A read out from Creative PEC
Bernard Hay and Emily Hopkins
On Wednesday 11th June the UK Government published its Spending Review, which outlines UK Government departmental budgets for day-to-day spending until the 2028/2029 financial year, and capital investment until 2029/2030, as well as top-level settlements for devolved administrations. Below, we set out key announcements relevant to the creative industries.
Positive signals of support for the creative industries against a backdrop of a reduced overall budget for the Department for Culture, Media and Sport (DCMS)
This Spending Review states that it ‘provides a significant increase in funding for the creative industries, as one of the government’s eight growth driving sectors’. We anticipate further detail on this in the forthcoming Creative Industries Sector Plan and Industrial Strategy.
DCMS also announced:
- £2.9bn additional capital investment in culture, heritage, youth and sports infrastructure over the Spending Review period.
- Additional support for young people and youth centres ahead of the DCMS National Youth Strategy to be published this summer.
- A statement of continued support for National Museums, Arts Council England and ‘local projects’ alongside ongoing reviews of Arms-Length Bodies (including ACE).
- £132.5m to support disadvantaged young people to access cultural and sports opportunities, funded from dormant assets.
Nonetheless, DCMS faces real-term cuts to its budgets, with its Departmental Expenditure Limits shrinking by 1.4% for this Spending Review period. DCMS’s Capital Expenditure Limits will also be cut by 2.8%. These cuts are occurring alongside other department cuts at a similar rate including HMT, DEFRA, Cabinet Office, though not to the same extent as those faced by FCDO.
An increase in the UK Government’s R&D Budget
The UK Government has committed to increase its annual R&D budget from £20.4bn in the 25/26 financial year to £22.6bn in the 28/29 financial year. Within this, DSIT’s R&D budget will increase to £15.2bn by 2029/30, including:
- £500m for an R&D Missions Accelerator Programme
- £410m for a Local Innovation Partnership Fund
- New sectoral and technology programmes focused on the Industrial Strategy
- Funding for UKRI and potential association with Horizon Europe
- £1bn to scale up ARIA
- £750m for a new supercomputer in Edinburgh
Creative PEC has argued for increased recognition and support for the use of arts, humanities and social sciences disciplines in R&D across the economy alongside an increase in UKRI’s R&D budget allocation for the creative industries. This would build on strategic investments including the Arts and Humanities Research Council’s Creative Industries Clusters Programme and CoSTAR initiative. In January 2025, the Secretary of State for DCMS announced a commitment by UKRI to develop a new cross-council strategy to supporting the creative industries.
Public R&D investment is a vital for productivity, innovation and growth across the creative industries. We look forward to detail on how this settlement will support R&D across the creative industries and arts, humanities and social sciences. The new R&D Missions Accelerator Fund and Local Innovation Partnership Funds also provide opportunities to stimulate cross-sectoral innovation activities supporting the creative industries as a priority sector for Combined Authorities across England.
An increase in UK Government Finance for creative industries infrastructure and scale-ups
The UK Government has announced a substantive increased settlement for the British Business Bank (BBB), which will support SME’s to scale-up, and re-confirmed its National Wealth Fund commitment. The Spending Review includes:
- A two thirds increase in BBB’s financial capacity to £25.6bn over the SR, enabling investment of around £2.5bn per year.
- Up to £27.8bn via the National Wealth Fund over the SR period to support priority growth sectors, including the creative industries.
- Confirmation of a new social impact investment vehicle to be launched in the summer, led by DCMS, HMT and the Office for Investment.
Creative PEC has previously argued for increased financial offers and better coordination around creative industries investment to address market failures holding back creative growth. Our recent blog also highlighted the equity gap for the UK’s creative industries, with estimated investment shortfalls of around £1.4bn in 2023. The increase in funds is welcomed after a commitment in January to review BBB’s role in supporting creative industries. We look forward to further detail on the settlement’s distribution across priority growth sectors.
Creative PEC has also previously recommended further development and consideration of social impact investment vehicles for the sector. The forthcoming investment vehicle should be co-developed with existing investors working in the creative industries, and in coordination with arts funders like ACE to ensure further stimulation of the social impact investment market and to not duplicate or compete with other public investments for the sector. New investment vehicles also mean opportunities to collect much-needed financial data on investment into creative firms.
