Economic Impact

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  • Or as I have become to know it – Pandora’s Box! Which I’m sure will make sense to you as we go along

    Unfortunately this session isn’t about giving you a wonderful magic formula for you to take away and calculate your own organisation’s economic impact – it’s not that simple. What I hope you will get out of it is more of an understanding of economic impact in the arts and culture sector including the various methodologies that have been used and the considerations that go with them.

    So first, just a bit of background information on economic impact and the arts.
  • First appeared in 60/70s with the Community Arts Movement arguing the social benefits of the arts on individuals and communities – unfortunately the evidence was anecdotal and significant gaps

    In the 80s with the decline of lots of the manufacturing industries, arts and cultural activity became an increasing feature of urban regeneration in the cities. As a result the sector started to gather and providing systematic evidence of it’s economic impact.

    Importantly was the publication in 1988 of Myerscough’sThe Economic Importance of the Arts in Britain which established the arts sector as a significant, growing and value-added sector in
    its own right, with a turnover of £10 billion enhanced wealth and job creation, and made cities appear more attractive to citizens and companies.

    Late 90s we had the new labour Government come to power which saw the creative industries in the spotlight and the government pushing the notion of this new cultural economy with ‘Cool Britaina’.

    No doubt we’ve seen our creative industries flourish at home and abroad in the last 10 years however it’s allowed us to take our focus away from the need of continually evaluating ourselves.

    Which has lead to where we are now where after the recession, new government and the recent spending review, we are all fighting to show our value and impact on the economy.

  • So, what do we mean by economic impact and how do we measure it? Well that has been debated for some time – how the economic contribution made by creative industries can be effectively defined and measured. Here are some quotes I’ve found…
  • As you can see, we’ve hit the first issue of economic impact – what is it and how is it measured?

    Some facilities are able to strongly present their case by calculating their gross value added to the economy through income, expenditure and employment. While others might only have intangible impacts which are of social, cultural, educational and health benefits.


    Because we are unable to really get over this first hurdle, it’s lead to lots of debates and concerns with economic impact studies in the arts and culture sector
  • Evaluation is generally regarded as additional, rather than integral to arts activity, which mean’s it is often thought about last and is given disproportionate resources
  • People have different definitions therefore want different indicators measured – trouble is coming up with a solution that meets all your stakeholders wishes
  • Although the idea of economic impact in the sector has been around since the 60s there is still no consistent processes or methodologies which we can all follow – as we go through you’ll become aware of all the reasons why this is although that’s not saying that there shouldn’t be.

    Also means there are no set benchmarks to work against and compare
  • We’ll talk about the various indicators that can be involved in measuring economic impact. But for our sector in particular, the work we do can be said to have outcomes that are difficult to quantify therefore making it hard to measure them.
  • Again, when we go through some of the techniques and methodologies we’ll look at specific concerns and why it can be argued that the evidence isn’t robust
  • All techniques/methodologies are concerned with measuring the positive impacts but very few recognise if there are any negative impacts
  • Some argue that we can’t measure our impact on individuals and communities without knowing if that want to be impacted on and what they feel the impact is rather than us selecting the indicators to measure against.

    Now, putting the overall concerns aside (although not forgetting them!), we’ll look at some of the techniques that have been used in the sector.
  • The most common economic impact techniques are those that illustrate the facility’s trickledown effect of spending in an economy by calculating the facility’s gross value added (GVA).
  • The most common method of this technique is Multiplier Analysis - it shows how the initial direct impact is multiplied through the economy by the further transactions it generates. Basically the knock-on effect of spending.

