Speaking on supporting the growth in creative industry businesses outside of London, our MD Lesley Gulliver took a trip to Westminster on March 28th to offer her valuable insight for the Creative England-run event.
Attending alongside company leaders from those including Duck Soup, Pixel Toys and EMU Films, Lesley and others discussed why – despite the success of creative industries being a huge part of the UK economy’s growth – they still face a market failure when it comes to accessing the investment needed to develop.
From a policy development perspective, the roundtable – co-chaired by Caroline Norbury, chair of the Creative Industries Council Investment for Growth Group – focused on two key issues of:
- The need for easier access to finance at an early stage and a relatively low level – £50,000 to £250,000
- The importance of more creative industry specialist business development support.
The roundtable was held on the back of research commissioned by the Creative Industries Council, as part of the Sector Deal, whose findings included how:
- 62% of creative businesses felt their growth had been restricted in the past – due to a lack of finance – and 72% felt they were undercapitalised
- 58% of businesses had invested their own money, compared to 22% of all SMEs.
Creative England explained how investment market failure was “partly because of the intangible, IP, asset base of creative industry businesses, often perceived as too risky by mainstream investors.”
The Government-commissioned Bazalgette review, which informed the subsequent Sector Deal, identified three investment pinch points in the ‘ladder of growth’ for creative businesses:
- Low level loans and equity, up to £250,000 (rung one)
- Angel equity finance for high growth potential firms looking to scale up (rung two)
- Debt and equity growth finance for established businesses (rung three)
It was noted that the British Business Bank had put in place action to help improve the availability of equity finance outside of London and the South East, through a Regional Angel Fund (rung two).
However, as part of the discussions, Creative England raised how “commercial investments do not address the market failure at rung one of the growth ladder for businesses seeking early stage seed investment, low level loans and equity up to £250,000.” It said that, “without sufficient capital at seed level, there won’t be enough deal flow to feed the private Angel or VC funds higher up the ladder.”
And the not-for-profit organisation further stated how the evidence suggested that these companies “need, and want, help and support to develop their business and gain access to wider networks and new markets. But, they look for that advice from people who understand their business – from peers or specialists – and do not tend to access generic business support.”
Speaking about the roundtable event, Lesley added: “It’s a privilege for The Engine Room to offer its expertise on this topic because it’s one that affects several business leaders. I hope the discussions we’ve had, and the insight raised as a group, will help towards levelling out the playing field for all creative industries across the UK.”