NECP response to DCMS inquiry on Brexit11 November 2016
Written evidence submitted by the North East Culture Partnership
The impact on BREXIT on the creative industries and the digital single market
1. About the North East Culture Partnership
1.1 The North East Culture Partnership consists of the: 12 Local Authorities, 5 universities, colleges, North East Chamber of Commerce, cultural and heritage sector organisations, Historic England and Arts Council England.
1.2 NECP also has a wider stakeholder group, and a series of sub-committees bringing in other partners and sectors, such as health, economic development and international trade.
1.3 The Partnership launched its strategy, the Case for Culture, at Durham Castle in July 2015, and at the House of Commons in November 2015. The Case for Culture is a positive statement of ambition for the next 15 years, building on the strengths of the North East’s diverse communities and pointing to the opportunities for further investment in arts and heritage right across the region.
2. Executive summary and recommendations
• Importance of being able to attract and retain leading creative and heritage practitioners post-Brexit;
• Request that current sponsorship system is retained for incoming artists;
• Care needed over visa system for incoming EU staff and students;
• Concern over post-work possibilities for creative students post-Brexit;
• Request that UK agencies receive funding to support exporting and touring of cultural activity;
• Importance of EU funding to North East’s creative and heritage sectors, and need for alternative funding to replace loss of EU funding;
• Negative impact on financial viability of creative businesses with falling pound and low interest rates, due to less money for NE public to spend on seeing creative works and supporting the National Lottery.
3. Employment in the creative industries: Will the UK be able to attract and retain talent from across the world in order to maintain its high reputation in these industries?
3.1 There is a danger that the UK may not attract talent to the same degree in the future, as the Brexit vote may mean that the UK is perceived as becoming more culturally insular, and therefore less welcoming than previously. While the UK has strong international links, and a reputation for being open to best practice, we may be seen as turning away from Europe, and may appear less open to engagement with European and worldwide markets.
3.2 The ability to retain talent will depend to what degree the UK continues to attract some of the leading practitioners in the creative industries, and to retain opportunities for people to develop their creative practice. This combination of the UK enabling the development of new talent, whilst housing worldwide leaders in their field, is an attractive package, but there is a danger in complacency. While London, and other cities, including Bristol, Leeds, Liverpool and Manchester, have established reputations and a high profile in particular areas of the creative industries, it is increasingly important that the UK continues to promote its support for the creative industries worldwide.
3.3 The NECP published an international survey in March 2016, which showed that the NE cultural sector currently trades with one-third of the planet. Restrictions on the free movement of people would have a negative effect on the ability of the creative industries to attract and retain highly trained talent. The ability to attract Creatives from around the world to tour to, and work in, the North East (NE) and vice versa is vital to the diversity and richness of the NE’s cultural sector.
3.4 There is already a significant skills shortage in the UK’s creative industries, which means that many companies have to recruit specialist workers from overseas. This situation will not be helped by the current absence of arts and creative subjects in the new English Baccalaureate (Ebacc). Sunderland University’s National Glass Centre (NGC) is already aware that fewer schools are able to offer kiln-based and maker-focused arts and crafts. Even fewer have access to hot-glass techniques and production. Peter Bazalgette recently described the NGC as the most important crafts centre in the UK. However, the number of under-graduates able to study glass and ceramics here will diminish if the proscriptive nature of the Ebacc is allowed to marginalise schools’ provision of arts, design and crafts. It is hard to see how a crackdown on work visas, alongside a reduction in the number of students studying arts, design and media, will be good for our booming creative industries sector.
3.5 The introduction of the sponsorship system (replacing work permits) has made the whole process of dealing with incoming foreign artists much more straightforward and we should suggest that the sponsorship system should be retained. Although we did manage to work with the old system, the new system is much quicker, and a return to the former arrangements would give artists and their representatives the impression that things were becoming more difficult, and could act as a deterrent to their choosing to tour in the UK.
3.6 Several NE cultural organisations have advised that their international touring work is a vital source of income, which they use to cross-subsidise their work in disadvantaged NE communities and in the region’s rural areas. If visa restrictions become too complex, this will reduce their ability to tour, and this will have a detrimental impact ono their regional work, and on using the culture sector as a means of place-making in the North East.
3.7 We are keen to ensure that any post–Brexit settlement continues to allow European staff and students to work and study at our universities; such staff and students make a tremendous contribution to the life and culture of our region.