    It takes into account indicators such as income, expenditure and employment

    It measures impacts that are direct – so for instance the employment of staff of that facility,
    It measures impacts that are indirect – so the employment of staff of a supplier of that facility (catering/cleaning company)
    and induced impacts – which could be the sandwich shop around the corner which feeds the staff of both the facility and it’s suppliers

    Does this through quantitative analysis of financial accounts, box office data, and surveys

    The 1988 Myerscough publication The Economic Importance of the Arts in Britain used this methodology but to show a recent a example I’ve got a case study
  • Commissioned by ACE to carry out a comprehensive economic impact study of theatre in the country

    Previous study was the Wyndham Report (Travers, 1998) which focused exclusively on West End theatre in London

    Shellard had 2 formula to calculate the economic impact
  • Formula 1 - What a theatre contributes to the local and national economy and ignores turnover and overseas earnings

    AVS (an estimate of what an audience member spends on food, transport and childcare)

    Formula 2 - - the total economic activity generated by a theatre – what economic activity an area would lose in total if the theatre was not there

    (Turnover + overseas earnings + additional visitor spend + salaries + subsistence allowances + goods and services expenditure) x a multiplier of 1.5


    Due to lack of data only formula 1 was calculated
  • Formula 1 - What a theatre contributes to the local and national economy and ignores turnover and overseas earnings

    AVS (an estimate of what an audience member spends on food, transport and childcare)

    Formula 2 - - the total economic activity generated by a theatre – what economic activity an area would lose in total if the theatre was not there

    (Turnover + overseas earnings + additional visitor spend + salaries + subsistence allowances + goods and services expenditure) x a multiplier of 1.5

    Due to lack of data only formula 1 was calculated
  • Economic impact of UK theatres is £2.6bn annually

    In terms of economic impact, there are some key differences between theatres in the West End and outside it

    The average AVS per audience member outside West End is £7.77 inside is £53.77 - (spending patterns suggest the West End theatres are considered as major outings and events and London audiences are also prepared to pay a wider range of ticket prices)
  • Not this particular study but with this technique

    As with all survey based evaluations does the sample correctly represent the wider population
  • Not this particular study but with this technique

    As with all survey based evaluations does the sample correctly represent the wider population
  • As mentioned before no consistent processes so organisations define their own measurements
  • Again, various procedures for selecting and applying multipliers

    they can easily amplify inaccuracies and assumptions
  • Using employment figures as some will be short-term/freelance/part-time contracts
  • An estimate of those impacts that may reasonably have been achieved by other facilities
  • The proportion of the jobs that will be taken by residents outside the area – their money is going else where
  • Doesn’t take into account other impacts which could be social, cultural, education and health

    As Al mentioned there is a need to measure that intrinsic value of arts and culture as it is part of the economic impact and although they can be difficult to quantify there are techniques and methods that measure these intangible indicators
  • There are techniques that consider the wider value of facilities in that they can offer increased self-esteem, a sense of local identity and sustainable development all of which can make an impact on the economy. The trouble however is how to measure these difficult-to-quantify’ indicators as they are often intangible and not monetary.

    Ros wood photo
  • There are techniques that consider the wider value of facilities in that they can offer increased self-esteem, a sense of local identity and sustainable development all of which can make an impact on the economy. The trouble however is how to measure these difficult-to-quantify’ indicators as they are often intangible and not monetary.
  • A common technique used is Stated Preference

    Assesses the public’s willingness to pay (WTP) for continued access of a facility or willingness to accept (WTA) compensation for its loss.

    It is often used for the valuation of non-monetary costs and benefits such as libraries and museums. Again to show a recent a example of this technique I’ve got a case study
  • The British Library set out to discover both the value enjoyed directly by users of the Library, and the value enjoyed indirectly by UK citizens

    Uses Contingent Valuation which draws, in quantitative terms, how much people value a particular organisation/service/facility

    Consumer surplus i.e. the value consumers have gained over and above any cost to them of using the Library’s services
  • Through these questions they could measure the value in monetary terms by the size of the consumer surplus
  • Each year the British Library generates value around 4.4 times the level of its public funding

    For every £1 of public funding the British Library receives annually, £4.40 is generated for the UK economy

