EXCLUSIVE: Arts finances in worst state for five years

Finances of arts and culture organisations in the UK are in their worst state than at any time in the past five years, an investigation by Arts Professional in partnership with financial benchmarking company MyCake has found.

Analysis of a constant cohort of 2,800 organisations across the country that filed accounts for every year since 2018 shows they posted a combined deficit of £117.8m in 2023.

This represents a huge decline in their financial health compared with 2022 when, despite contending with the ongoing impact of the Covid pandemic they were collectively £152.4m in profit.

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The only other overall deficit was recorded in 2020 when organisations' collective expenditure exceeded income by £15.3m during a period in which venues were forced to close due to Covid restrictions.

Finances improved sharply in 2021 as venues were allowed to reopen with a collective surplus of £232.6m recorded. This was followed by a £152.4m surplus in 2022. But since then the situation has dramatically worsened (see graphic).

The data set is dominated by non-profit organisations and does not include organisations that have closed during the period. It covers a range of cultural organisations, from small amateur dramatic societies to large organisations that receive core funding from national arts funders.

The £118m loss for 2023 comes despite combined income hitting is highest level in the six-year period of £4.72bn, but expenditure came to £4.84bn.

The £4.72bn income level for 2023 is 4.7% above the 2018 combined income of £4.51bn, but has failed to grow in line with inflation. According to Bank of England figures income levels of £4.51bn in 2018 would have needed to have risen to £5.62bn in 2023 to keep pace (see graphic).

Income for arts and culture comes from a variety of different sources including core funding and grants from central and local government, donations, ticket sales and other commercial sources such as cafes and restaurants.

But many of these income streams have been hit in recent years with local government funding particularly affected as many councils cut back on arts and culture spending.

Sarah Thelwall, Director and found of MyCake, said the investigation "gives a greater voice to those who haven't been heard".

"It moves us from individual anecdotes to a clear perspective on the sector," she said.

"It's not just one or two organisations having a tough time, the data shows a trend across the sector."

"If the financial picture is not expected to get better any time soon, we need to work out who the anchor organisations are that the sector cannot live without and the answer cannot only be to save the largest institutions."

'Unsustainable'

Jack Gamble, Director of Campaign for the Arts, said the analysis underlines the financial pressures on arts and cultural organisations.

"After years of declining public investment, and a period of significantly higher prices, there’s more money going out than money coming in," he said.

"Ultimately, this is not sustainable.

"The Campaign for the Arts will continue to urge all parties to protect and increase arts funding at local and national levels."

Ben Walmsley, Dean of Cultural Engagement at the University of Leeds (UK) and Director of the national Centre for Cultural Value, said: "This sobering analysis unfortunately just confirms what we are hearing on the ground about the precarious financial situation of the sector.

"The Tories are justifiably proud of their Cultural Recovery Fund, which certainly saved many cultural organisations from the brink, but the damaging cuts and cost-of-living crisis they have faced since the pandemic has left them worse off than ever.

"If Labour’s pledge to invest in cultural organisations is to amount to more than a platitude, these figures show that the party can’t wait for economic growth to kick in first - rather it will need to address the crisis in local government funding and halt councils’ devastating cuts to arts and culture."

'Maximising potential'

Appearing before the Culture Select Committee on 22 May, just hours before Prime Minister Rishi Sunak called a general election, Culture Secretary Lucy Frazer was quizzed on the extent of financial pressures facing the arts and culture sector, but could not give any examples of organisations in serious difficulty.

She said that during her year as Culture Secretary she feels cultural organisations have been allowed to "maximise their economic potential" by making theatre, orchestra, museum and gallery tax reliefs permanent.

But Labour has acknowledged the financial situation, with Shadow Culture Secretary Thangam Debbonaire saying that seeking more money for the arts would be her first priority if Labour wins the general election.