The UK’s creative industries are an economic success story, contributing £124.6 billion to the country’s economy in 2022 – around 6% of the total. These industries, which include film, TV and publishing, grew by more than 50% between 2010 and 2022.
According to the latest figures from the UK’s Department for Digital, Culture, Media & Sport (up to December 2022), there were 2.4 million jobs throughout these creative industries – 295,000 more than in 2019, an increase of 14.1%. In the same period, overall UK employment increased by only 0.6%. So, they are making up a growing share of the UK’s workforce – 7.1% in 2022.
It’s also a key sector for UK exports. In 2021, creative industries contributed 14% of all UK service exports. But it’s important to attract the foreign investment this homegrown success story needs to keep growing and achieving.
With this in mind, the UK government has published a green paper outlining its ambitions to capture a greater share of foreign investment in “strategic sectors” that include the creative industries.
Attracting capital in the form of foreign direct investment (FDI) is vital as a means of driving economic growth. FDI includes takeovers such as Universal Music’s 2023 acquisition of UK classical label Hyperion Records, and also firms increasing their UK presence, as international publisher Hachette has done in recent years. As well as boosting employment, FDI can generate “spillovers” in knowledge, labour, supply chains and regional development through increased output and productivity.
Understanding FDI in this sector, from where it originates to where it ends up, is critical to attracting new investment. A recent report we produced with our colleague Giorgio Fazio aimed to improve understanding of the flows of FDI into the UK’s creative industries.
We worked with the Creative Industries Policy and Evidence Centre, led by Newcastle University, which provides evidence to support policymaking in the creative economy – covering areas like research and development (R&D), innovation, skills and education. Our report, analysing data on the number of FDI projects in the sector, revealed several key findings.
Creative clusters
The UK is a key destination for foreign investors – the second most popular location globally after the US. Creative industries now make up around 10% of all FDI coming into the UK economy. This investment covers nine creative sub-sectors including IT, advertising, film and TV, and publishing.
At first glance, it looks like the investment is concentrated in London and the south-east of England. But while it’s true that more than half of FDI ends up in the UK capital, the top ten locations also include Belfast, Manchester and Edinburgh.
It’s actually quite a nuanced picture, and some patterns emerge. Cardiff is more prominent in the film, TV, video, radio and photography sub-sectors, as Edinburgh is in the publishing sub-sector. Clusters like these might play an important part in attracting FDI, with foreign firms attracted by a supply of workers and pool of knowledge in a specific field.
FDI in the creative industries tends to be dominated by investment from North America, followed by Europe – with just ten countries accounting for nearly 80% of the UK’s creative FDI. This perhaps highlights a need to try to attract investment from a more diverse range of locations, to avoid becoming too dependent on a handful of countries.
The US accounts for 45% of investment into UK creative industries, but there are several other important source countries. These include India (for IT, software and computer services), Canada (film, TV, video, radio and photography, as well as IT, software and computer services), France (advertising, IT, software and computer services, and publishing), the Netherlands (architecture), and Ireland and Germany (IT, software and computer services). This knowledge can provide useful detail on where the UK should look for capital in future.
Casting the net overseas
As well as attracting inward investment, the UK is also a big player in terms of investing in other countries’ creative industries (known as “outward FDI”). Globally, the UK has been the second biggest source location behind the US for generating FDI.
Outward FDI doesn’t only create new markets for UK companies. Mergers with and acquisitions of international creative companies offer an opportunity to acquire valuable new intellectual property and assets such as knowledge, brands and technologies.
Our report raises a number of things the UK should consider, from scaling up and supporting innovation to improving the general business environment in order to maintain inward investment. Identifying regional clusters of creative industries could highlight and promote these talent pools to foreign investors.
Creative industries are likely to continue to expand in the future. As robots and AI undertake more routine tasks, we envisage an opportunity for workers to shift towards more creative jobs. The UK is well placed to embrace this opportunity, as it is globally recognised for its innovation, talent and cultural influence. It already excels in industries including music, film and television, video games, fashion and design, advertising, publishing and architecture.
Our research is just a starting point for understanding creative FDI in the UK. There is still a lot to learn, but the answers will help frame future iterations of UK policy, providing much-needed evidence on how to continue the success of its creative industries.
Jonathan Jones is a Senior Lecturer in Economics at Newcastle University and a researcher with Creative PEC, a partnership between Newcastle University and the Royal Society of Arts, which is funded by the UKRI via Arts and Humanities Research Council.
Daniel Simandjuntak is a Research Associate at Newcastle University with Creative PEC, a partnership between Newcastle University and the Royal Society of Arts, which is funded by the UKRI via Arts and Humanities Research Council.
Sara Maioli is a Reader in Economics at Newcastle University and a co-investigator at Creative PEC, a partnership between Newcastle University and the Royal Society of Arts, which is funded by the UKRI via Arts and Humanities Research Council.
This article was originally published on The Conversation. Read the original article.
