One reason why AHSS R&D has not been as widely recognised is because it is seen as ‘less tangible’ than other forms of R&D. Indeed, it can be difficult to measure. We have previously called for the UK government to improve its data collection for AHSS R&D. But in this blogpost we present an initial attempt to estimate the contribution of AHSS to creative industries R&D.
Our 2022 Creative PEC report Understanding Createch R&D was based on a survey of 361 R&D active businesses in the creative and high-tech sectors who had received funding from UK Research and Innovation research councils, or from Innovate UK funding.
In the survey questionnaire we asked a number of novel questions, adapting the OECD Fields of R&D (FoRD) classification to ask companies whether their R&D activities drew upon a number of different academic disciplines: science and technology; social sciences; creative arts; humanities; design; or other fields. Respondents were then asked to assign a percentage to each of the fields they had indicated they drew upon in their R&D activity. (For instance a respondent could hypothetically reply that their R&D activities drew 60% from science and technology; 20% from design; 10% from social sciences; and 10% from the creative arts).
Of our sample, 175 (48.4%) of respondents were in the creative industries, 175 (48.4%) were in (non-creative) high-tech sectors and 11 (3%) were in other sectors but were related to creative areas (for instance textile mills, which collaborate with fashion designers). Of the 175 creative industries respondents, 44% said their R&D drew upon at least one of creative arts, humanities or social sciences, whereas only 17% of high-tech respondents said their R&D drew upon at least one of these.
To determine the spend on AHSS R&D of companies in the sample, we took the sum of the percentage of AHSS R&D activities respondents had indicated (so for the example above the value would be 10% social science + 10% creative arts = 20% AHSS). We then multiplied this by the company’s overall reported R&D expenditure as reported elsewhere in the survey to give a value of AHSS R&D spending (for the hypothetical example above, assuming the total R&D expenditure was £100,000 – the median value for R&D spend for creative industries businesses in our sample – 20% of £100,000 is £20,000. We would assume this to be the value of AHSS R&D for this business.)
We then took the sum of all estimates of AHSS R&D spend calculated in this way (for a total of £2.54m) and then took the sum of all R&D spending for creative industries respondents, which gave a total value of £26.2m. Dividing these two figures gives us the estimate that 9.7% of R&D spending in the creative industries firms in our sample is on AHSS R&D.
To generate an estimate for the entire population, we make the assumption that our sample of creative industries firms is approximately representative of the population of R&D active, CI firms. This is a simplifying assumption given that we do not have access to BERD micro data which could be used as a proxy for the population of R&D active creative industries firms. The 2020 BERD data for creative industries, when summed across the nine DCMS sub-sectors, gives a total value for creative industries R&D in 2020 of £3.314 billion. Taking our 9.7% figure and multiplying it by the £3.314 billion figure gives us the estimated value of AHSS R&D of £321 million.
We must reiterate that this is an illustrative calculation. We make a number of assumptions to derive an estimate of spending by creative industries firms on AHSS R&D. Nonetheless we believe it indicates the order of magnitude of a key dimension of R&D investment by one of the UK’s fastest growing sectors which is currently being ignored by R&D tax policy. (We do not here attempt to estimate the amount of AHSS by non-creative industries tech businesses, though the survey finding that 17% of non-creative high-tech firms also draw upon AHSS in their R&D suggests the number could be significant)
Producing accurate estimates of investment by the UK’s creative industries in R&D is challenging, because of distinctive features of R&D in these sectors. R&D policies, including R&D tax incentives, have been designed with the needs of businesses undertaking STEM R&D in mind. Our estimate of £321m investment by creative industries on AHSS R&D indicates the scale of current investment which is not within the scope of UK tax reliefs, and therefore the unrealised potential for unlocking further success in the UK’s creative industries.