What is the creative economy?

  • Creative industries have become more crucial to the global economy.
  • Deloitte says the creative economy is likely to be a key driver of economic growth as countries re-emerge from the coronavirus pandemic.
  • The creative economy comprises a range of industries, including music, performing arts and architecture.
  • It is more important to define how the creative economy is organised rather than by what it does.
  • Creative professions are less likely to be replaced by artificial intelligence (AI) and robotics.

The creative economy is a term often used interchangeably with ‘creative industries’ and is a concept that has significantly evolved over the last twenty years. The creative economy describes various activities based on creative imagination and covers a wide range of industries.

Creative industries, sometimes labelled as cultural industries, includes theatre, dance and music to architecture and computer programming. Historically, some artists found the term ‘industry’ offensive, believing it to be a derogatory term to describe their art.

In 2014, Nesta, the UK innovation foundation, felt that creative industries had advanced so much that they should be labelled as the creative economy, defining it as sectors specialising in the use of creative talent for commercial purposes.

Professional services network Deloitte says the creative economy is likely to be a key driver of economic growth as countries re-emerge from the coronavirus pandemic. However, the value of creative industries amongst governments has not always been recognised.

Over the years, creative industries have become more crucial to the global economy, employing millions of individuals worldwide. However, during the early stages, many governments did not recognise the importance of creative industries and their impact on economies. The US government was the only exception, with the US film industry having enormous value on the US economy and becoming central to US culture.

Although creative industries were not viewed as sectors in the same way as automotive and finance, the broad scope of professions from advertising to tourism led to a fusion with other economies. For example, creative industries have demonstrated greater reliance on technology and, in turn, have significantly impacted the digital economy.

What constitutes a creative industry is still debatable, though many argue it is more crucial to understand how the creative economy is structured rather than focusing on semantics.

Creative Economy

Measuring the value of creative industries

Today, the creative economy is recognised as a valuable tool for social cohesion, providing cultural representation and representing human experiences. However, for many years much about the creative economy was unknown, including the value and benefits.

In 1997, the UK Labour government decided to assess the impact of creative industries on the UK economy. The assessment led to the UK’s new Department for Culture, Media and Sport (DCMS) putting together the ‘Creative Industries – Mapping Document’. The document observed a range of creative activities from fashion to software and concluded that all sectors had the potential for wealth creation through the generation of intellectual property.

There were critics of the study who argued that industries such as engineering also required creativity. It was also criticised that there was no distinction between small to medium-sized enterprises (SME) and large corporations, both of which operate very differently. The latter often displayed little evidence of creativity.

However, a follow-up study of creative industries in 2001 discovered that creative sectors were generating jobs at twice the rate of the UK economy as a whole.

A report written by Deloitte in 2018, which looked at six economies in Europe and three in Asia, found that the creative economy employed almost 20 million people across these nine countries, which is 7% of total employment.

The creative economy has experienced rapid growth compared to the wider across these nine countries, with total employment within the creative economy up 4 million from 2011. In the UK alone, employment within the creative economy grew to 2.9 million in 2018, responsible for 10% of UK total employment.

Creative industries in 2021

In 2021, creative industries are recognised by almost all governments, yet what constitutes ‘creative’ remains debatable. Some countries take a more traditional view, linking creativity closely with arts and culture. Others argue that food and gastronomy are also considered creative as cuisines are closely related to a country’s culture.

The UK has often struggled to categorise policy developments for creative industries, questioning whether it falls under economic, industrial, cultural or education policy, or even all four.

As creative industries began to fuse with digital technology, new professions and businesses were emerging that were not recognised by Standard Industrial Classifications (SIC) and Standard Occupational Classifications (SOC) codes, both classifications of occupational information in the UK.

With the creative economy constantly evolving, it is expected that we will witness further growth in the following areas:

Creative supply chains

Continued growth in software, music and craft, including film, sets making and costumes, can make individual countries a more attractive investment for film and TV locations.

