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
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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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
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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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
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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. Why Do It?
• Accountability – stakeholders, funders and the public
• Competitive advantage
• Development and renewal
• Organisational planning and management
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. 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. 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
Editor's Notes
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
