Efforts to attract private investment in the creative sector are being hampered by a “perceived lack of commercial focus” and business models that “rely on key individuals”, a government-commissioned study has found.
An evaluation of government’s Creative Growth Programme (CGP), commissioned by the Department for Culture, Media and Sport and carried out by Frontier Economics, offers early insights into programme’s first two years (2022-2024).
First launched in June 2022, the programme was designed to support creative businesses and unlock economic growth outside London.
The £17.5m programme, now extended until March 2026 and covering 12 regions rather than the original six, aims to bolster the development of creative industries with the ‘highest growth potential’ in key areas.
According to the evaluation: “The evidence suggests the programme has had, or will have, a positive impact on the growth of many supported businesses.
“There is less evidence the CGP will increase growth through increasing equity investment, as was an initial intention of the policy. It has had little impact on overall demand for investment or the willingness of investors to invest in creative businesses.
“However, the CGP has increased the investment readiness of some firms seeking investment.”
Barriers to investment
Of CGP’s three delivery strands – business support, finance and investor-confidence building – it is the latter that has seen the least impact.
The evaluation found that the main barriers limiting the appeal of businesses to investors were “a perceived lack of commercial focus among creative businesses, limited investor understanding, limited business collateral and business models that rely on key individuals.”
The CGP hosted investor-focused activities with the aim of increasing investment, such as roundtables, networking sessions and showcase days.
The consensus across investors who attended was that there is a “perceived lack of commercial focus among creative businesses” and they may “prioritise artistic or cultural outcomes over financial returns, which can make them less appealing to profit-driven investors.”
Another issue raised was that understanding of the creative sector was limited, meaning confident investments were less likely to be made. Even if businesses demonstrated past success, investors found it difficult to evaluate the likelihood of future success or scalability.
The report notes the take up of the CGP’s investor activities was sparse, meaning the results would likely be marginal. The small turnout was attributed to limited advertising and investors feeling that Innovate UK Business Connect, the company running the grant and investor partnership competitions, had aimed its activities at larger investors unsuited to arts investment.
Six businesses did secure Innovate UK investor partnerships through CGP, leading to £2.1m in private investment, however the report notes that these businesses were already near investment-readiness, and other CGP-backed firms were too early-stage or lacked scalability.
Structural challenges
Despite a lack of progress in investor confidence, the CGP did make progress in increasing business confidence and innovation.
Among surveyed participants, 85% reported improved confidence in articulating their business value and more than 60% felt more informed about investment opportunities and financial planning.
However, the report raises concerns about the programme’s longer-term impact due to ambiguity in defining ‘high-growth potential businesses’ and the absence of infrastructure or policy follow-ons. No new dedicated funds or regional legacy programmes have been established as a result of the CGP.
Publication of the report coincides with the government’s Creative Industries Sector Plan, published earlier this week, which sets out the aim of nearly doubling business investment in the sector by 2035 – from £17bn to £31bn in a bid to “cement the UK’s position as a global creative superpower”.
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