New research published by the Creative Industries Policy and Evidence Centre (Creative PEC) highlights the huge untapped investment potential of the UK’s creative industries. It shows that the Creative Industries account for almost 10% of UK firms classified as having ‘high-growth potential’. This is higher than both Life Sciences and Advanced Manufacturing.

Key findings

Scale

There are almost 6,000 High-Growth Potential Firms (HGPFs) operating across the Creative Industries. They account for 9.7% of the UK’s total HGPF. This compares with 5.1% from Life Sciences and 2.4% from Advanced Manufacturing.

Sub Sectors

Over two-thirds (3,981) of Creative Industries HGPFs operate in Application Software. Significant numbers work in Marketing, Branding and Advertising, Films and TV, and Video games. These correspond to three of the four “frontier" creative industries identified in the Industrial Strategy.

Regional Variations

Creative Industries HGPFs are disproportionately concentrated in London and England’s major cities compared with Life Sciences and Advanced Manufacturing. As such, they dominate the creative high-growth potential landscape. This is largely due to their world-leading universities, infrastructure, and proximity to clients and investors.

London accounts for half of Creative Industries HGPFs (2,942). Other regions that host significant numbers are the North West (378), South West (362) and East (354).

However, some parts of the UK currently host few very Creative Industries HGPFs. Examples include the North East, East and West Midlands in England, along with Wales and Northern Ireland. This suggests that policymakers in these regions have more work to do if they are to realise their Creative Industries growth ambitions.

Equity Gap

The number of equity deals for Creative Industries HGPFs fell by 16.5% between 2021 and 2024. This compares to drops of 6.0% for Life Sciences, 14.0% for Advanced Manufacturing HGPFs and 30.6% for the economy as a whole.

This helps explain why previous estimates published by the Creative PEC suggest an equity gap. This is a significant shortfall in funding in the Creative Industries. There may be as much as £3.1bn in potentially unmet demand.

Debt Finance

Creative Industries HGPFs face structural challenges in relation to debt finance. Creative Industries firms in general are more likely to have asset bases composed of intellectual property, brands and other forms of intangible capital. Banks and lenders are less likely to accept these as collateral. Consistent with this, only 4% of Creative Industries HGPFs have secured debt finance. In comparison, 6.1% of Life Sciences and and 6.2% of Advanced Manufacturing HGPFs have succeeded in doing so.

Breaking New Ground

The new report is the first of its kind to map the UK’s Creative Industries high-growth potential firms and compare them with other priority sectors in the Government’s Industrial Strategy.

It was welcomed by Ian Murray, Minister of State for Media, Tourism and Creative Industries, at the Big Creative UK Investment Summit. Co-chair of the Creative Industries Council Baroness Shriti Vadera and Executive Chair of Innovate UK Tom Adeyoola also welcomed the report.

Baroness Vadera said: "This research fills a critical gap in the evidence base. It makes clear that there are substantial untapped investment opportunities in the UK’s high-growth Creative Industries... across a wide range, from Advertising, Films & TV to Video Games and Software."

Tom Adeyoola said: "This is an important report as we aim to drive economic growth and ensure a thriving Creative Industries sector. It helps us understand who and where the high potential businesses are, the conditions for success and how to target the interventions needed to drive our breakthrough ideas to global greatness."

The report's co-author Hasan Bakhshi is Director Creative PEC and Professor of Economics of the Creative Industries at Newcastle University. He said: "There are somewhere between 260,000 and 270,000 firms in the UK’s Creative Industries, but not all of them have the same growth potential. Our research estimates that there is a vital group of almost 6,000 businesses that have especially high-growth potential.

"Given the UK’s well-known strengths in IT, it won’t be surprising to investors that the majority of these firms operate in Software. But less well known will be that as many as 30% of Creative Industries High-Growth Potential Firms working in Software work in sub-sectors like Advertising, Films & TV, Video content and Video games too.

"This suggests that investors may identify significant new investment opportunities if they include the Creative Industries within the scope of their prospecting activities. Growth-focused policymakers for their part should consider the needs of High-Growth Potential Creative Industries firms in their regions."

Collaboration

The report is the first output from the Creative PEC’s collaboration with Beauhurst, who are a  leading source of data on businesses. Its findings will be discussed at a high-level policy roundtable at the Creative UK Big Investment Summit on 17 February.

A second report will look at the characteristics of Venture Capital funds that invest in the Creative Industries.