    Lowest figure as:
    did not capture the complete range of products and services which the Library offers
    exclude any value generated for non-UK British Library users;
    only provides a snapshot of the British Library based on today’s picture.
  • Is it a good enough size to represent the target population
  • One of the biggest debates with this technique is that it includes non-users – can they put a value on something they don’t use if so should that value actually be included – can’t be of value if they don’t use it. Some argue yes – they have the option to use it or might just value it’s existence
  • People tend to put more value on losing rather than gaining
  • Consumer wants the lowest price/best product, citizen holds intangible values above a market value
  • Is the target population everyone in the UK or those from a 2-hr drive time
  • demonstrates our economic impact to the diverse stakeholders who have invested and have aspirations of our organisations,
    a powerful justification to funders for continued investment
    Public – big society, they know what money they are putting in and what the return on it will be

    When justifying our impact and value is at its strongest, and there is increased competition for scarce funds, methodologically sound and accurate measurement of our impact provides one source of competitive advantage

    Arts and culture are important agents for economic development and urban renewal, strengthen our agreement to be part of that development and future

    Not only, of ensuring accountability but to reflect on, and improve our own planning, management, and allocation of resources to achieve desired outcomes


  • CASE Engagement Review – economic impact studies and arts
  • As mentioned at the beginning, I haven’t been able give you a formula to take away and calculate your economic impact.

    There are many concerns and considerations with applying economic impact and all the techniques. Due to inconsistency of terminology, conceptual clarity and methodological transparency, no one methodology has currently been established to be robust enough to be accepted and consistently applied across the arts and cultural sector.
     
    There is a large amount of information needed for a full economic impact assessment and the analysis of the data is a complex task

    UK Sport methodology which is one of the more commonly used, and proven, methodologies

    Understand that it will only ever give estimations of the economic impact, rather than a definite figure
  • Economic Impact

