Partners

Commissioned by the Creative Industries Council (CIC)

The Creative Industries Council is a joint forum between the UK creative industries and government. Set up to be a voice for the Creative Industries, the Council focus on areas where there are opportunities for, and barriers to, growth for the sector, such as access to finance, skills, export markets, regulation, intellectual property (IP) and infrastructure. Council members are leading figureheads drawn from across the creative and digital industries including computer games, design, fashion, music, arts, advertising, publishing, film and television. The council is co-chaired by The Rt Hon Oliver Dowden CBE MP, Secretary of State for Digital, Culture, Media and Sport (DCMS), The Rt Hon Kwasi Kwarteng MP, Secretary of State for Business, Energy and Industrial Strategy (BEIS) and Tim Davie CBE, Director General, BBC.

Find out more at www.thecreativeindustries.co.uk

In association with Digital Catapult and Moore Kingston Smith

Digital Catapult

Digital Catapult is the leading authority on advanced digital technologies and the only innovation organisation with a specific remit for the creative industries on behalf of UK government.  Digital Catapult has been a key partner of CreaTech since its inception. 

Digital Catapult’s internationally recognised programmes and facilities are helping creative organisations to develop, adopt and embed advanced digital technologies that drive innovation, productivity and competition. It’s not just immersive tech that’s making a difference: applications for IoT, 5G, distributed ledgers, AI and machine learning are just as prevalent in the creative industries as they are in manufacturing, helping to drive the emergence of tech in the sector and open up new markets and business opportunities. 

Find out more at www.digicatapult.org.uk

Moore Kingston Smith

Moore Kingston Smith is committed to helping put CreaTech on the map as a unified sector, recognized internationally for its innovation, collaboration and creativity.

As the only firm of accountants and advisers with a dedicated office of over 100 media specialists, we proactively support independent media businesses throughout their life cycle. From a corporate finance perspective, this involves preparing CreaTech businesses for, and advising on, funding rounds and ultimately sales processes.

In an industry that powers on innovation, there is considerable opportunity for CreaTech companies to leverage R&D tax credits. In addition to our accountancy and tax compliance services, our team helps clients make the most of this scheme.

As commercial partner of www.thecreativeindustries.co.uk, the official website of the Creative Industries Council (CIC), and an associate partner of the CIC CreaTech programme, we are fully integrated in the drive to help the CreaTech sector thrive on both the national and international stage. Consistent with CIC’s commitment to providing a unifying platform for the sector to demonstrate its extensive investment potential, our purpose is to bolster CreaTech businesses through access to our strategic advice that supports them maximise their growth.  

As a member of Moore Global - a network of accountancy and advisory firms in over 100 countries – Moore Kingston Smith is also excellently placed to provide support to global CreaTech businesses, or those looking to expand internationally.

Find out more at www.mooreks.co.uk/media or contact Rob Husband, Partner, Moore Kingston Smith, rhusband@mks.co.uk

Executive summary

CreaTech is the intersection of technology and creativity. Companies pioneering this critical combination are leveraging UK historic strengths in tech and the creative industries respectively, and gaining significant traction.

In Part 1 of this report, evidence as to the significant investment footprint of CreaTech was presented. Just under one billion pounds of venture capital (VC) investment was raised by UK CreaTech companies last year, representing around 9% of total VC funding plugged into tech in the country, and investment is on the up - doubling over the last four years, from just under £500mn in 2017, to over £980mn in 2020.

Looking at the labour market footprint of CreaTech, up to 4.29mn jobs (DCMS, 2020; Tech Nation, 2021) in the UK economy either involve an inherent combination of creative and technical skills, or else are likely to be impacted by a company level, or industry level combination of creative and tech functions.

Not only is CreaTech an economic powerhouse, with strong international prospects, it also represents a movement in the UK economy to deliver positive social, cultural and environmental impact, as well as economic returns.

Known as impact tech, companies delivering beyond economic returns are on the rise in the UK and Europe, as evidenced in the Tech Nation Report 2021. VC investment into UK companies delivering public good has increased by 160% since 2018 - a record in Europe. Many CreaTech companies have the potential to enable a shift to more green solutions by disaggregating the relationship between space and content creation, this may be facilitated through immersive, virtual and augmented reality (VR and AR) solutions, to name a few.

Figure 1 Global Impact tech investment (2015-2020)

Take the screen industries, for example, where visual effects tools developed in the games industry and applied new and innovative ways have not only put the UK front and centre in the world for next generation content creation, but also reduce the carbon footprint of the screen sector. By reducing reliance on 'on-location' filming, involving physically moving people and equipment, companies like REWIND, Double Negative, Milk VFX, and Flipbook Studio, are helping UK screen industries both tread more lightly from an environmental perspective, and punch far above their weight on a global stage.

