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AQ Launches 2nd Recession Impacts Report

9th November 2009

Arts Quarter LLP has launched the findings of its 2nd Survey into the affects of the current recession on the UK cultural and wider not for profit sectors.

The report provides a detailed insight into how the global economic meltdown is working its way through these two vital sectors of the UK economy comparing and contrasting these latest findings to those of the first survey conducted by AQ earlier in 2009.

Launching the findings today, John Nicholls, managing partner of Arts Quarter commented, ‘Having conducted our first survey on this issue over January and February 2009 and given the level of interest in our findings, we saw merit in repeating the exercise some six months later in order to track degrees of recessionary impacts and plot out further areas of innovation throughout the cultural and wider not-for profit communities. We have also taken time to plot the impacts of the 2010 General Election and of the 2012 London Olympics – both of these have produced some highly telling results.’

A copy of the full report can be requested from AQ free of charge by clicking here.

AQ’s findings show that the recession is clearly continuing to work its way through the cultural and not for profit communities' abilities to generate support from trusts, companies and individuals but both sectors are now broadly hopeful that the end of its impacts at least in fundraising terms may be in sight and that stability and indeed growth may become evident by 2011/ 2012 – but this may be purely in terms of recessionary impacts.

John Nicholls, commented further, ‘Our respondents are sending out a clear message that they foresee two further threats to fundraising looming by way of the wider impacts of government spending cuts post a 2010 General Election and beyond that ongoing affects of the London 2012 Olympics notably on organizations’ capacities to generate private sector fund-raising income.’

Sample Findings:

Overall Responses

Looking to their current financial year-end:

39.4% of respondents from within the cultural sector at large are predicting that sponsorship incomes will be down on amounts raised in their last completed financial year against 32% of respondents from within the wider not-for-profit community.

31.4% of cultural sector respondents are predicting that core funding from trusts will be down on levels raised in their last completed financial years against 24% of respondents from within the wider not-for-profit sector.

22% of cultural sector respondents are predicting that lower level giving from individuals (gifts of under £1k) will be down on levels raised in their last completed financial years against 11% of respondents from within the wider not-for-profit sector.

Looking ahead to their next financial year however:

36% of cultural sector respondents believe that they are likely to raise more next year compared to their current financial year while 32% believe that they will raise around the same amount next year as in this.

27% of wider not-for-profit sector respondents believe that they are likely to raise more next year compared to their current financial year while 36% believe that they will raise around the same amount next year as in this.

These predictions are however a marked improvement in forecasts made when AQ last posed this question to these sectors back in January 09 when only 15.8% of cultural sector respondents foresaw improved performance next year and only 12.3% of wider not-for-profit respondents were as optimistic.

Regional Variations

Looking at wider fundraising performance regionally, the impacts of the recession on fundraising income are evident to a greater extent outside of London than within the capital.

44% of respondents outside of London reported generating less income from sponsorships this year thus far compared to the same point in their last financial year. 26.9% of London-based respondents reported a shortfall in sponsorship income when comparing performance to date to this same point in their last financial year.

Cultural Sector Fundraising Performance

AQ’s findings indicate that within the wider cultural sector, it is those communities other than the theatre community that are now being more severely impacted by the recession in terms of fundraising performance.

When asked to predict positions for current financial year end:

36% of respondents from within the theatre community are predicting that sponsorship incomes will be down on amounts raised in their last completed financial year against 41.5% of respondents from within the other parts of the cultural sector. This represents a significant shift in position as predicted by respondents back in January 2009 when 47.8% of theatre respondents predicted a shortfall versus 22.7% of other cultural sector respondents.

Similarly, looking at project based funding from trusts, 13.6% of theatre sector respondents are predicting that grants will be down on levels raised in their last completed financial years against 32.6% of respondents from within the wider cultural sector – excluding theatre. Again, this represents a significant shift in position as predicted by respondents back in January 2009 when 30.4% of theatre respondents predicted a shortfall in this area versus 21.9% of other cultural sector respondents.

Cultural Sector Earned Income Performance

On ticket sales/ admission charges, 57% of theatre respondents predicted achieving the same or higher levels of income compared to their last full financial year versus 49.9% within the rest of the arts sector. Among theatre respondents this represented a decline compared to January 09 when 65.1% of theatre respondents predicted hitting similar or higher levels of revenue. Among other arts sector respondents the position remains unchanged compared to January 09.

On commercial and private hires of spaces, again the picture appears to show modest improvement across both the theatre community and among other arts sector respondents with 38% of theatre respondents now predicting similar or improved revenues to year-end compared to 33.6% back in January. Among other arts sector respondents, the picture has improved from 24.7% in January to 31% now.

Possible Organisational Impacts of Shortfalls in Revenues

Across all three of AQ's key respondent groups (not-for-profit organizations, theatre community and wider cultural sector, [non-theatre] – all three saw their most favoured course of action to offset potential revenue losses being to make organizational savings which will not impact on public activities. Views then differed on second most likely options with theatre bodies and not-for-profits favouring foregoing capital programmes while the wider arts sector favoured seeking additional statutory support ahead of following their peer respondent groups.

Impacts of the 2012 Olympics on the Cultural Sector

Following AQ’s survey on this topic as reported in November 2008, AQ returned to the London 2012 Olympic Games in light of the recession.

Among theatre community respondents, some 62% felt that the Games may impact negatively on their fundraising capacities – clearly at a time when they might hope to see some degree of recovery. Among other arts sector respondent groups, 60% were of the same view.

Looking regionally – 18% of all respondents based in London felt that the Games would have a positive impact on their fund-raising, with some 47% undecided at this time. Among respondents based outside of London, 4% felt that the Games would impact positively on their fund-raising with 57% undecided.

On earned income however, 39% of London-based respondents felt that the Games would have a positive affect with 26% undecided but just 8% of out-of-London respondents foresaw the potential for gains with 45% undecided

Expectations of the UK Cultural Sector of the 2010 General Election

The cultural sector is seeking very clear assurances from all political parties of its place at the heart of UK society. Many respondents felt that to date, very little has come forward to provide assurance from any party.

In anticipation for there being no further direct funding available from government sources for the arts, the sector is looking to the major parties to provide manifesto commitments by way of alternative funding solutions in the form of tax breaks for those supporting the arts or further changes in taxation regulations for arts organisations.

An overwhelming majority of respondents - some 80% of those who expressed a preference - foresaw a Conservative majority government being elected.

Irrespective of the outcome of that Election, a majority of respondents - some 69% fear a cut in real terms in government support for the arts, not just a funding freeze.

Conclusions

The impacts of the financial downturn on institutional and wider private sector fundraising generally may indeed be reaching their lowest ebb but based on our findings, the speed and scale by which turn around may be achieved remains questionable based purely the global economic position and most recently on statements made by the G20 on the variable nature of the recovery. That said, most respondents remain hopeful that recovery will be fruitful within the next year to eighteen months and that incomes from these sources will either stabilize or indeed grow again.

John Nicholls of AQ added finally, ‘Based on our latest findings, the cultural and not-for-profit sectors could be merely within the first wave of what may be a three-wave recession for this significant sector within the wider UK economy. What is clear is that thanks to the recession, the 2010 Election and the 2012 Games, the cultural and wider charitable communities of the UK are now entering what could become potentially the greatest period of change and one hopes, innovation seen in a generation.’

This AQ Online Survey was launched on 5th August 2009 and remained available for completion until 16th September. A total of 388 individual organization responses are reported. Close to 80% of those who had participated in our first recession survey conducted in January and February 2009 participated again.

To find out more about AQ's Research Programme, click here

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