growth in the West Midlands was significantly higher than the national rate of growth (+13%) or the growth seen across all sectors in the West Midlands (+19%) over the same period. Perhaps surprisingly, while turnover was found to have increased, employment in creative industries in the region was found to have fallen over the same period. The report speculated that merger activity and large companies increasing their turnover and out-competing smaller companies might provide an explanation for this. The relative strengths of the creative industry subsectors, in terms of total turnover, were found to be: 9 Lutz, J., Chapain, C., Collinge, C., Barber, A., and Tice A. (2007) Making the Business Case: Baseline and Growth Study of the Creative Industries in Birmingham, University of Birmingham 10 Culture West Midlands (2007) Growing the Cultural Economy in the West Midlands 11 Culture West Midlands (2009) Culture & Prosperity: The Economic Role of Culture in the West Midlands BOP Consulting 2010 (www.bop.co.uk) 10

Figure 1: Share of total creative sector turnover by sub-sector, 2005 Sub-sector % share of total CI turnover Software and computer games 45% Architecture 31% Designer fashion 6% Advertising 4% Arts, antiques and crafts 4% Publishing 3% Design 3% Music and performing arts 3% Video, film and photography 1% Total 100% In 2009, Creative & Cultural Skills (CCS) published their Creative Blueprint West Midlands 12, as part of a wider national plan. The main focus of the programme is to expose skills gaps in the learning (creative) economy, and propose strategic priorities for closing those gaps. Its figures differ from those in other reports, but are more up-to-date. They report signs of a downturn in employment. The key statistics highlighted are: The total number of people employed in creative and cultural industries in the West Midlands is 43,320 (6% of the national total) Design is the largest (in terms of workforce and GVA) of the creative and cultural industries, both regionally and nationally Prior to the recession, productivity in the creative and cultural industries in the West Midlands had decreased by 8 per cent; this is compared to a decline across the UK creative and cultural industries of 7per cent. Prior to the recession, the number of people employed in the creative and cultural industries in the West Midlands had also declined, by 6 per cent since 2006. Across the UK, growth was 9 per cent in the creative and cultural industries over the same period. 78 per cent of businesses are micro businesses (employing 1-5 people), compared with 77 per cent across all UK industries. 3.4 Screen, Image and Sound Among particular sub-sectors, the screen, image and sound cluster was identified some years ago as a priority for the region. A report by BOP Consulting 13 found the cluster was a dynamic sector, exhibiting strong growth in business formation, a skilled and highly educated workforce, and high levels of innovation particularly around the emergence of new digital technologies (p1). Data from the Skillset employment census of 2006 (the most recent) suggests the region has a particular strength in computer games, where it accounts for 18 per cent of the national total. In most other forms of creative media to animation or web and internet the region s share of UK employment is much lower: below 5 per cent in almost all cases. 12 Creative and Cultural Skills (2009) Creative Blueprint West Midlands 13 BOP Consulting (2007) Screen, Image and Sound Cluster: Preliminary Impact Study BOP Consulting 2010 (www.bop.co.uk) 11

A Screen, Image and Sound Cluster Plan has been developed for 2008-11. It funds programmes of activities in three fields: screen media, audio and music, and (digital) business futures. There are also a number of other initiatives in this area, such as the Animation Forum West Midlands. 3.5 Impact of the Recession Clearly, the credit crunch and recession are having a significant impact on the creative and cultural sector, as indeed they have on almost all industries. Some research has already been published on its effects, though these reports often rely on relatively small samples of businesses. In February 2009, Tourism West Midlands was able to see some signs of hope 14 : the cultural sector continues to hold up comparatively well compared to most sectors (p4). This was thought to be due to the irregular treat characteristic of attendance at cultural events. However, retail was struggling, while the manufacturing and service sectors were seeing confidence dip. By April 2009 the picture was gloomier. The West Midlands Regional Observatory 15 recorded, amongst other things, that the number of regional cultural sector vacancies advertised through Jobcentre Plus was at its lowest level since records began in 2003. It noted the fear among arts organisations that local authority culture budgets would be squeezed in future years. The report also quoted work carried out by Screen West Midlands that suggested that many of the region s creative media organisations are being adversely affected by the recession (p3). If Birmingham s creative sector is to be able to survive the recession and benefit from a return to growth, it is important that it uses the resources available to it wisely. The next several sections of this report explore the size and character of the city s creative industries to provide a platform for identifying potential growth opportunities. 14 Tourism West Midlands (2009) Visitor Economy: Trading Conditions Summary of Discussions at February 2009 TWM Board Meeting 15 West Midlands Regional Observatory (2009) West Midlands Cultural Sector Economic Snapshot, April BOP Consulting 2010 (www.bop.co.uk) 12