These firms are just the tip of the iceberg; UK CreaTech is pervasive, creating tens of thousands of new jobs and sculpting the labour market of the future. The research is exploratory, using traditional data sources can makes it difficult to describe new and emerging phenomena, hence why we focus here on finding innovative ways to find an evidence base for the changes that are occurring. Nevertheless, it can be difficult to get a comprehensive picture no matter what data is used, so the findings here should be seen as indicative not absolute. This is a start, and we think it’s helpful to inform the wider policy debate.

In absolute terms, the number of advertised CreaTech jobs have increased over the last three years by 16% - compared to the UK labour market as a whole, where we have seen employment increase by 3.3% over the same period. Additionally, the weight of advertised CreaTech roles as a proportion of all advertised creative/ design roles is steadily increasing, from 33% of roles in 2017 to 36% in 2019.

The UK has all the ingredients to accelerate the growth of CreaTech even further.

If international VC investment for this area of the economy were the same as UK tech as a whole, we would expect to see a boost of over one billion pounds to investment. The scale of the opportunity is global. Expert stakeholders interviewed for this report suggested that deep, facilitated collaboration between creative and tech firms, CreaTech and corporate entities, and international institutions and UK CreaTech companies, could have a transformative impact on the space, as we build back from the disruption of Covid-19.

The future of the UK economy will be built on technology, and creativity - as a hotspot of economic growth in its own right, and an enabling force for broad based, positive transformation. CreaTech represents a pivotal movement for the UK, its propagation and development in the next decade will help lay the foundations for a prosperous, culturally rich, and environmentally conscious century.

Investment trends and projections

In 2020, despite the pandemic the UK received a record level of CreaTech investment reaching just under one billion pounds. Further information can be accessed here, in the initial part of this research which focussed on analysing CreaTech financial trends in the UK and internationally.

We forecasted Createch Venture Capital (VC) data to measure the growth rate and trends in the space as well as to compare with other emerging areas including Climate Tech, HealthTech and InsurTech to evaluate potential.

Figure 2 CreaTech investment (2018-2020) and projected investment (2021-2022)

(Source: Tech Nation, Pitchbook, 2021)

The technology ecosystem has been greatly impacted by recent events including Covid-19 and Brexit, making forecasting future growth in CreaTech a challenging exercise.

We collected monthly VC data between January 2018 and December 2020 to measure possible future growth. Using records which take into account the effects of these instances on UK investment, we still project steady long term growth in VC investment for CreaTech companies. The model was created using exponential smoothing to account for investment variance.

Our forecast shows CreaTech investment reaching £1.1bn by the end of 2021, a 14% increase from the record levels of investment seen in 2020, and a 25% increase by 2022 with a projection of £1.2bn.

Figure 3 Actual and projected annual investment trends in CreaTech (2018-2022)

Please use the legend to the right to scroll through investment trends from 2018 to 2020, and projected to 2022

(Source: Tech Nation, Pitchbook, 2021)

Emerging hybrid industries

Figure 4 Actual and projected investment in emerging tech industries (2018-2022)

(Source: Tech Nation, Pitchbook, 2021)

Based on recent investment trends and strategic economic policies, we see Insurtech, Healthtech, Climate Tech and CreaTech as the leading spaces for growth within the UK technology sector.

Our projections show CreaTech and Climate Tech as the two leading industries projected to see the highest growth in VC capital. Climate Tech leads the way between 2020 and 2021 with a projected 35% increase, followed by CreaTech with 14%, Healthtech with 10% and Insurtech with 2%.

International investment boost

Figure 5 Investment into UK tech by global region of investor (2020)

In 2020, 63% of UK tech VC investment was from overseas. For CreaTech companies, this was almost the opposite, with 64% of VC investment in 2020 coming from domestic investors. Other things being equal, if non-UK CreaTech investment were boosted to the same levels as the tech sector as a whole, we would expect to see an increase in investment of £1.05bn.

Future growth

Eighteen interviews with CreaTech stakeholders, to explore the challenges and opportunities for UK CreaTech were conducted as part of this report. The following sections on Education, Collaboration and knowledge sharing, and Access to finance, contextualise and present stakeholder perceptions on the future of CreaTech.

Interviewees were overwhelmingly positive about CreaTech as a movement to unite disciplines across the economy combining creativity and technology. Many felt, as a term, CreaTech helped give a shared voice to disparate programmes and verticals, encourage cross-fertilisation, and make the industry more digestible to outside audiences.

Education and skills

Science, Technology, Engineering, the Arts and Mathematics (STEAM)

Science, Technology, Engineering, the Arts and Mathematics (STEAM) education was highlighted by stakeholders as pivotal for the CreaTech talent pipeline.

Education Technology defines STEAM Education as “an approach to learning that uses Science, Technology, Engineering, the Arts and Mathematics as access points for guiding student inquiry, dialogue, and critical thinking.”

