Close-Up: Live issue - How creative industries boost the bottom line

A report recognising the economic benefits of advertising may help forge closer ties with government, Lucy Aitken says.

For anyone who insists that creativity and business are awkward bedfellows, The Work Foundation's latest report, Staying Ahead: The Economic Performance of the UK's Creative Industries, should be required reading. This 266-page tome, commissioned by the Department for Culture, Media and Sport (DCMS), positions the creative industries at the forefront of UK plc.

Staying Ahead describes 13 creative sectors - including advertising, television and publishing - as Britain's "great unsung success story", employing 1.8 million people. The report estimates that, between them, these sectors represent a whopping 7.3 per cent of the UK's entire economic revenue, and £4 billion in exports. Astonishingly, the UK's creative exports trounce those of the US, according to Unesco figures quoted in the report. In 2002, UK cultural exports were worth $8.5 billion, compared with $7.6 billion from the US.

The report positions the UK's advertising industry as second only to the US and superior to its European counterparts. But there are caveats to the flag-waving. First, there is advertising's tendency to fall victim to the boom-and-bust economic cycle. Second, there are rumblings about a skills shortage, particularly tech-savvy talent.

Staying Ahead attributes the success of the creative sectors to, among other factors, diversity in the UK and the rise of cities and regions such as Gateshead, Cornwall and Glasgow as cultural hubs. But, it warns, the cultural hegemony of the UK and the US may begin to wane as emergent superpowers such as China and India become more influential.

HOLISTIC STRATEGY

Six months of research - including lengthy summits with all 13 sectors - went into Staying Ahead. So how will the new-look DCMS, under the newly appointed culture secretary, James Purnell, use the report? A spokesperson says: "It will form the basis of a Green Paper pencilled in for the autumn on the creative industries. It's too early to say how we're going to help the advertising industry specifically, but that will be in the paper."

Hamish Pringle, the director- general of the IPA, welcomes Staying Ahead. "It's the first time that the ad sector has been incorporated into an impressive, insightful and seminal piece of work," he says.

But he argues that more joined-up thinking is required in the government's relationship with the ad industry. He points to the split in responsibilities between the Department of Business, Enterprise and Regulatory Reform (formerly the Department of Trade and Industry) and the DCMS. "We need a holistic strategy," he urges. A mixture of creativity and business acumen, advertising straddles these two departments awkwardly. Jed Glanvill, the chief executive at MindShare, says: "Advertising wants recognition for the business value it creates. But, we're also closely aligned with the creative sectors as part of the media industry. The latter is how we're defined by the City, because advertising allows big media companies to exist."

SCAPEGOAT MENTALITY

Glanvill adds that he'd like to see the government adopt a more open approach to issues such as public health, without the ad industry being singled out as the villain. "There's been a huge debate this year about advertising to kids, based on pressure from NGOs and the Daily Mail, and politicians seem to be listening to that. I think it's a simplistic debate and advertising needs to have a high-level, broader-based discussion, where the industry accepts some governmental concerns but also highlights the contributions that these organisations make in terms of the wealth of the economy, employment and community initiatives."

Now is the time for the industry to be vocal about these and other concerns, according to Will Hutton, the chief executive of The Work Foundation. Reflecting on advertising's occasionally strained relationship with Westminster, he adds: "I know that advertisers complain that they are blamed for child obesity, or whatever, but the way we position advertising in this report is pretty bloody positive. We've tried to locate advertising very firmly within an economic model, as well as in a sector of creative industries that are growing faster than GDP."

The figures in the report make for very positive reading: advertising accounted for £1.1 billion of exports in 2004, up £450 million from 1997. However, not everyone in the industry agrees that the research will offer any benefits to a much-maligned sector. Bruce Haines, the group chairman and chief executive of Leo Burnett, says: "I've long held that aligning ourselves too closely with the creative industries does us a disservice."

Rather than rubbing shoulders with architects, musicians, performing artists and designers under the aegis of the DCMS, Haines believes agencies should be aligned with the Department for Business, Enterprise and Regulatory Reform. Such an association would respect the business contribution that advertising makes to the bottom line, he argues. "New reporting requirements have come into force, whereby companies must declare their intangible assets on balance sheets. That makes me think that we might be getting better recognition for what we do in terms of our end contribution, rather than for making great ads."

Haines says that Leo Burnett's major clients such as McDonald's, Procter & Gamble and Kellogg expect a clearly defined return on investment, and that if the business benefit that advertising delivers was more transparent, the government would be less inclined to use advertising as "an easy whipping boy". He says: "The value of the food industry to this country is immense, and advertising plays a major role in building, growing and protecting that wealth. If advertising is not treated as part of that wealth-creation, it's easy for government to ban food advertising without considering the effects."

Government should also focus on management skills, says Greg Orme, the chief executive of the Centre for Creative Business, a non-profit joint venture between London Business School and The University of the Arts London. Orme argues that the government should commit investment to closing the skills gap which, in turn, would improve the business performance of agencies. He believes that, whereas the report cites diversity as one of the key reasons for UK's flourishing creativity, this is not true of the ad industry, where more than 95 per cent of the workforce is white.

Pringle adds that a positive image of advertising is needed if the right talent is to be attracted, and here the government has an important role to play. He says: "Why would any sensitive, creative and clever individual want to join an industry that is full of bad guys making the country too fat or too thin, or whatever the particular fashion is?"

Despite its shortcomings, Staying Ahead is an important first step that acknowledges the contribution made by advertising to the UK's economy. Hutton says: "The notion that everything in advertising is going to be perfect from now on is improbable. But advertising has been recognised in terms of its importance to the knowledge economy and value-generation, and I hope that makes people working in the industry prouder."

THE INDUSTRY VIEW

- "It's the first time that the ad sector has been incorporated into an impressive, insightful and seminal piece of work" - Hamish Pringle director-general, IPA

- "The industry should accept some governmental concerns, but also highlight some of the contributions it makes to the economy" - Jed Glanvill chief executive, MindShare

- "We've tried to locate advertising very firmly in a sector of creative industries that are growing faster than GDP" - Will Hutton chief executive, The Work Foundation

- "We might get better recognition for what we do in terms of our end contribution, rather than for making great ads" - Bruce Haines chief executive and group chairman, Leo Burnett.

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