Scottish Government

PART 1 - AMBITION - ACHIEVING OUR AMBITION

The Government is ambitious for our creative industries. We want to see them succeed. We have established Creative Scotland and brought together the key public sector organisations involved in providing support to the creative industries in the Scottish Creative Industries Partnership. We believe that this creates the right structure to ensure effective, joined up support.

Putting the right structures in place - better alignment of the public sector

The Government recognises that public sector support to the creative industries must be delivered in partnership, with organisations responding according to skills, expertise and knowledge. The key roles and responsibilities of different public sector agencies are set out in the Creative Industries Framework Agreement ⁶ published in February 2009, and the subsequent Scottish Creative Industries Partnership Report, which was published in June 2009 ⁷. The Partnership builds and maintains effective working relationships, brings together substantial budgets and ensures that we get the maximum impact for public sector resources.

Membership of Scottish Creative Industries Partnership ( SCIP) Co-ordination Group

The Scottish Creative Industries Partnership Report advocated the formation of a Creative Industries Coordination Group. It was to be convened and chaired by Creative Scotland, comprising a core membership of senior level representatives from Scottish Enterprise, Highlands and Islands Enterprise, Scottish Local Government, Skills Development Scotland and the Scottish Funding Council.

This co-ordination group was established in 2009 and meets approximately every three months. The Scottish Government has a standing invitation to attend meetings of the group, which has three main outputs:

• providing information, analysis and strategic advice about the creative industries to policy makers, especially the Scottish Government;
• looking at the opportunities for growth and barriers to success being faced by the sector; and
• exploring innovative approaches to developing the sector.

Ensuring effective engagement with the creative industries

In order to achieve these outputs, Scotland's Creative Industries Partnership Co-ordination Group has established industry practitioner reference groups for:

• film;
• music;
• product design;
• design services; and
• the performing arts.

In addition, a publishing group has recently been set up and has had held two meetings. Groups typically have 15-20 members, and are able to bring a range of experience to bear across the different sub-sectors.

The final reports of these reference groups will be published in due course, and the public sector, through the Scottish Creative Industries Partnership Co-ordination Group, will develop detailed actions to address the recommendations. It is already possible, however, to identify key themes from the meetings of the different sub-sectors.

Goals for the sector - these have been agreed by all of the reference groups:

• Increase the annual GVA of the sector; and
• Increase employment within the sector.

Priority objectives for the sector - these have been agreed by all of the reference groups:

• To improve Scotland's competitive position at UK and international levels;
• To build the scale of businesses, business activity, skills and investment;
• To attract business activity, businesses, skills and investment to Scotland; and
• To develop creative leadership and build the talent base in Scotland.

The reference groups have also undertaken analyses of the strengths, weaknesses, opportunities and threats facing each sub-sector. As part of this process, a number of barriers to growth have been identified, and general recommendations have been made to address these barriers. These are listed below.

Recommendations to tackle barriers to growth

Recommendation 1: Shared ambition, co-ordinated action

Scotland's creative industries and public sector to share the ambition to grow significantly the country's creative industries sector, and to work in partnership to achieve the goals set out. Partnership working is already the key principle behind Scotland's Creative Industries Partnership, and needs to be maintained by the creative industries and the public sector. Creative Scotland should take the lead co-ordination role, acting as custodian of the partners' agreed action plan.

Barrier 1: Lack of joined up approach to sector's growth

There are growth opportunities for each of the sectors within the creative industries. However, unless the whole of the industry with the public sector approaches these opportunities in a co-ordinated way, gaps may remain and opportunities to realise the sector's potential may be lost.

Recommendation 2: Increase scale, capacity and commercialisation

Scotland's creative industries should collectively support a number of companies of scale for the contribution they will make to the sector's health and seek to encourage companies with this ambition and ability to consider increasing their scale. Simultaneously the public sector should investigate mechanisms including, if necessary, incentive and development finance to enable the companies who wish to grow to achieve this. The public sector should seek to support and, if necessary, establish networks to help the creative industries to draw upon expertise and skills.

Barrier 2: Lack of scale of businesses, business activity and investment

As across Europe, the sector's ecology is a collection of small and micro enterprises and sole traders working, at times, collegiately. The volume and value of business activity and investment as a sum of all these parts delivers critical mass. The industry grows predominantly by increasing the numbers of companies, and companies tend to grow to an optimal size and stop. Companies scale up for a project adding the exact skills and experience they need for that project, then scale back down to the core company team. For this reason, networks are important; so that companies can draw upon expertise and skills when necessary. The core strength of the sector is its ability to generate unique intellectual property ( IP) and sell it nationally and internationally. The main weakness of the sector is the inability to retain a significant proportion of these rights in order to bring sustainable income streams and strengthen the company's base. In order to strengthen the ecology of the Scottish creative industry sector, more companies of scale with sufficient strength to negotiate retention of these IP rights are required. They bring inward investment, new and challenging creative work, increased reputation, higher employment, greater supply chain potential and higher returns. This creates strong sustainable businesses that are able to trade with their IP, and retain it and maximise it. In this way smaller companies and freelances also benefit from the activity of the companies of scale. A lack of companies of scale means that the sector is often unable to capitalise on market opportunities or maximise its overall potential.

