PublicSector
Final curtain?
A reduction in funding and exposure has cast doubt on the future of arts and cultural organisations. Vivienne Russell reports
Image: iStock
Finance and the arts have always had a complicated, co-dependent relationship. For centuries, the arts and artists – whether poets, painters or musicians – relied on the patronage of wealthy individuals or institutions, while the latter basked in the reflected glory that accrues from the creation of great art.
Art is also good business. William Shakespeare was first and foremost a businessman and entrepreneur writing and producing plays for profit, while one only has to look at London’s West End to see that the commercial theatre of today is in rude health.
But art is not just about commercial gain. Funding the arts benefits not only the creators and their audiences, but wider society and the economy.
Success for arts and culture means success for everyone, says Dr Josh Siepel, research lead at the Creative Industries Policy and Evidence Centre (Creative PEC) and senior lecturer at the University of Sussex Business School.
“The arts and cultural sector make a huge impact on society,” he says. “We are aware of the intangible benefits of culture and there is growing evidence on the impact of exposure to culture on health and wellbeing, but the economic contribution of these sectors is also vital.
“The creative industries make up 6% of the UK’s economy, and arts and culture play a major role driving investment and supporting talent development, as well as supporting the economy through areas such as tourism.”
These are not organisations that have been underperforming; they are organisations which have been recipients of cuts across the board.
Benefits of a mixed economy
Arts funding in the UK is complex and comes from a variety of different sources. Corporate and philanthropic donors, trusts and foundations make important contributions, although Siepel warns that we should not rely on the private sector to do all the heavy lifting.
Controversy over Baillie Gifford’s sponsorship of nine UK book festivals in 2024 illustrates how vulnerable corporate funding can be to outside pressures. The Edinburgh-based investment firm pulled its sponsorship following boycotts over its perceived ties to fossil fuels and companies linked to Israel.
The public sector is therefore an important funder, and both central and local government play their part. The Department for Culture, Media and Sport funds 15 national museums and galleries in England as well as Arts Council England, Historic England and the British Film Institute through grant-in-aid. There are parallel arrangements in the devolved nations.
The arts councils in turn fund a variety of organisations, programmes and projects. National Lottery funds are another key source of funding, feeding into and distributed by the arts councils, but the largest funder of arts organisations is local government. This means these groups have not escaped the cuts affecting the wider public sector.
“That publicly funded sector, the sector that is about social impact, has really suffered through no fault of its own,” says Eliza Easton, founder of Erskine Analysis, a think-tank focused on the creative industries. “These are not organisations that have been underperforming; they are organisations which have been recipients of cuts across the board.”
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Local government spending
Local government has been particularly hard hit by the spending cuts pursued by governments since 2010. According to figures published by Creative PEC, overall public spending on the arts shrank from £4.75bn in 2009/10 to £3.75bn in 2019/20. The majority of the £1bn reduction came from local government revenue spending and, to a lesser extent, local government capital spending. Other public funding sources, while not always immune to cuts, have remained broadly where they were (see chart below).
Tax reliefs have also emerged as an increasingly important source of government support for creative industries. The eight currently available reduce the amount of corporation tax paid by companies if they produce films, animation, good-quality television, video games, theatre, exhibitions or orchestral concerts and are intended to incentivise investment in new work. Between 2009/10 and 2021/22, the government paid out £10.4bn in tax relief and the number of claims increased eightfold, from 340 to 2,775. Tax relief has acted as a cushion in some sectors but has not done enough to offset the overall picture of funding decline.
Impact on the frontline
Given the size and diversity of the arts sector, tracking the impact of cuts on frontline organisations and creatives can be difficult. However, analysis from the charity Campaign for the Arts in its State of the Arts report in July 2024 highlights a significant drop in the number of music, theatre, comedy and dance events being offered across venues of all sizes between 2018 and 2023. While the Covid-19 outbreak in 2020 and 2021 had a huge impact on events, the recovery has not returned to pre-pandemic levels, with the number of events offered in 2023 amounting to only 77% of those available in 2018.
Campaign for the Arts says its analysis “suggests that a significant number of venues, producers and promoters have scaled back their operations or shut down”.
Applying a financial lens suggests a similar picture of a sector in declining health. Analysis carried out by news and information provider Arts Professional, together with financial benchmarking company MyCake, suggests that the sector is in the red as income struggles to keep pace with expenditure. Analysis of the accounts of 2,800 arts organisations of varying sizes suggested a combined deficit of £117.8m in 2023, representing a massive fall from a collective surplus of £152.4m in 2022. Campaign for the Arts director Jack Gamble described the situation as “unsustainable”.
Can Labour ride to the rescue?
This year’s general election and the change in government is giving some people hope that a reset for the arts could be on the cards.
Siepel says longer-term financial settlements are important in providing more certainty and stability. “[They] would allow funders to make better plans for budgeting,” he says. “The Labour manifesto contained a number of helpful steps to support arts organisations, so enacting those commitments are a good first step.”
He points to impact investing, which links investment to specific social or environmental gains, as a potential new financial instrument that might allow arts organisations to build back their financial resilience.
Easton says the new government has sent some encouraging “positive signals” to the sector with prime minister Sir Keir Starmer and chancellor Rachel Reeves both attending a day for the creative industries. But she adds that it’s important to manage expectations as the new government has been honest about the dire state of the public finances it has inherited and investing in the arts is not an economic quick win.
“If the sector wants things to feel better overnight, and is expecting that, they might be disappointed,” Easton says. “But do I think there's an opportunity to kind of think more broadly about other types of models? Yes, I think Labour is super-interested in that.”
New look for the arts
Easton points to research being led by the National Theatre to better understand evolving business models for the arts, including new revenue streams and partnerships.
Part of the solution might also come from stronger collaboration between the worlds of arts and finance. Financial leadership and stewardship are badly needed in the sector, Easton says, and she makes a plea to finance professionals to get involved.
“Arts organisations always need and want people with financial acumen and accountancy skills, so there is a real opportunity, especially within management but also at board level, for more of those skills to be brought in,” she says.
Source for chart: pec.ac.uk/blog_entries/a-new-deal-for-arts-funding-in-england