    1. 1. Evaluating Economic Impact in the Arts & Cultural Sector Kerry Ellis Byrne Research and Audience Development Manager
    2. 2. Economic Impact in Arts & Culture 1960/70s Community Arts Movement 1980s Urban Regeneration 1988 The Economic Importance of the Arts in Britain by Myerscough 1990/2000s New Labour’s ‘Cool Britannia’ 2009/10 Recession, new government, Spending Review
    3. 3. What is Economic Impact?
    4. 4. What is Economic Impact?
    5. 5. What is Economic Impact?
    6. 6. What is Economic Impact? ‘A relationship of cause and effect. It can be measured through the evaluation of the outcomes of particular actions’
    7. 7. What is Economic Impact? ‘A relationship of cause and effect. It can be measured through the evaluation of the outcomes of particular actions’ 'The effect of that phenomenon on such economic factors' as the economic behaviour of consumers, businesses, the market, industry; the economy as a whole, national wealth or income, employment, and capital'.
    8. 8. The Sector’s Concerns with Economic Impact • Lack of standard definitions and clarity of terminology • Limited resources for evaluation • Meet the needs of all stakeholders • No consistent assessment processes / methodologies • Inadequate measuring of 'difficult-to-quantify' outcomes • Lack of robust data and evidence • Calculating negative impacts • Ethics of seeking improvement without informed consent
    9. 9. The Sector’s Concerns with Economic Impact • Lack of standard definitions and clarity of terminology • Limited resources for evaluation • Meet the needs of all stakeholders • No consistent assessment processes / methodologies • Inadequate measuring of 'difficult-to-quantify' outcomes • Lack of robust data and evidence • Calculating negative impacts • Ethics of seeking improvement without informed consent
    10. 10. The Sector’s Concerns with Economic Impact • Lack of standard definitions and clarity of terminology • Limited resources for evaluation • Meet the needs of all stakeholders • No consistent assessment processes / methodologies • Inadequate measuring of 'difficult-to-quantify' outcomes • Lack of robust data and evidence • Calculating negative impacts • Ethics of seeking improvement without informed consent
    11. 11. The Sector’s Concerns with Economic Impact • Lack of standard definitions and clarity of terminology • Limited resources for evaluation • Meeting the needs of all stakeholders • No consistent assessment processes / methodologies • Inadequate measuring of 'difficult-to-quantify' outcomes • Lack of robust data and evidence • Calculating negative impacts • Ethics of seeking improvement without informed consent
    12. 12. The Sector’s Concerns with Economic Impact • Lack of standard definitions and clarity of terminology • Limited resources for evaluation • Meeting the needs of all stakeholders • No consistent assessment processes / methodologies • Inadequate measuring of 'difficult-to-quantify' outcomes • Lack of robust data and evidence • Calculating negative impacts • Ethics of seeking improvement without informed consent
    13. 13. The Sector’s Concerns with Economic Impact • Lack of standard definitions and clarity of terminology • Limited resources for evaluation • Meeting the needs of all stakeholders • No consistent assessment processes / methodologies • Inadequate measuring of 'difficult-to-quantify' outcomes • Lack of robust data and evidence • Calculating negative impacts • Ethics of seeking improvement without informed consent
    14. 14. The Sector’s Concerns with Economic Impact • Lack of standard definitions and clarity of terminology • Limited resources for evaluation • Meeting the needs of all stakeholders • No consistent assessment processes / methodologies • Inadequate measuring of 'difficult-to-quantify' outcomes • Lack of robust data and evidence • Calculating negative impacts • Ethics of seeking improvement without informed consent
    15. 15. The Sector’s Concerns with Economic Impact • Lack of standard definitions and clarity of terminology • Limited resources for evaluation • Meeting the needs of all stakeholders • No consistent assessment processes / methodologies • Inadequate measuring of 'difficult-to-quantify' outcomes • Lack of robust data and evidence • Calculating negative impacts • Ethics of seeking improvement without informed consent
    16. 16. The Sector’s Concerns with Economic Impact • Lack of standard definitions and clarity of terminology • Limited resources for evaluation • Meeting the needs of all stakeholders • No consistent assessment processes / methodologies • Inadequate measuring of 'difficult-to-quantify' outcomes • Lack of robust data and evidence • Calculating negative impacts • Ethics of seeking improvement without informed consent
    17. 17. The trickledown effect of spending in an economy
    18. 18. Multiplier Analysis • Indicators – income, expenditure and employment •Measures impacts that are direct, indirect and induced • Analysis financial accounts, box office data and surveys
    19. 19. Case Study 1 – Multiplier Analysis • Economic Impact Study of UK Theatre 2008 - Dominic Shellard • Commissioned by Arts Council England • Previous study - Wyndham Report (Travers, 1998) • Defines economic impact as what a theatre contributes to the local and national economy • Through venue questionnaires analysed 259 out of 541 building- base UK theatres
