26 June 2006
Speech by Secretary of State for Culture, Media & Sport, Tessa Jowell to the Social Market Foundation Seminar – 'Rights and Rewards: Enhancing the UK's Creative Economy'
(As delivered)
Michael Birch, the British born founder of the social networking site Bebo, said last week that he believes "British people are still the most inventive in the world".
That spirit of adventure, creativity and imagination are the motor that drives our creative industries.
Today, I'd like to talk briefly about just how important the creative industries are to the UK's root and branch economy and why I'm sure they will become even more important in the future.
I'd like to touch briefly on negotiations between independent producers and broadcaster. Also, I'd like to look at how we can create an IP framework that allows for technological change and also look forward to significant changes in the UK creative economy in the future.
There's little doubt that we're at a time of challenge and change. Channel 4 have announced that from tomorrow viewers can watch programmes live online. And it's the end of the road for Top of the Pops.
Both are signposts to the revolution and evolution of the UK's creative industries.
The challenges and opportunities posed by the integration of the emerging industrial giants of China and India into the global economy and the disruptive impact of digital convergence means that now, more than ever, we need to maintain our momentum and be clear about the UK creative industries' 'USP' .
The buzz around the creative industries has been growing steadily louder. In 1997 there were less than 200 mentions of the "creative industries" in newspapers. By last year there were almost 1,500.
It's no surprise that journalists are paying so much attention. The global market value of the creative industries increased from $831 billion in 2000 to $1.3 trillion in 2005; more than 7% of global GDP.
Today the UK's creative industries make up 8% of GVA; greater than any other country.
In London alone they already generate over £21 billion each year and employ over half a million people. And if they sustain their current rate of growth they'll be bigger than the financial services industry by the time we host the Olympic and Paralympic Games in 2012.
And we're not only home to longstanding world class companies from EMI to Reed Elsevier but also innovative new firms with global reach such as A.R.M. and LastFm.
And, of course, there's that rich mix of firms in our amazing television production base that has seen UK TV exports rise by 80% in just five years to almost $1 billion.
The breakneck pace of development in Brazil, Russia, India & China is well known. On present trends they will account for 40% of world growth by 2025 compared to 20% in 2003 and within the next twenty years there could be approximately 200 million people in these economies with incomes over 15,000 dollars a year.
The Asian market for the creative industries almost doubled in size between 1995 and 2000.
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The impact of China and India on product markets is already familiar. But as George Cox found in his review of creativity in business "what is impressive – and worrying – about the emerging economies is not where they stand today but how they are positioning themselves in the future."
China is now producing four times as many graduates as a decade ago. It has surpassed the United States as the world's largest exporter of digital goods and recently overtaken Britain to become the world's fourth largest economy.
Over three million graduates leave Indian universities every year – literate, highly skilled, highly productive workers.
As you know, understanding the competitive challenge also means being aware of not only new technologies, but also emerging ones.
No amount of concentration on the sales and marketing tactics of the opposition could have prepared Encyclopaedia Britannica for Wikipedia or US newspapers for Craig's list.
As Andy [Duncan] set out so impressively in his New Statesman lecture last week people under 25 expect to find entertainment and information when and where they want it.
Convergence poses tough questions not only for established business models but also for regulatory frameworks; not least for those that govern IP.
That's why I was pleased to hear that PACT have reached agreement with ITV, Channel 4 and the BBC over new media rights and I look forward to the conclusions of Ofcom's review.
These changes are already having a major impact on our economy. As Professor Michael Porter so succinctly put it, the UK "faces a transition to a new phase of economic development".
As the Chancellor set out earlier this month, globalisation means that high-value, knowledge intensive activities are becoming more important to the economy. We must recognise that low cost, low margin goods and services can more easily be produced offshore.
For example, the current Leitch review of skills has identified the need for 5 million more highly skilled workers by 2020. A pinch Sir Martin Sorrell says he's already seeing on the near horizon in the advertising industry.
At the same time as these enormous challenges, there are incredible opportunities.
As the cost of some basic goods has fallen, spending on leisure activities has doubled in the last forty years. By 2020 household income is projected to increase by almost two-thirds in real terms.
By October last year over 50% of homes were online and of those 59% had broadband, and by 2012 every home will have digital television.
But it's not just that consumers are buying more they are also buying a wider range of products. Online retail means a greater diversity of products can reach larger potential markets. This means quality as well as quantity.
For example, consumers derive ten times more benefit from the variety provided by online bookshops than the lower prices.
We're in a position to take advantage. As Chris Lee, Director of Media Molecule argues, the UK has a unique mix of talents.
It's the exceptional mix of skills in programming, our brilliant artists, deep design base and high production values that enable the UK to punch above its weight.
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Innovation is fundamental to the process of economic growth. But it is also something the market alone struggles to provide, because ideas are expensive to produce but cheap to copy.
So Government has a clear role supporting creativity and innovation through R&D tax credits and putting creativity at the heart of both education and businesses; as both the Cox and Leitch reviews emphasise.
We know that creativity and innovation are encouraged when knowledge and the tools to create are in the hands of the many. We all see further when we "stand on the shoulders of giants".
So we invest in museums, public libraries and public service television. The People's Network has put high-speed broadband into over ninety-five per cent of public libraries.
The creative industries have to be able to bring creative ideas to the market. That means making sure valuable ideas receive adequate protection.
The challenge here is what I call "the Goldilocks problem." We need to get the length and breadth of IP protection - not too much, not too little, but just right.
I'm aware that the cost of regulation is particularly burdensome on SMEs. So we need to ask how well businesses are able to negotiate the complexity and expense of the system.
That's why we asked Andrew Gowers to lead his independent review into the UK's Intellectual Property regime. Andrew recognises that IP is at the heart of Britain's success in the knowledge economy and he is committed to ensuring that the Review is open, transparent and takes into account the views of all stakeholders.
The immense changes in the global economy and the impact of new technologies are why I wanted my Department to lead a major study into what support the UK's creative industries need to grow and thrive.
A strong entrepreneurial base is an essential driver of growth and prosperity in a modern economy. But the average life span of an entrepreneurial venture in this country is only 24 months. It's at this point that a poorly conceived business strategy begins to show the cracks.
Time and again the Creative Economy Programme has come back to theme of the need to merge creative and business brains.
Creativity and business skills don't always go hand in hand – but both are needed in heavy doses to succeed in the 21st century.
There are two schools of thought here. One that there are left sided brains and right sided brains and never the twain shall meet. Or, that those working in the creative and cultural fields just don't do business because they've never had the training and support to do so.
What the dilemma demonstrates is that there is a management skills gap and we need to address this.
A creative industry dating agency or mentoring scheme could certainly play an important role. A dating agency could bring together the brains of the creative industries with the brawn of the business world.
But we're not talking about speed dating here. We want long meaningful relationships that deliver for both partners. Creative family values. Ensuring innovation and creativity are joined to enterprise.
In a global economy the temptation is to erect barriers to competition and support national champions. That kind of short term protectionism will inevitably lead to long term decline. Competition keeps companies fit and forward looking.
We know our creative industries are among the best in the world because, just as we know the City is a global financial hub, they compete on the world stage.
As you demonstrate, in Britain we're lucky to have an incredible depth of talent and blend of skills that makes us home to some of the world's leading creative companies and individuals.
Meeting the challenge posed by globalisation, and the UK's future prosperity, means doing even more to help join creativity and innovation with entrepreneurship and business acumen.
Our aim is to put the foundations in place that enable all Britain's creative talent to achieve their undoubted potential. And this requires the light hand of government, rather than the heavy hand of regulatory bureaucracy.
Thank you.
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