Global nerves as recession bites

The international financial downturn will have a strongly negative effect on sponsorship, philanthropic giving and endowment income, according to a report detailing responses from 12 countries. The International Federation of Arts Councils and Culture Agencies (IFACCA) has drawn together responses from countries on five continents, including Australia, the USA, Cuba, Canada, Singapore and all four UK arts councils, for the report, ‘Global financial crisis and recession: Impact on the arts’. Opinions from respondents included that “many foundations… are dramatically reducing or cutting their granting budgets entirely” and that “competition for sponsorship dollars will be stiff as the pie shrinks”. However, the general response was that the recession would last at least two years and would have an overall “mildly negative” impact on the arts.

The majority of the respondents identified staff layoffs, a reduction in commissioning new work and less-adventurous programming as likely outcomes of the downturn. Performing arts and visual arts are seen to be most at risk, and the non-subsidised sector at more risk than the subsidised sector. However, consumer behaviour is believed to have the potential to have both negative and positive impacts. A reduction in cultural tourism is widely expected, and audiences are expected to buy less art and opt for cheaper arts experiences. The report adds that changes in consumer spending “will skew arts attendances towards bigger, more mainstream and crowd-pleasing fare as smaller personal budgets make audiences more discriminating and risk-averse in their arts spending”. However, there is also hope that some consumers will shift their spending to the arts and away from more expensive leisure pursuits, and that local provision will benefit as people seek arts events closer to home. There is also confidence that arts organisations will show resilience, and will generate consumer interest by creating art based on issues arising from the recession. Other positive factors include an increase in the number of people exploring their own creative activity and the ability of the arts to lobby for funding.

Unpublished research by Arts Council England (ACE), on which the IFACCA report draws, states that “venues appear to be looking at less ‘risky’ options, some on the basis of pressure from local authorities or their Board”. ACE began gathering information from a sample of Regularly Funded Organisations (RFOs) in November. Its report from March shows that while box office takings are holding up, income from both corporate sponsorship and local authorities is “markedly worse” and ancillary income from bar takings, programmes etc., is down by around 10%. Corporate hospitality has also reduced and is lower key. However, festivals in particular have found success in gaining sponsorship from local businesses that “wish to show their confidence despite the downturn”. Many RFOs “remain pessimistic about future settlements” from their local authorities, while in-kind support has declined. Information about trusts and foundations shows that “they will be less interested in funding quality artistic activity and more focused on sustainability and education”, and that there is “an emerging hard line against replacing lost sponsorship or public subsidy for core activities”. However, the sample RFOs have reported that banks are willing to lend them money, “generally because their guaranteed ACE income allows them to demonstrate how it will be repaid”. Flexibility from ACE lead officers in agreeing payment schedules has also assisted cash flow.

Both IFACCA and ACE plan to continue to revisit the research.