UK Trade in a Global Creative Economy
Creators: name: Fazio, Giorgio
name: Jones, Jonathan
name: Maioli, Sara
name: Simandjuntak, Daniel
Publisher: name: Zenodo
Year: 2024

description: Executive summary 




This report is the first of a series assessing the international outlook of the UK’s creative industries, and it is focused on exports. We showcase both macro (national) and micro (firm-level) evidence on the export performance of the UK’s creative industries. In addition, we present two deep dives into topics where industry and policy stakeholders have told us they want to see more evidence, namely digital trade in the creative industries (focusing on the video games sector) and the creative industries in South Korea, which are widely seen as having been successfully supported by that country’s government. 




 




We show that, overall, the UK’s creative industries are strongly internationally oriented, but increasing global competition means that their strength cannot be taken for granted. Our macro and micro evidence shows a continued rise over the period 2010-2021 in UK creative services exports. This rise seems to exhibit a slowdown after 2016, the year of the Brexit referendum, but does not show any reduction from 2020, which saw both the COVID-19 pandemic and the signing of the UK–EU Trade and Cooperation Agreement. The share of creative services exports in total services export grew as well. 




 


 

 

 



By contrast, the growth of UK creative goods exports was stagnant and showed larger drops than even total UK goods exports in 2016 and 2020, with no sign of recovery in 2021. This presents a striking dichotomy in the recent performance of trade in services versus trade in goods for the UK’s creative industries, and it likely partly reflects a growing comparative advantage of the UK in the production of services more generally. 




 




Creative services exports are concentrated in a few sub-sectors with the most important being ‘IT, software and computer services’, followed by ‘Film, TV, video, radio and photography’ and ‘Advertising and marketing’. These services exports have become more concentrated over time. Creative goods exports are largely found in ‘Crafts’, ‘Music, performing and visual arts’ and ‘Publishing’. The impact of, and resilience to, Brexit and COVID-19 differed across sub-sectors. The data on these broad sub-sector groups is the most detailed available in the UK Department for Digital, Culture, Media and Sports’ (DCMS) exports statistics, which we use because they permit comparisons across groups. However, statistics published at a more disaggregated level show that the DCMS groups can mask significant divergences across individual sub-sectors. 




 




Europe and North America are generally the main market destinations for the UK’s creative goods and services exports. However, bilateral trade statistics show that some sub-sectors export considerably outside these two blocs, and to Asia in particular. When we look at exports to the EU and North America, we see that since 2016 (the first year for which bilateral trade data is available) the share of European markets for creative services exports has declined while that of North America has increased. The opposite is true for creative goods exports.  




 




We show that the UK enjoys a comparative advantage vis-à-vis many comparator countries in both creative goods (except for China, France and Italy) and creative services (except for Ireland). This position should not be taken for granted and is challenged by the rapid rise of countries such as China and the loss in comparative advantage against some competitors in ‘Audiovisual and related services’ and ‘IT, software and computer services’ in particular. 




 




Using firm-level data from the Financial Analysis Made Easy company financial database, we uncover a number of key insights. A range of factors are found to impact on creative industries firms’ ability to export as well as on their levels and intensity of exporting. These factors include their holdings of intangible assets and how productive they are. The export intensity of firms in the creative industries is also found to have been increasing over time. Exporting creative industries firms tend disproportionately to be based in the London and the South East of England. This is as expected, given this region’s dominance in the UK’s creative economy, although a more varied picture emerges across the nations and regions when looking at the percentage of creative industries firms that are exporters and the intensity of exporting (the share of overall revenues accounted for by foreign sales) in a region. 




 




Using experimental data on digital trade from Stojkoski et al. (2024) for the period 2016-2021, the UK appears to be the fourth top exporter of video games in the world, with the US in pole position. UK exports growth in the video games sector seems to have accelerated during the COVID-19 pandemic, reaching a volume of exports in 2021 which was about 2.5 times bigger than in 2016. 




 




The lack of data on trade in digitally ordered and digitally delivered goods and services more generally highlights the challenges in collecting digital trade data for the creative industries. In the absence of official statistics, Stojkoski et al. (2024) combine several sources of data and make use of novel estimation methodologies. Given the increasing digitalisation of the economy and the large share of digitally delivered services that is represented by creative industries, improving our statistical capabilities to record such trade is essential for providing a true picture of the sector’s international performance. The growth of digital trade, reflecting technological change, also highlights how important it is that UK trade policymakers increasingly negotiate digital agreements within existing and new trade agreements to future-proof international market access against such technological change. 




 




The South Korea case study demonstrates that creative industries exports can thrive on the back of government investment in world-class digital infrastructure, and with integrated technology and industrial policy more generally. While its creative industries are export-oriented at early stages in the production process, such as employing foreign talent and languages in creative content like K-pop, South Korea also has a specialist agency tasked with promoting the creative content industries domestically and abroad.