4 DATA ANALYSIS FINDINGS 4.1 Data Evidence Toolkit Perhaps the most important effort to measure the creative industries came from the Department for Culture, Media and Sport (DCMS), which produced a list of the subsectors it considers make up the creative industries in 2001 16. It is this definition which has become the default position for government policy nationally, regionally and locally. (It has also influenced international thinking on the creative economy.) However, the DCMS is careful to point out that the data it produces for its annual Creative Industries Economic Estimates are, even at the national level, not to be treated as equivalent to National Statistics, due to problems with small sample sizes and a lack of statistical robustness in the data. Clearly, these issues are even more acute in smaller geographies, such as local authority areas. A common response to this problem has been to group the creative industries together, to improve the reliability of the data. The DCMS itself has put its weight behind a method known as the Data Evidence Toolkit (DET), to which BOP contributed in the development stage. This groups the activities for which the DCMS is responsible into seven broader classes, or domains : Four of these refer to the creative industries: Audio-visual, Books & Press, Performance and Visual Arts & Design. (The other three are heritage, sport and tourism.) Aggregating data into domains allows us greater confidence in our results due to larger sample sizes. The DET creative industry domains include 43 Standard Industrial Classification (SIC) codes. Each domain contains the following sub-sectors: Figure 2: DCMS Data Evidence Toolkit (DET) creative industries domains Audio-visual (AV) TV & radio Film & video Photography Advertising Music Interactive digital media (games, web, mobile etc) Computer software Performance (P) Theatre Dance Circus Carnival Puppetry Books & Press (BP) Publishing (books, magazines, newspapers) Literature Printing Visual Arts & Design (VA) Design Architecture Fine arts Crafts Art & Antiques The data source we use for calculating the size of these domains is the Annual Business Inquiry. This is a government survey which provides the most reliable figures on workplace employment each year. It divides industries up according to Standard Industrial Classification (SIC) codes. 16 Advertising; Architecture; Arts and Antiques; Crafts; Design; Designer Fashion; Video, Film and Photography; Music and the Visual & Performing Arts; Publishing; Software, Computer Games and Electronic Publishing; Radio and TV BOP Consulting 2010 (www.bop.co.uk) 13

However, a sizeable minority of the SIC codes that are counted as creative industry codes include both creative and non-creative industrial activity. In order to accurately calculate the size of the creative industries, it is therefore necessary to devise weightings to apply to these problematic codes. BOP uses information from Experian s National Business database to do this. Statistics for both business and employment number are then calculated by applying the weightings to the Annual Business Inquiry data. Appendix 1 gives further details of the methodology BOP has adopted to prepare this analysis. One particularly problematic area is computer software. The DET regards this as a creative industry, on the grounds that the two SIC codes under which it falls (72.21 and 72.22), embrace computer games and web design. However, there is also a significant amount of conventional business software and sales in these SIC codes. We have followed the DET s logic and counted 100 per cent of the two codes as creative. It should also be noted that, while the Annual Business Inquiry is the most reliable government dataset available, it does not include those businesses which are too small to be registered for VAT or PAYE. As a result, it is likely to miss a percentage of freelancers and very small companies. Given that these types of business are important in the creative industries, the data may therefore understate the true size of the sector. 4.2 Creative Business Numbers Business numbers have grown steadily over the last five years for which data is available. (All figures are rounded to the nearest ten.) Their number has increased by more than a fifth between 2003 and 2007. The strongest growth has been seen in Visual Arts & Design, where numbers have grown by almost two-thirds. This sub-sector has now overtaken Audio-Visual to be the largest domain. Nevertheless, the numbers of Audio- Visual businesses also grew. By contrast, the smaller Books & Press and Performance domains saw numbers fall a little. These 3,450 businesses amounted to almost ten per cent of the city s 34,750 business units in 2007. Figure 3: Creative business numbers by domain, 2003-07 Year 2003 2004 2005 2006 2007 % change Domain Audio Visual 1,200 1,120 1,150 1,250 1,280 6.7% Books & Press 560 540 500 480 490-12.5% Performance 180 160 170 170 170-5.6% Visual Arts & Design 920 1,010 1,190 1,270 1,510 64.1% Total 2,860 2,830 3,010 3,170 3,450 20.6% Source: ONS ABI/BOP Consulting (2009) BOP Consulting 2010 (www.bop.co.uk) 14

