Creative Industries

Lord Sharkey Excerpts

Thursday 3rd November 2011 Lords Chamber

[Lord Sharkey]

I, too, thank my noble friend Lady Bonham-Carter for providing the opportunity to debate such an important issue, and I congratulate her on her forceful and insightful analysis of the creative industries and their contribution to the life of the United Kingdom.

I will focus my remarks on one particular sector of our creative industries: advertising. In April this year Alexandra Albert and Dr Benjamin Reid produced a report under the auspices of the Work Foundation, entitled The Contribution of Advertising to the UK Economy, a creative industries report. The executive summary of this report says, in part:

“The advertising industry has been a UK success story for much of the 20th century, developing as a base for globe-spanning organisations, and taking a central role in the broader creative industries sector. The 21st century advertising industry makes a major contribution, both directly and indirectly, to the UK economy”.

The figures, as we have heard this morning, bear that out. The creative industries as a whole represent 8.7 per cent of all UK businesses and employ 1.3 million people. As the noble Lord, Lord Macdonald, pointed out, the creative economy represents a larger percentage of GDP in the UK than anywhere else in the world. It is twice as big as its nearest competitor in Europe. Paradoxical as it may seem, the advertising sector is in many ways an unsung hero of the UK creative economy. Its products are highly visible but the industry itself is often not. This is in part perhaps because the industry has a strong tradition of self-reliance and self-regulation and does not attract or seek public subsidy.

In fact, the Secretary of State for Culture, Media and Sport addressed a gathering of senior advertising people recently and spoke eloquently and forcefully about the importance of the creative industries without once mentioning advertising itself. Advertising is a driver of growth in the creative economy. Its gross value added—at around £7.8 billion in 2008—was bigger than the film, TV, radio and designer fashion sectors combined, and does not include the multiplier effects of indirect and induced economic impacts.

Other than the public purse and the BBC, if those can be said to be two different things, the advertising industry is the single biggest funding stream for the core arts, the film production and post-production industries and the cultural industries such as commercial TV and radio. According to the Institute of Practitioners in Advertising’s Bellwether report last month, every year around £30 billion of marketing and media money circulates around the UK economy. For every £1 spent, company turnover increases on average by £3 to £5, and profitability by £1.50 to £3. These are truly remarkable figures and show clearly the key economic significance and contribution of the UK advertising industry.

Advertising in the UK has another less direct effect. It provides access to corporate brand budgets, which can be and frequently are directed towards the funding of music venues, film and book festivals and independent programming. Without advertising, ITV and Channel 4 would not be in business, and nor, perhaps slightly more equivocally, would the Millennium Dome. Of course, the diversity, range and freedom of our press would be directly threatened. All this is to speak about the quantitative aspects of our advertising industry.

The qualitative aspects of the industry are just as important, perhaps even more important. I am not entirely impartial here and should perhaps declare a by now somewhat historic interest. I have spent 30 years of my commercial life working in and around the advertising industry. I am proud to have been managing director of Saatchi & Saatchi here when it was the largest advertising agency in the world and producer of the highest quality creative work. But even allowing for a slight partiality, I believe it is true that we have here in the UK one the two best advertising industries in the world. External rankings consistently put the US or the UK in the No. 1 or No. 2 positions. Given our relative sizes, this is a truly astonishing achievement. In the UK, the advertising industry is a truly world-class industry.

The advertising industry has undoubtedly been very successful in the UK, but, as with other leading creative industries, it faces new and very fierce challenges. The Work Foundation report notes that:

“It is likely that the global centre of advertising creative and production gravity will continue to shift away from the western countries and towards the BRIC and SE Asian markets”.

The industry is alive to this challenge and so I believe, very largely, are the Government.

The industry is proactive in positioning itself as a creative and innovation hub to the largest and fastest growing companies in emerging markets, with a view to encouraging them to take their brands global. For example, the Institute of Practitioners in Advertising has just launched a new consumer R&D service in China. Speaking of China, the number of IPA member agencies with offices in China has risen from 23 to 62 in the past three years. With the active support of the DCMS and UKTI, the industry runs trade missions to promote our skills, our expertise and our companies. There was a mission to China at the end of September, and there will even be a mission to Silicon Valley and Hollywood, which is due to leave next week.

The UK is a collection of world-beating industries. Our future prosperity will depend more and more on our ability to sustain and develop our creative leadership in advertising as in all creative industries. As someone who has dealt professionally with creative people for 30 years or so, perhaps I may close by saying to my noble friend the Minister that I have always found it useful when dealing with creative people to bear in mind two key principles: first, be very supportive, especially at an earlier stage; and, secondly, keep well out of the way.