3.8 We are also concerned about the potential reputational damage to our universities by the current complex visa application system for overseas students. NE universities are already reporting that there is already a major issue of attracting students. Some EU students are turning away from the UK to study in other countries, and this situation will deteriorate with the loss of Erasmus funding post-Brexit. NE universities are also finding that the Brexit messages are reducing the recruitment of international staff applicants from outside and inside the EU. Universities are aware that many students from regions such as China and South East Asia are increasingly opting to study in the USA, Canada and Australia which are regarded as more welcoming and accessible. This trend will cost the UK billions in lost revenue. So we hope that the government works hard to introduce a fairer and more equitable visa application process to allow creative industries students from overseas to choose to study in the UK.
3.9 There is also concern that, post-Brexit, EU university students will face the same post-study work restrictions as non-EU students currently do. If so, our best EU creative study students will need to return to their countries of origin, rather than be able to stay and enrich the NE’s cultural arena.
3.10 Creative practitioners in the NE who are EU, non-UK, residents, are also worried whether they will be allowed to stay in the North East after the UK has left the EU.
3.11 Raising of the ceiling beyond which Foreign Entertainers’ Tax is payable (deducted from the artists’ fees) from £1,000 to £8,000 has been hugely helpful, and a return to former arrangements (as exist with the USA) would be a further deterrent to artists wishing to appear in the UK. In jazz, for example, the current exchange rate with the dollar (if remaining at that level) will make to even more difficult to attract artists from the US as the dollar equivalent of fees paid in pounds will be so much less than it was, and promoters need to be able to bring the best of jazz from across Europe in order for their programmes to continue to attract audiences.
3.12 We note that the DCMS report entitled: Creative Industries: Focus on Employment: June 2016” states that “The Creative Industries accounted for 1 in 30 jobs (3.2 per cent) in the North East compared with 1 in 8 jobs (11.5 per cent) in London. We are concerned to ensure that Brexit does not exacerbate this discrepancy still further. According to the DCMS statistics, 38,000 people work in creative industries in the North East, with a total of 66,000 working in the creative economy.
3.13 The UK already lags behind other European countries in terms of support for export, certainly in music, via subsidy for travel costs, setting up of special two-country relationships, support for showcase events both in the UK and abroad etc. Brexit could mean that the UK needs to increase its efforts beyond that which UKTI is currently able to achieve with limited resources. The British Council has moved away in recent years from direct support for touring; their role should be revisited in this new context. Arts Council England has been supporting showcases; and we recommend that they receive funding to continue with this work strand.
3.14 Some of the NE’s smaller cultural sector organisations are concerned that, once the UK has left the EU, other EU countries will prefer to book cultural organisations from other EU countries, as they perceive that the UK’s health and safety and other legislative requirements will vary significantly from those in other EU countries.
4. The Digital Single Market: The UK digital sector currently is worth £118 billion a year; 43% of UK digital exports go to the EU. How has UK membership of the EU helped to shape the Digital Single Market to date? What are the fears and advantages arising from the UK being outside the developing Single Market? What will happen to companies that have used the UK as a base for sales within the Single Market?
4.1 There is already a skills shortage in the digital sector in the North East, and Brexit may exacerbate this shortage.
4.2 We expect that the Brexit vote, particularly given the lack of definition around the nature of our future relationship with Europe, and the time-scale for clarification of this, may be disadvantageous to the UK digital sector. Particular areas, including Teesside, Sunderland, Newcastle and Gateshead, have established reputations for investing in the development of the digital sector.
4.3 The Tees Valley Combined Authority recognises that the Tees Valley is fast becoming one of the most vibrant digital hubs in the UK. Teesside University has developed a significant reputation for its digital, arts and media courses and has invested in the development of progression routes.
5. What will be the impact of the loss of European Union funding, both specialised (such as the Creative Europe fund) and more general (such as the Regional Development Fund). Will the UK Government replace these? Can tax exemptions or private sponsorship fill the gap?
5.1 EU funding has been enormously important to the North East, particularly the Structural Funds. While the routes to seek European funding may be complex, our cultural organisations, universities, colleges, creative and heritage organisations have a strong tradition of working collaboratively, which has helped to offset capacity challenges. Many smaller organisations or businesses have benefited from being partners in EU projects. Some have gone on to initiate successful European proposals, identifying their own partners.
5.2 In addition, the opportunities to lever significant European funding have helped to encourage investment in creative industries from local authorities and government.
5.3 Many of the significant cultural capital buildings of the last two decades have only been possible thanks to grants from the European Regional Development Fund (ERDF):
• The Toffee Factory, for digital and creative businesses, received £2.8m;
• The Sage Gateshead received £5.6m in 2006;
• Live Theatre’s Liveworks received £2.5m;
• Beamish Museum;
• Dance City – £7.6m refurbishment which included ERDF;
• Customs House, S. Shields;
• Tyneside Cinema – £7m refurbishment including ERDF;
• Northern Stage – £9m refurbishment;
• Great North Museum: Hancock – £26m refurbishment including ERDF in 2009;
• Seven Stories – 2005.