Whilst there are examples of existing jobs such as Architects, Graphic Designers, and Animators that show the intersection and application of STEAM skills, many argue that students will enter the labour market to work in jobs that do not exist yet. So, the type of skill students are acquiring from their early years, as well as being exposed to multiple career paths is extremely important. 

We’ve seen the growth in tech roles and it now accounts for 9% of the UK workforce. Whilst the focus on STEM education is important, in order to respond to the growing digital skills gap, creativity should not be ignored. 

Talent attraction and retention

Stakeholders mentioned the impact of the UK's exit from the EU in talent attraction and retention. It was suggested that alternative routes to recruiting CreaTech talent from Europe would need to be considered for future supply - both longer term migration of talented people to the UK, but also short term access for events, and short term projects.

Opportunities articulated by stakeholders included:

• Communicate a positive message around CreaTech roles, and make the evidence available to schools, colleges and universities to enable effective career guidance on CreaTech jobs.
• Promote the UK as a hub for ideas generation and innovation.
• Develop role models for CreaTech.
• Make use of existing local messaging e.g. Camden STEAM Council, who are working to encourage the integration of Arts with STEM for young people in the borough.

Collaboration and knowledge sharing

CreaTech sits at the interface between creativity and tech. Collaboration is therefore critical in propagating CreaTech, both as an area of economic activity in its own right, and as an enabling force across the economy.

A number of interventions have aimed to seed collaborative activity between creative and tech firms, often with a mechanism for measuring impact, as is the case with UKRI's Audience of the Future Challenge. The challenge has invested in a range of projects, from e-sports and gaming to performance, and moving image to visitor experience.

In further developing collaborative activity in CreaTech, an international focus was mentioned by some stakeholders:

'it's about practically organising ourselves, it's about linking up areas of expertise that are dotted around the country. It's about encouraging more collaboration in order to make the UK collectively more globally competitive.'

Access to finance

There is an opportunity to broaden the pool of available finance to CreaTech companies by raising awareness of firms looking to raise, and working with both scaling CreaTech businesses and investors to bridge a perceived information gap.

One interviewee suggested that bridging work could be done with both early stage investors and CreaTech companies to establish a shared sense of the economic opportunity, and boost investment into CreaTech firms:

'My perception is, the angel investor community is less aware of how to invest in creative content or creative technology companies. I think, is still a place where we've got more to do. And that's an educational process for both sides of education process for the for investors to see how to invest and what, and what, what to look for in good investments, and it's an education process needed for the companies to become more investor ready so I think that's, that's a big piece of it.'

Another interviewee supports the perception that access to finance may be an issue for CreaTech companies from a knowledge sharing standpoint, rather than limited pools of capital in the market:

'I hear often from businesses that I talked to, they feel like access to capital is, is tough. I don't know that it should be, it doesn't feel like it is when I look at the CreaTech report. Oh, that would be the last thing I would conclude I would say, hey, plenty of people are accessing huge amounts of capital and this thing's massive, but when I talk to companies and they say yeah we're finding quite difficult, aren't that many of avenues of Finance to us, you know, outside of that, you know, once you get outside of the mainstream banking system which tends to close a lot of these creative companies out for a lot of reasons.'

As well as access to venture capital, and early stage private equity finance, stakeholders mentioned the need for continuing effective government interventions, such as R&D Tax Credits, which facilitate investment into CreaTech. When asked about opportunities for CreaTech growth, one stakeholder mentioned Innovate UK backing, and Creative Tax Credits as two key mechanisms:

'...Innovate [UK] backing. Make sure the tax incentives work, so there is great work through the creative tax credit. So, video games, broadening the scope of video CTR system to allow it to encompass some of the other things that are happening... obviously the R&D system is pretty good...'

Methodology

Jobs and skills

Over 14m job advertisement data was used to analyse the number of advertised  creative/design jobs amongst all advertised roles. The number of advertised roles identified as a creative or design role (just under 125,000) was taken as a category. These types of roles were not explicitly roles with ‘design’ or ‘creative’ within the advertised title to create the category - but rather the type of role which can be defined as a creative or design role, which includes but is not limited to artists, architects, fashion stylist, designer.

The roles where employers demanded a cross section of creative and technical skills (listed in the skills sought in the advertised role) were analysed - these types of roles were identified as CreaTech roles.

In these identified CreaTech roles, ‘Designer’ roles were more prevalent. 

Forecasting

Pitchbook data was collected to forecast CreaTech Venture Capital Investment. Pitchbook is a data and financial software company. They collect data using over 650,000 web crawlers capturing relevant information from news articles, regulatory findings, press releases, websites and other sources. They use natural language processing to filter out all irrelevant data while having a Quality Assurance team manually review the data and a research team which validates the data with the source. Data was collected on a monthly basis from 2018 to 2020.