Over the past few years, the UK arts and cultural sector has seen significant growth – a recent report by the Centre for Economics and Business Research produced for Arts Council England estimated that it contributed £8.5bn to the economy in 2015, a jump of 10% in a single year. What makes this all the more remarkable is that it has occurred against a background of equally big funding challenges – unprecedented falls in public investment, a drop in corporate sponsorship for arts and culture, and a more competitive philanthropic grant-giving environment (see the National Campaign for the Arts’ Arts Index 2017 report for year-on-year changes of 20 key indicators for arts and culture between 2007 and 2016). Although the data is somewhat behind real life (many of the reports published in the last couple of years draw on figures from 2014/15), this trend seems to continuing and earned income is becoming increasingly important for arts and cultural organisations to remain thriving.
All of this has fuelled the need and appetite to explore for other forms of finance in arts and culture. In 2014, Nesta launched The New Art of Finance report, looking at how funding for arts and culture could be reimagined through new financial instruments to bring new money into the sector, and offer more opportunities for existing funding to work harder. Among other financial innovations, the report proposed that arts and cultural organisations could benefit from the progress made elsewhere in the use of social impact investment, which fills the space between purely commercial finance and grant subsidy, and considers the social return of an investment alongside the more traditional pursuit of financial return.
To test the idea that arts and cultural organisations have the appetite for this kind of finance – as well as the ability to repay it – in 2015, Nesta joined forces with Arts Council England, Esmée Fairbairn Foundation and Bank of America Merrill Lynch to launch the Arts Impact Fund pilot, providing unsecured loans of between £150,000- £600,000 to the sector. Over the course of its three-year investing period, the Fund made over 20 investments across England and demonstrated how motivated repayable finance can be used to develop financial resilience and grow social impact.
Looking at how the landscape had changed since 2015, in 2018 Nesta published a further report examining the demand for repayable finance among arts and cultural enterprises, which pointed to an unmet demand for small-scale investment as well as a potential market for repayable finance of up to £309m over the following five years. The results of the report have informed the development of future Arts & Culture Finance funds.
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