Making the economic case in arts and culture

It’s no secret that securing local government funding has become increasingly difficult in recent years.

Since 2015, central government funding for local authorities has decreased by 18% in real terms, forcing substantial local spending cuts. Indeed, in 2022/23, local government expenditure was 42% lower than would have been expected based on 2010/11 levels. This trend has had a clear impact on arts and culture, seeing local government funding decrease by 29% in Scotland, 40% in Wales and 48% in England from 2009/10 – 2022/23, a total reduction of £2.3bn in real terms.

These cuts have made recent years especially challenging for cultural organisations. Additionally, the new devolution plans (see more from us on this topic here), do not bring much encouragement for the sector. Whilst integrated settlements will give mayoral strategic authorities more choice over how they spend their money, they will not necessarily have more money to spend. As such, we can expect the challenging funding conditions to continue.

So, is all hope lost when it comes to securing funding from local government? Not quite. This article will explore how stressing the economic benefits of arts and culture can be key to securing funding in this tricky landscape.

Making the economic case

Arts and cultural organisations need to be smart in how they approach local government for funding. Whilst we in the sector believe strongly in the value of art for art’s sake, in this current climate, it is increasingly unlikely that such arguments will cut it. Instead, arts organisations need to prove their value in other ways.

So, what economic case can cultural organisations make and what funding opportunities might this bring?

The big picture

It’s important that the sector understands the significant contribution it makes to the national economy. A 2023 study by McKinsey & Company, titled Assessing the direct impact of the UK arts sector, found that the total revenue of arts organisations and enterprises was £140 billion in 2022. In terms of Gross Value Added (GVA) to the wider economy, this equated to a figure of £49 billion or 2.2% of national GVA overall. For context, this contribution is roughly the same as that made by the food and beverage industry and is double the value added by the entire telecommunications industry. Government research in 2022 echoes these findings, recording the GVA of the cultural sector as £34 billion. This, it notes, was a 5% increase on 2019 levels, significantly higher than the 2% GVA increase of the UK economy as a whole.

These figures show that culture is an important and fast-growing economic force in the UK. Stressing this fact can provide strong foundations for a funding application.

The knock-on effects

As well as making significant economic contributions themselves, arts and cultural organisations play a key role in facilitating economic growth in other areas.

The local economy

Cultural institutions drive local economies and recent studies give a host of examples to support this:

Manchester’s International Festival generated over £39 million in economic benefit for Manchester in 2023, attracting visitors from across the UK and encouraging spending at local businesses. This refers to money that was injected into the area as a direct result of the festival and there is more information on the methodology here.
In the same year, Liverpool Biennale generated £13.2 million in economic benefit for Liverpool from visitors to the Biennale spending elsewhere in the city. This provided vital income and opportunities for local hotels, restaurants and bars. Read more about the data here.
The Terracotta Warriors exhibition, which ran from February to October 2018 in Liverpool, attracted a total of 600,000 visitors and generated £78 million across the city.
Basingstoke-based Anvil Arts attracted 200,000 visitors in 2024, with two-thirds saying that they wouldn’t have visited the town centre otherwise.

All of these examples show the vital role that culture plays in supporting local businesses and economies. Nothing attracts visitors and spending as effectively as culture and, when speaking to local authorities, this fact should be front and centre.

Business development

Businesses already recognise the value of culture and are taking steps to support and protect it. In Liverpool, the Accommodation Business Improvement District provides funding for cultural organisations by collecting a fixed percentage of a hotel or serviced accommodation’s rateable value. Recent discussions have centred around increasing this contribution through the introduction of a nightly £2 tourism levy. Speaking to Arts Professional, Bill Addy, the CEO of the group, noted the ways in which strong cultural offerings can “turbo-charge the city’s economy” and the desire of local business to support and harness this.

If cultural organisations can prove their value to local business, as they have done in Liverpool, they can more effectively embed themselves in the local ecosystem and demonstrate their important economic standing to local authorities.

Skills development

Skills development is another important area that strategic authorities will have funding control of under new devolved government legislation. Cultural organisations are ideally placed to support this area, whether it be through initiatives for young people, or providing support to vulnerable or disadvantaged members of the community.

This can be achieved via a wide range of mediums, from the music provision for young people that has been seen in Hertfordshire, to formal apprenticeships or learning opportunities at larger organisations. Theatres, for example, can offer a huge range of skills development, from lighting, sound, design and management, to the usual suspects such as acting, performing and public speaking. Smaller organisations also have much to contribute, fostering soft skills and building confidence in young and vulnerable people by encouraging creativity and self-expression. Nottingham’s Child-Friendly Creative City initiative is a strong example of this, seeing dozens of Nottingham’s arts, educational, and community organisations facilitate development and creative opportunities for children, supported by a mix of local and national funding.

If a local authority has an ambition to upskill and improve the employment chances of residents, cultural organisations should make sure that they are front and centre of these conversations. Whether it be developing skills outside the classroom, or offering formal learning opportunities in fast-moving workplaces with sophisticated technology, arts and culture has a role to play.

What to do now

This article is not suggesting that all organisations have the time and capacity to conduct detailed investigations into their own economic impact. However, there are a few simple ways to incorporate this information into funding proposals and communications.

Begin to collect data like visitor numbers, distance travelled, and motivations for visiting to build a picture of footfall and how many people your organisation brings to the local area. As Anvil Arts showed in its research on visitors to Basingstoke, gaining a sense of what brings people to areas can be a powerful tool in advocating for arts and culture.
Use case studies and reports. There’s a common misconception that arts and culture are a luxury and not an economic necessity. Use key statistics about the GVA of culture and its impact on local economies to change the narrative.
Speak to local businesses to garner support. It is likely that local bars, restaurants, cafes would be happy to speak on your behalf if your business brings in their customers.
For organisations with more capacity, make use of tools such as the AIM Economic Impact Toolkit, which can translate information into estimated economic contributions to the local area and region.
Combine audience and visitor data with management accounts information and insights from senior staff to build a more comprehensive picture of economic impact. The case studies in this Arts Council England report provide a useful reference point.
Analyse your staffing to construct an image of how your organisation supports and generates income for local people. As this case study from Tyne and Wear Museums shows, impact can extend beyond just income and incorporate measures such as skill development and decreased reliance on state support. The AIM toolkit cited above can help you get started with this.
Make sure to tie all of this data to local missions and delivery strategies. As with any funder, Local Authorities need specific evidence as to how you might help them achieve their goals.