    20. 20. Case Study 1 – Formulas Formula 1 Formula 2 (Turnover + overseas earnings + additional visitor spend + salaries + subsistence allowances + goods and services expenditure) x a multiplier of 1.5 Additional Visitor Spend Salaries Subsistence Allowances Goods and Services Expenditure Multiplier of 1.5
    21. 21. Case Study 1 – Formulas Formula 1 Formula 2 (Turnover + overseas earnings + additional visitor spend + salaries + subsistence allowances + goods and services expenditure) x a multiplier of 1.5 Additional Visitor Spend Salaries Subsistence Allowances Goods and Services Expenditure Multiplier of 1.5 Formula 2 Additional Visitor Spend Salaries Subsistence Allowances Goods and Services Expenditure Multiplier of 1.5 Turnover Overseas Earnings
    22. 22. Case Study 1 – Report Findings Data Supplied – 259 venues Total Additional visitor spend £162,378,047 Salaries £145,062,460 Subsistence allowances £2,156,645 Goods and services £191,406,701 Total (for 259 venues) £501,003,853 • UK theatres - £2.6bn annually • Theatres outside West End - £1.1bn • West End theatres - £1.5bn • AVS outside West End - £7.77 • AVS West End theatres - £53.77 • There are at least 16,000 volunteers working in UK theatres
    23. 23. Concerns and Considerations • Size and representation of samples surveyed • Reliance on self-report measures • Procedures for applying multipliers • Employment figures • Failure to take account of displacement • Failure to take into account leakage of spending • Failure to address export issues • Not full value of the facility - other impacts such as social, cultural, education and health
    24. 24. Concerns and Considerations • Size and representation of samples surveyed • Reliance on self-report measures • Procedures for applying multipliers • Employment figures • Failure to take account of displacement • Failure to take into account leakage of spending • Failure to address export issues • Not full value of the facility - other impacts such as social, cultural, education and health
    25. 25. Concerns and Considerations • Size and representation of samples surveyed • Reliance on self-report measures • Procedures for applying multipliers • Employment figures • Failure to take account of displacement • Failure to take into account leakage of spending • Failure to address export issues • Not full value of the facility - other impacts such as social, cultural, education and health
    26. 26. Concerns and Considerations • Size and representation of samples surveyed • Reliance on self-report measures • Procedures for applying multipliers • Employment figures • Failure to take account of displacement • Failure to take into account leakage of spending • Failure to address export issues • Not full value of the facility - other impacts such as social, cultural, education and health
    27. 27. Concerns and Considerations • Size and representation of samples surveyed • Reliance on self-report measures • Procedures for applying multipliers • Employment figures • Failure to take account of displacement • Failure to take into account leakage of spending • Failure to address export issues • Not full value of the facility - other impacts such as social, cultural, education and health
    28. 28. Concerns and Considerations • Size and representation of samples surveyed • Reliance on self-report measures • Procedures for applying multipliers • Employment figures • Failure to take account of displacement • Failure to take into account leakage of spending • Failure to address export issues • Not full value of the facility - other impacts such as social, cultural, education and health
    29. 29. Concerns and Considerations • Size and representation of samples surveyed • Reliance on self-report measures • Procedures for applying multipliers • Employment figures • Failure to take account of displacement • Failure to take into account leakage of spending • Failure to address export issues • Not full value of the facility - other impacts such as social, cultural, education and health
    30. 30. Concerns and Considerations • Size and representation of samples surveyed • Reliance on self-report measures • Procedures for applying multipliers • Employment figures • Failure to take account of displacement • Failure to take into account leakage of spending • Failure to address export issues • Not full value of the facility - other impacts such as social, cultural, education and health
    31. 31. Concerns and Considerations • Size and representation of samples surveyed • Reliance on self-report measures • Procedures for applying multipliers • Employment figures • Failure to take account of displacement • Failure to take into account leakage of spending • Failure to address export issues • Not full value of the facility - other impacts such as social, cultural, education and health
    32. 32. The wider value effect on the economy Image by Ros Wood
    33. 33. The wider value effect on the economy Angel of The North •Seen by more than one person every second • Given the area a national and international profile in the arts • Reclaimed many derelict areas •Involved thousands of local people in the arts, through education programmes, workshops, artist residencies and public events Image by Ros Wood
    34. 34. Stated Preference Measurement Indicators • Willingness to pay (WTP) for continued access of a facility • Willingness to accept (WTA) compensation for its loss • Valuation of non-monetary costs and benefits