Recommendation 3: Improve international competitiveness and access to markets

Scottish Government to consider influencing the UK Government's use of tax incentives or using the limited taxation powers currently available to it in Scotland, to increase the competitiveness of Scotland's creative industries. The public sector to collaborate to increase and improve international marketing to attract business activity, businesses, and investment to Scotland and to ensure that there is effective access to international markets for Scottish talent, businesses, ideas, services and content.

Barrier 3: International competitiveness and access to markets

The sector operates in a global marketplace. International and domestic UK competition for attracting talent, production, businesses and investment is severe, through intense international marketing, the offer of financial incentives and the provision of effective support mechanisms, including appropriate physical infrastructure. One example of this is the film industry, where Scotland competes with regions inside and outside the UK which offer significant incentives for film production, including Northern Ireland, the Isle of Man and Canada. Canada for example offers a 40% tax credit (double the UK tax credit). The market is highly competitive - for ideas, talent, businesses, content and investment - and Scotland needs to be more proactive in positioning itself within that international arena, and in making sure that it takes full advantage of its strengths (such as locations and skilled crew, in the case of films).

Recommendation 4: Improve access to finance

Scotland's public sector will seek to increase European funding applications, increase information available to companies regarding funding available, and increase investor awareness of the creative industries. It will also, where necessary, investigate appropriate financial mechanisms that would assist businesses, business activity and investment, increasing Scotland's competitive position at a UK and international level.

Barrier 4: Access to finance

Perhaps the key structural weakness that impedes growth across the creative industries as a whole is access to appropriate investment at the critical stages of product and business life cycles. This includes a lack of access to working capital - individual enterprises do not have the scale to attract sufficient equity investment and are unattractive to commercial lenders and are therefore unable to fulfil their growth ambitions. Other barriers to finance include poor information, lack of awareness amongst investors of funds available and of the creative industries, and a lower application rate for European funding.

Recommendation 5: Improve industry skills base

Scotland's creative industries and public sector to commit to implementing the industry endorsed Sector Skills Agreements of the Sector Skills Councils (Creative & Cultural Skills and Skillset) to increase and improve the scale and capacity of skills and businesses in Scotland, to foster and develop creative leadership and to retain skills in Scotland. Enterprise skills are a significant part of this - it is important that talented individuals have access to the support and training which will help them to establish successful businesses. Skills Development Scotland, the Scottish Funding Council and the two sector skills councils have been working on a Creative Industries Skills Action Plan. The creative industries and public sector are committed to implementing the recommendations of that plan.

Barrier 5: Access to appropriate industry skills

The creative industries sector is being transformed by changes in working practices, advances in technology, internationalisation and the digital revolution. These all demand a constant re-skilling and up-skilling of existing workforces and better links between education and industry. Critically, they also require leadership across the sector in driving the change needed to seize market opportunities.

Recommendation 6: Improve access to market intelligence

Scotland's public sector to investigate the role it can play in supporting the creative industries as a whole to be more market aware and competitive by looking at options for the effective gathering and dissemination of relevant market intelligence. This is being pursued by the SCIP Research Group. Action has already been taken to provide better market intelligence in relation to the television production industry following the recommendations of the television and broadcast industry advisory group ⁸. In addition digital media companies can access in-depth market research and intelligence together with product and technology support through initiatives like the Interactive Scotland service funded by Scottish Enterprise.

Barrier 6: Access to market intelligence

All businesses need access to up-to-date and relevant market intelligence. However, affording that intelligence is usually beyond the ability of small and micro enterprises. When the sector is by its nature comprised of such enterprises, this poses major issues for the sector as a whole in identifying market opportunities and then being able to exploit them.

Recommendation 7: Measuring success

Scotland's public sector to investigate options for a shared measurement methodology for the value of the sector, and to conduct an economic impact study of the creative industries.

Barrier 7: Measuring success

The public sector does not have a consistent approach to measuring the economic value, impact and success of the creative industries. The nature of the sector makes this a task that the creative industries themselves do not have the capacity to achieve.

This highly adaptable, resilient, and growing sector to date is not immune to the current economic climate and global threats to their industries. The creative industries, by their very nature, experiment and innovate. Although this can bring high rewards, new approaches and benefits to society it also, inevitably, exposes businesses to risk. The current fragility of elements of the sector and the potential loss of talent/skills from the sector could undermine the ambitions set out in this paper Unlike other sectors, such as manufacturing, the variability of the flow of business activity (for example the fact that some sub-sectors come together for fixed-life projects and then disband) poses challenges for the sustainability of the sector. This reinforces the need to support the sector's growth through the co-ordinated actions of the partners to help businesses and workers to remain active within the sector during and after the recession and go on to maximise their potential.