5.4 In addition, revenue Structural Funds have played an important part in offering opportunities for people to develop their practice in the creative industries in the North East and Tees Valley through projects such as the Cultural Sector Development Initiative, worth £12.9 m ESF/ERDF (a total of £32m with matched funding).
5.5 Of the £320m of ERDF approvals for the North East in 2007-2013, 11% (£35.3m) was for 25 creative/design/digital projects:
Creative/design/digital ERDF projects funded in 2007-2013
5.6 ESIF 2014 -2020
If Article 50 is triggered in March 2017, the UK will be out of the EU by March 2019. Substantial amounts of ERDF and ESF funding not committed by then will be lost to the North East and the Tees Valley, including to the creative and heritage sectors. For example, within the North East LEP area, £37.3m ERDF, £127.2m ESF, and £10.5 European Agricultural Fund for Rural Development (EAFRD) are currently not committed and therefore are at risk of being lost to the North East unless contracts can be issued before the UK leaves the EU.
5.7 In addition, any loss of ESIF funding will be exacerbated by the concomitant loss of public and private matched funding which would have been provided. As the North East is so dependent on EU funding, the loss of ESIF will likely widen the imbalance between London and the North East.
5.8 European funding has also been a significant income source for the heritage sector. For example, between 2006 and 2024, £20 million of EAFRD was committed towards managing the North East’s rural heritage through the Environmental Stewardship Scheme, with 2,384 agreements offered for the maintenance or restoration of heritage assets on farm holdings.
5.9 In 2016, a further £260,000 was committed to managing farm heritage in 40 agreements under the newly launched Countryside Stewardship scheme. In addition to direct grant aid to owners, the fund committed additional resources under Measure 323 (conservation and upgrading of rural heritage) through the community-based LEADER programme, supporting four community heritage projects in 2007-13 via five Local Action Groups during this period.
5.10 Current LEADER work includes projects such as: developing small-scale grant schemes linking tourism with heritage; co-ordinating the marketing of cultural and heritage activities; investing in the rich and diverse culture and heritage of the uplands, and supporting the development of community buildings as hubs for arts, crafts, music and heritage.
5.11 Nationally, Historic England has calculated that agri-environment schemes removed 788 scheduled monuments from the Heritage at Risk Register between 2009-16. Regionally Historic England advises that at least 14 sites have been removed from the Heritage at Risk Register with agri-environment scheme money since 2012/13. They also advised Natural England on 130 North East applications, affecting 103 sites on the Heritage at Risk Register in the last two years. These applications affected a total of 121 designated heritage sites.
5.12 Therefore, agri-environment schemes, whose money comes through DEFRA agencies, are a major contributor of DCMS outcomes by saving and managing heritage sites.
5.13 Horizon 2020
NE universities are already reporting that some EU partners are restricting the roles of UK participants in Horizon 2020 – an important funding source for research relating to the creative industries. For example, Creative Fuse NE has been discussing a collaborative Horizon 2020 bid with the Digital Catapult. The loss of EU research funding will be of an even more significant loss to the universities than either ERDF or ESF.
5.14 At least two NE organisations have received funding from the Creative Europe programme and the previous Culture programme. For example, Event International has participated in four EU Culture projects, and Isis Arts is one of 10 partners in the CORNERS project (1 Sep 2014 – 28 Feb 2018); a €1.2m project funded by Creative Europe.
5.16 NE organisations are concerned that it may become increasingly difficult for UK organisations to be partners in Creative Europe projects, as other countries may see UK involvement as a possible barrier to success in a highly competitive process. The longer that our status is uncertain, the more this will apply. This is particularly troubling given the imminent deadline for Creative Europe network and collaboration projects for 2017-2021.
5.17 The NE culture sector wishes to decide locally on its spending priorities post-Brexit, to ensure that any income from the Government can be allocated to where the sector needs it most – whether this is on capital or revenue schemes.
5.18 Due to the significant income from EU funds to the North East, their shortfall cannot be addressed by private sponsorship and tax exemptions alone. And Brexit is causing a decline in confidence and uncertainty amongst businesses, which could reduce private sector sponsorship of the arts still further.
6. Other challenges and opportunities that Brexit could bring
6.1 If the pound continues to devalue vs. other currencies and low interest rates on savings, the NE public will have less money in their pockets to spend on Lottery tickets, so Lottery income will decrease. Therefore, Lottery support for arts and heritage projects in the NE will reduce.
6.2 The NE public will also have less to spend at cultural and heritage venues. Producing work, running a company and writing grant applications is particularly difficult for small cultural organisations timewise. So, if ticket sales fall as well, many creatives may find they have to leave the sector in order to earn a living.