Figures 4 and 5 show the changes in the domains over the five years more clearly. Figure 4: Creative business numbers by year, 2003-07 4000 3500 Number of businesses 3000 2500 2000 1500 1000 VA P BP AV 500 0 2003 2004 2005 2006 2007 Year Source: ONS ABI/BOP Consulting (2009) Figure 5: Creative business numbers by year and domain, 2003-07 1600 1400 Number of businesses 1200 1000 800 600 400 200 AV BP P VA 0 2003 2004 2005 2006 2007 Year Source: ONS ABI/BOP Consulting (2009) BOP Consulting 2010 (www.bop.co.uk) 15

4.3 Creative Employment Numbers The patterns in the employment figures are rather different. Overall, job numbers have fallen a little over the five years to just under 20,000, having peaked in 2004. Audio-visual is the largest domain, accounting for just under half (49.4 per cent) of creative jobs in the city in 2007. However, the number of such jobs fell by 10 per cent over the period. Job numbers also fell in Books & Press, though this remains the second-largest domain. Visual Arts & Design is the third largest domain, but is the fastest growing, having added 30 per cent more jobs over the period. Performance is the smallest domain of the four, but has seen some growth. Figure 6: Numbers employed in creative businesses by domain, 2003-07 Year 2003 2004 2005 2006 2007 % change Domain Audio Visual 10,280 11,330 9,850 9,810 9,250-10.0% Books & Press 5,540 5,610 5,430 4,800 4,290-22.6% Performance 900 700 1,060 1,300 1,000 11.1% Visual Arts & Design 3,200 3,510 3,670 3,860 4,180 30.6% Total 19,920 21,150 20,010 19,770 18,720-6.0% Source: ONS ABI/BOP Consulting (2009) The graphs (figures 7 and 8) confirm that employment has hovered around the 20,000 mark in Birmingham for most of this period. Figure 7: Numbers employed in creative businesses by year, 2003-07 25000 20000 Number of employees 15000 10000 5000 VA P BP AV 0 2003 2004 2005 2006 2007 Year Source: ONS ABI/BOP Consulting (2009) BOP Consulting 2010 (www.bop.co.uk) 16

Figure 8: Numbers employed in creative businesses by year and domain, 2003-07 12000 10000 Number of employees 8000 6000 4000 2000 AV BP P VA 0 2003 2004 2005 2006 2007 Year Source: ONS ABI/BOP Consulting (2009) The different patterns seen in business units and employment reflect the different sizes of firms in each domain. The (mean) average number of employees in 2007 was 7.2 for Audio-visual businesses, 8.8 for Books & Press, 5.9 for Performance, and just 2.8 for Visual Arts & Design firms. 4.4 Gross Value Added Gross Value Added (GVA) is a measure of the value added by firms to their inputs. Although the ONS supplies figures for GVA by SIC code at local authority level such figures are subject to considerable data suppression in order to protect confidentiality. As a result, the reliability of GVA data at small geographies is questionable, and these results should be seen as indicative only. GVA figures are supplied for the full SIC code. As only a proportion of some of these codes can be classed as creative, as explained earlier, we have weighted them using the weightings calculated for employment for the DET. BOP Consulting 2010 (www.bop.co.uk) 17