Modest commitments around skills and increased levys for HEIs
The Spending Review made modest commitments on additional skills funding for the SR ahead of it’s forthcoming Post-16 skills strategy, particularly around tackling shortages in high-skilled, digital and technical areas. Announcements include:
- £3.5bn per year of employment support.
- £1.2bn additional investment in skills system (largely construction focused).
- Doubling eligible institutions in Individual High Potential Visa and further reviews of Global Talent Visa and Innovation Founder Visa as previously announced in the Immigration White Paper.
The Spending Review also announces that further budget (and allocations) will be found via the proposed Immigration Skills Charge on UK firms hiring non-UK workers, and from the proposed international student levy proposed on universities, both of which were announced in the recent Immigration White Paper.
Creative PEC recently argued for reform to the High Potential Individual Visa to better recognise applicants from world-leading creative HEIs, which should be considered in developing new eligibility standards.
The proposed increased levy on HEIs for international students risks further damaging the financial viability of the HEI sector, and of Creative HE – the dominant route for entering the creative workforce. Creative HE courses attract international students, which increases opportunities for domestic students to study HE courses. This announcement of further costs comes after the SoS for Education’s recent guidance to the Office for Students to reduce undergraduate teaching-grants for subjects relevant to the creative industries such as media studies, journalism and publishing. Without support, our world-leading Creative HE provisions remain at risk.
Uncertainty remains about future funding for the British Council and BBC World Service
The British Council and BBC World Service are funded by the Foreign, Commonwealth and Development Office, which see the sharpest reduction in departmental budgets following the Government’s commitment to reduce overseas development funding to 0.3% of GDP. The Spending Review re-confirms this funding reduction and states that Official Development Assistance (ODA) spend will be re-increased to 0.7% GDP when ‘fiscal circumstances allow’. The majority of British Council funds come from the ODA budget (£163m in 2024-25). Whilst the BBC World Service is not directly funded through that budget, it receives funds from the FCDO.
The Spending Review focuses on boosting defence spending. The role the BBC plays in the UK’s soft power (and by extension defence and security agenda) should be focused on in the Government’s forthcoming BBC Charter Review. Soft power plays an important role in the UK’s diplomatic and international relations efforts, with the UK Soft Power Council launched in January 2025. The World Service and British Council are central vehicles for the UK’s soft power agenda globally.
Opportunities for devolved and regional policymakers
The Spending Review signalled a deepening of the Government’s commitment to place-based investment and devolution, which will have implications for the creative industries:
- More mayoral authorities being granted integrated funding settlements to expand the scope of their powers, where self-defined priorities may include creative industries.
- Regional and devolved budgets being continued or increased, including 10-year capital settlements for mayoral city regions in the North and Midlands based on productivity and agglomeration potential (Creative PEC also recognised the agglomeration potential of the Northern creative economy).
- Targeted investment in up to 350 deprived communities focused on ‘community cohesion’, which could address cultural engagement inequalities.
Transport investment is a central focus of this SR, with a total of £15.6 billion allocated for city region transport settlements and an additional £2.3 billion for areas outside those regions. Major infrastructure improvements will be made to the Transpennine Route (Manchester to Leeds) and East West Rail (Oxford to Cambridge), as well as across Wales’ Core Valley line and connections between Cardiff and Bristol. Transport was noted as a key enabler in our RSA-PEC-ACE Creative Corridor policy framework. The potential to increase connectivity across the North of England could support One Creative North, whilst cross-nation opportunities may strengthen Bristol and Cardiff collaborations.
Devolved governments saw the largest funding increase in real terms since 1998 through the Barnett formula, raising questions around how national Arts Councils and cultural departments in Scotland, Wales and Northern Ireland may benefit.
Changes to the HM Treasury’s Green Book may be positive for the appraisal of place-based creative industries investments
Changes to the HM Treasury’s Green Book may be positive for the appraisal of place-based creative industries investments
Finally, the Green Book has been revised to focus on shorter and simplified appraisal processes. This also includes the introduction of place-based business cases, which could be positive for creative and cultural investments as it will allow their value to be considered alongside other local priorities (e.g. transport, housing). Further questions arise around how the Culture and Heritage Capital valuation methodology may also be reflected in future appraisals.
Photo by Mark Stuckey on Unsplash
