The force is strong
Britain’s creative sector firms can flourish, says Star Wars visual effects guru
Phil Dobree’s visual effects studio may be Londonbased, but it spent much of the past year in a galaxy far, far away. That’s because his team was hard at work generating spaceships, alien planetscapes and a harsh galactic storm for scenes in Hollywood sci-fi flick Solo: A Star Wars Story.
“When A New Hope came out in the Seventies, no one had seen effects like that before,” says the Jellyfish Pictures co-founder. “We were so proud to be pushing the boundaries of VFX again.”
The project caps a strong year for the firm, which worked on two Netflix original films and three hit children’s animation series. To meet a healthy pipeline, it will more than double headcount to 300 over the next 12 months and move office in January.
Things are as encouraging for the rest of the creative sector’s 284,000 small and medium-sized enterprises (SMES), with eight in 10 expecting to grow over the next three years, according to a recent study by the Creative Industries Federation (CIF).
That could mean a significant boost to the economy, with these businesses employing 2m people and contributing £101.5bn of gross value added. But the sector must first overcome some key barriers to growth, argues the report, which puts access to talent and finance top of the list.
Dobree understands the former well; his company is “typical” of the industry, with 40pc of staff coming from the EU. “Our sector is severely threatened by Brexit,” he says, citing a negative atmosphere as a particular challenge. “It’s possible for people to continue to come here up to December 2020 and then remain for a £65 fee,” he explains. “There isn’t this perceived immediate threat, which is already putting off so much great talent.”
Another problem is the Government’s intention to apply a £30,000 minimum annual salary threshold to EU migrants who want to work in the UK after Brexit (this currently applies to non-eu migrants). “We hire a lot of young, up-and-coming artists, but offering an entry-level job at that wage just isn’t affordable,” says the chief executive.
The funding issue is twofold, explains Niall Santamaria of Edge Investments, which invests £1m to £5m into creative-sector SMES. First is how many of them work on a project basis – for example, a theatre producer that seeks investment for a specific show. It’s a model that’s unlikely to produce consistent or long-term revenue growth, as any return is linked to a single hit or flop. “It doesn’t give any security over revenue or assets from prior or subsequent successes, so often inhibits investment,” says the manager. “There needs to be a tangible business and it needs to generate and retain some of its own intellectual property if it’s going to build long-term value.”
But even if a company has a timeless hit show and a merchandising deal to boot, if it all rests on a founder’s creative vision, that’s also a problem. “If the value of the enterprise is the individual, there’s limited opportunity for a buyer to take over and run it successfully,” says Santamaria. “We look for exceptional management teams, but the business can’t be completely reliant on their ability.”
This tension between creative output and commerciality is something that affects younger firms in particular, says John Sinclair of digital studio and games developer ustwo.
“Our challenge was business naivety, as we always thought creativefirst,” recalls the co-owner, whose company has 250 employees and an annual turnover of £30m.
Ustwo’s other founder Matt Miller thinks that they should have hired HR and IT staff sooner, as it freed them up to focus on the creative. “Our work definitely got better,” he says, adding that SME owners in this sector can be averse to seeking external input. The risk is that their vision might be compromised or diluted. “We were very against it at first, but we’ve since had advisers and now have an amazing board who push and question us,” he says. “Had we got that earlier, we would have made fewer mistakes.”
Workarounds to these issues are very much in the hands of entrepreneurs (hire business support staff and get a mentor, advise Sinclair and Miller), but solutions to the talent and finance quandaries require input from elsewhere. “The argument is that we should just hire more home-grown talent,” says Dobree. “At the moment, the quality isn’t there.”
The CIF report recommends that the Government “restores creativity back into the heart of the curriculum” (the set of compulsory subjects for the English Baccalaureate excludes arts and creative disciplines, for example). Higher-education institutions should also be “properly resourced” to deliver relevant courses.
Sinclair wants a bigger and better national PR drive to show parents and students that the industry is a legitimate career choice. “People don’t understand how powerful and commercially successful it is,” he explains. “We need to raise the profile of creative entrepreneurship and get data out there that shows how it’s a viable business route – that you don’t have to be a lawyer or doctor.”
This year’s £150m Government and industry-backed creative-sector funding deal is a great start, but it must be built upon, says Caroline Julian, CIF’S director of policy. “It would be impactful to establish an equivalent to [entrepreneur network] Tech Nation for the creative sector that supports people through workshops, tailored guidance and business-to-business coaching.”
CIF already offers guidance around IP, marketing and finance, but Julian wants to see local authorities and other organisations empowered to tailor and deliver support specifically to their area. “A Uk-wide network of ambassadors would also help to unlock growth by identifying creative industries opportunities in the regions, and bringing enterprises and entrepreneurs together to resolve any challenges in the way.”
Increased and more accessible grant funding could also play a positive role in making firms more investable. “It enables creatives to experiment with concepts that private investors can then support at a more developed stage,” says Santamaria.
“Grant funding not only provides room for creative risk, but also enables a degree of clarity on the likelihood of future success, which is good for later-stage funders such as ourselves.
“It’s a crucial part of the funding environment for the sector.”