Shared intellectual property

Shared intellectual property (IP) is where creative economies feature common designs and characters. This practice often occurs across popular franchises such as Harry Potter, which provides significant revenues for many creative industries. Shared IP is also experienced in books and video games to introduce the content to new audiences.

Creative technology

There is a growing connection between digital and creative industries, and this is likely to advance with the evolving role of AI, visual effect (VFX) and collaborative production tools, particularly prominent in the video games industry.

Regional development

Creative industry clusters are likely to become more prominent across a range of regions in the future.

Skills policy

Creativity is becoming a rising priority for the education system, with technical skills in the creative economy constantly in demand.

Global competition

Countries are reaping the rewards from a robust creative economy, making them more competitive in creative goods production and services.

creative industry

Threats to the creative economy

Aspects of the creative economy have come under significant pressure over the past year due to the coronavirus pandemic. Cinemas, theatres and concerts were all subject to closures and cancellations due to strict social distancing measures to prevent the spread of infection.

In the UK, the arts and entertainment sectors were most impacted by COVID-19, with 70% of workers in the industry placed on the UK government’s furlough scheme during 2020.

Last year saw French/British magazine Marie Claire launch their Save the Arts campaign, which gained significant traction on social media, partnering with numerous high-profile celebrities. Marie-Claire labelled the impact of coronavirus on the arts industry as a ‘forgotten crisis’. They highlighted that UK arts provided GBP 2.8 billion in taxation a year to the Treasury and generated GBP 13 million per hour before the coronavirus pandemic hit.

A report by Oxford Economics conducted in July 2020 forecast a GBP 77 billion loss for UK creative industries, a 122,000 reduction in employees and 287,000 jobs lost for self-employed creatives.

The UK government pledged a GBP 1.57 billion rescue package, known as the Cultural Recovery Fund (CRF). However, the package primarily benefited large institutions and excluded crucial creative freelancers, most of whom were unable to work from March 2020.

However, a report conducted by the Centre for Economic and Business Research (CEBR) forecast that the CRF would provide creative industries with a GBP 1.4 billion boost and could see them return to pre-pandemic levels by 2022.

The coronavirus pandemic led to many performers turning to live-streamed events. However, whilst this trend helped compensate for live events, it can be challenging to monetise digital events and often, the financial rewards are minimal.

However, the UK government announced that all COVID-related restrictions would be lifted on 19th July 2021, allowing the resumption of live events, including concerts and theatrical shows. As a result, it’s hoped that the UK arts sector will flourish once again after over a year of COVID restrictions.

The future of the creative economy

In the age of globalisation, many countries have identified that a blend of solid culture and commerce can give their nation a competitive advantage. For example, the significance of the Eiffel Tower in France and the prominence of French theatrical entertainment attracts millions of tourists each year.

Furthermore, governments worldwide are desperate to rebuild economies following the financial devastation of the coronavirus pandemic. With the creative economy likely to bounce back more rapidly than the wider economy, greater focus is expected to be placed on creative industries.

In 2014, the author of Cultural Capital – The Rise and Fall of Creative Britain, Robert Hewison, stated that it is more important to define how the creative economy is organised than by what it does.

There is likely to be more rewarding career prospects for millions of people, particularly with the rise of artificial intelligence (AI) and robotics. Oxford University has forecast that machines could replace 47% of US jobs over the next 20 years and 35% in the UK. However, Nesta’s 2015 study, ‘Creativity vs Robots’ argued that the creative industries could be immune to this risk, with 86% of ‘highly creative’ jobs in the US, and 87% in the UK, are difficult to replace by automated processes.

The British Council argues that creative businesses are of growing economic significance, with a developing framework of how these industries are organised and how value is measured. As a result, it’s believed that the creative economy will be the fuel of the 21st century.

Deloitte forecast that consumer demand within the creative economy is likely to be stronger than other goods and services. As a result, it’s thought that the creative economy could grow by 40% by 2030, generating over 8 million new jobs across the nine economies studied in their report.

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