    35. 35. Case Study 2 – Stated Preference • British Library - Measuring our Value, 2004 • Direct value of users and indirect value of UK citizens • Uses Contingent Valuation methodology • Over 2,000 interviewed – users and non-users • Careful designed questionnaire to measure consumer surplus
    36. 36. Case Study 2 - Methodology • How much they would be willing to pay for the Library’s continued existence? • What is the minimum payment they would be willing to accept to forgo the Library’s existence? • How much they invest in terms of time and money to make use of the Library? • How much they would have to pay to use alternatives to the Library, if such alternatives could be found?
    37. 37. Report Findings • Generates 4.4 times the level of its public funding • Every £1 of public funding = £4.40 for the UK economy • If the British Library did not exist, the UK would lose £280m of economic value per annum
    38. 38. Concerns and Considerations • Size of sample surveyed • Includes non-users in sample • Respondents can be confused by the terms WTP and WTA • Not capable of valuing non-market goods • Loss aversion • Our consumer side verses our citizen side • Procedure for applying weightings • Fails to capture impact in terms of expenditure and employment
    39. 39. Concerns and Considerations • Size of sample surveyed • Includes non-users in sample • Respondents can be confused by the terms WTP and WTA • Not capable of valuing non-market goods • Loss aversion • Our consumer side verses our citizen side • Procedure for applying weightings • Fails to capture impact in terms of expenditure and employment
    40. 40. Concerns and Considerations • Size of sample surveyed • Includes non-users in sample • Respondents can be confused by the terms WTP and WTA • Not capable of valuing non-market goods • Loss aversion • Our consumer side verses our citizen side • Procedure for applying weightings • Fails to capture impact in terms of expenditure and employment
    41. 41. Concerns and Considerations • Size of sample surveyed • Includes non-users in sample • Respondents can be confused by the terms WTP and WTA • Not capable of valuing non-market goods • Loss aversion • Our consumer side verses our citizen side • Procedure for applying weightings • Fails to capture impact in terms of expenditure and employment
    42. 42. Concerns and Considerations • Size of sample surveyed • Includes non-users in sample • Respondents can be confused by the terms WTP and WTA • Not capable of valuing non-market goods • Loss aversion • Our consumer side verses our citizen side • Procedure for applying weightings • Fails to capture impact in terms of expenditure and employment
    43. 43. Concerns and Considerations • Size of sample surveyed • Includes non-users in sample • Respondents can be confused by the terms WTP and WTA • Not capable of valuing non-market goods • Loss aversion • Our consumer side verses our citizen side • Procedure for applying weightings • Fails to capture impact in terms of expenditure and employment
    44. 44. Concerns and Considerations • Size of sample surveyed • Includes non-users in sample • Respondents can be confused by the terms WTP and WTA • Not capable of valuing non-market goods • Loss aversion • Our consumer side verses our citizen side • Procedure for applying weightings • Fails to capture impact in terms of expenditure and employment
    45. 45. Concerns and Considerations • Size of sample surveyed • Includes non-users in sample • Respondents can be confused by the terms WTP and WTA • Not capable of valuing non-market goods • Loss aversion • Our consumer side verses our citizen side • Procedure for applying weightings • Fails to capture impact in terms of expenditure and employment
    46. 46. Concerns and Considerations • Size of sample surveyed • Includes non-users in sample • Respondents can be confused by the terms WTP and WTA • Not capable of valuing non-market goods • Loss aversion • Our consumer side verses our citizen side • Procedure for applying weightings • Fails to capture impact in terms of expenditure and employment
    47. 47. Why Do It? • Accountability – stakeholders, funders and the public • Competitive advantage • Development and renewal • Organisational planning and management
    48. 48. In 2006, the core UK film industry contributed over £4.3 billion to UK Gross Domestic Product, and over £1.1 billion to the Exchequer. The supported 95,000 jobs Illuminating Hadrian’s Wall generated a minimum of £3m in economic value to Hadrian’s Wall Country The first Manchester International Festival had an estimated economic impact of £28.8 million. It created 38 jobs and recruited 294 volunteers The 2007 Glastonbury Festival net impact was estimated at £35.8m for the Mendip District economy; £2.4m for Bath and Bristol; and around £10.9m for the rest of the South West.
    49. 49. What Now? • Undertaken an in-house study or commission an external researcher? • Further information – Arts Council England, MLA, CASE, Audiences London, HM Treasury Green Book • Ensure methodology meets all stakeholders’ requirements, captures all your impacts on the economy and is transparent and consistent
    50. 50. Evaluating Economic Impact in the Arts & Cultural Sector Kerry Ellis Byrne Research and Audience Development Manager Audiences North East kerry.byrne@audiencesnortheast.org.uk 0191 269 1103

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