UK arts and cultural organisations set to seek more than double in repayable finance over the next year than during 2016

23rd March 2018 - Repayable finance could play a significant role in supporting the arts and cultural sector, with organisations set to seek £309 million over the next five years, a survey(1) commissioned by innovation foundation Nesta reveals.

In light of cuts to public funding for the sector and following the full deployment of the £7m pilot Arts Impact Fund, managed by Nesta on behalf of partners Arts Council England, Esmée Fairbairn Foundation and Bank of America Merrill Lynch, the research uncovers the potential of repayable finance(2) to provide significant additional capital to arts and cultural organisations.

The £309 million figure over five years, amounting to £62 million per year, highlights a considerable increase in demand since 2016, where just 15 per cent of respondents received £29 million in repayable finance between them.

The positive impact is clear for organisations who have already sought repayable finance, as 72 per cent believe their income will increase over the next five years. While repayable finance is currently only used by a small proportion of organisations (15 per cent of respondents reported ever having sought it), they are optimistic about the benefits, with an average of 57 per cent believing they will see a higher income in the next five years.

The demand presents significant opportunities for the future of the sector. While organisations who have sought repayable finance tend to be based in London, 54 per cent of future demand is expected to come from outside the capital, allowing local arts and cultural industries in other areas of the UK to build resilience and grow their impact. Over twenty organisations since 2015 have received or are set to receive Arts Impact Fund loans. One example of an organisation that has benefited from repayable finance through the pilot project is South East Dance in Brighton, which plays a national leadership role in the development of dance.

Repayable finance could be of particular benefit for future entrepreneurial purposes, with the most popular proposed uses of finance named as developing new revenue streams, scaling up existing activities, and acquiring new tangible assets. This offers organisations new opportunities in addition to grant funding, rather than acting as a replacement.

Some respondents displayed caution about the barriers to taking out repayable finance, with the highest concerns relating to repayments, particularly in generating the income to repay the finance received (57 per cent) and the terms of the contract (49 per cent). However, those who have previously taken it out reported a positive experience, and are far less likely to cite any of the barriers.

Fran Sanderson, Director of Arts Programmes and Investments at Nesta, said:

“We’ve had a real sense through the investment period of the Arts Impact Fund that there would be strong and increasing demand for this kind of repayable finance. It felt as though organisations in the sector were warming up to the idea, and seeing the potential benefits of this type of finance through our and other case studies. We wanted to back this up with some data, so commissioned the report, and are happy to see that this supports the case for raising and deploying more funds into the sector.

“We are learning all the time about how to make investments in as constructive a way as possible, including working closely with funding partners such as Arts Council, Esmée Fairbairn, Bank of America and other social investors we’ve worked with, such as our collaboration with Big Issue Invest and Triodos on getting Village Underground’s Hackney Arts Centre off the ground.”

Jon Singleton, Executive Director at South East Dance, said:

“South East Dance, like many arts organisations, found it challenging to gain support when looking to finance our exciting new home for dance in Brighton – The Dance Space. In financial terms the charity is small in size but with big ambitions. The support offered by the Arts Impact Fund has therefore been hugely beneficial in realising our capital project.”

The report, Repayable finance in the arts and cultural sector, is available to download via: https://www.nesta.org.uk/publications/repayable-finance-arts-and-cultural-sector

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For media enquiries and interview requests please contact Anna Zabow in Nesta’s press office on on 020 7438 2697 or [email protected]

Notes to Editor

1. Innovation foundation Nesta commissioned MTM, a research and strategy consultancy, to run the survey. 1,068 survey responses were used to model the potential future demand for repayable finance across the sector, which is estimated at just under 3,000 active arts and cultural organisations above a threshold level of identifiable income.
2. Respondents were surveyed about ‘repayable finance’ as distinct from ‘social investment’. This was to explore the tools with which money can be deployed in arts and cultural organisations, whether that be repayable grants, grants convertible to loans on success, unsecured loans, secured loans, equity or venture capital

About the Arts Impact Fund

The £7 million Arts Impact Fund is a collaboration that brings together private, public and philanthropic investment and provides unsecured loan finance to arts and cultural organisations in England that can demonstrate positive social impact. The contributors to the Fund all share a commitment to supporting the arts and culture and include: Bank of America Merrill Lynch, Esmée Fairbairn Foundation and Nesta, with support from Arts Council England and additional funding from the Calouste Gulbenkian Foundation.

About Nesta

Nesta is a global innovation foundation. We back new ideas to tackle the big challenges of our time, making use of our knowledge, networks, funding and skills. We work in partnership with others, including governments, businesses and charities. We are a UK charity that works all over the world, supported by a financial endowment. To find out more visit www.nesta.org.uk

Nesta is a registered charity in England and Wales 1144091 and Scotland SC042833.