Feature 23 July 2026

The work of art

For years, the arts have relied on economics to prove their worth. But, as Britain searches for improved productivity and growth, and new sources of innovation, economics may now need the arts just as urgently

Colourful illustration showing people engaged in various activities: painting, sculpting, sketching, studying, teaching, writing, talking at a café, and walking near a bridge and buildings in an urban setting.

Professor Hasan Bakhshi, MBE

Director at the Creative Industries Policy and Evidence Centre

reading time: Eight minutes

Arts and culture Arts and society Economics and Finance Enterprise

Summary

Professor Hasan Bakhshi examines the changing relationship between the arts and economics. While public investment in the arts has long been justified through impact, jobs and valuation frameworks, Bakhshi suggests that economics now needs the arts to address Britain’s productivity challenge. By recognising the creative industries’ role in innovation, intangible assets and growth, he makes the case for treating culture as central to economic renewal.

^{Illustrations by Fien Jorissen}

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In recent decades, the case for public investment in the arts has relied increasingly on economic arguments. To justify and attract funding, arts and cultural organisations have been expected to demonstrate their economic impact, showing how they contribute to job creation, gross value added, tourism and increased footfall to local businesses. But, today, economists need the arts as much as the arts need economics. Let me explain.

Valuing culture

The dependence on economics is even greater in the museums and heritage space, where the majority of benefits are less ‘tangible’ and not fully reflected in market prices. Here, economic methods that estimate what people would be willing to pay are used to estimate the non-market benefits of culture and heritage, such as those that instil a sense of pride of place in the community or the value that accrues to the public from the mere existence of a cultural or heritage site.

It explains why in the UK, through the Department for Culture, Media and Sport’s (DCMS) landmark Cultural and Heritage Capital Framework, organisations like the DCMS and Historic England have become world leaders in applying economic valuation techniques to culture and heritage. So much for the value of economics to the arts. But what of the value of the arts to economics?

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Perhaps the question is not, then, whether the arts need economics or economics needs the arts – but how much longer we can treat them as separate conversations at all.

Productivity puzzle

Here, the starting point is the very slow productivity growth experienced in advanced industrial economies since at least the global financial crisis in 2008. Productivity growth matters because it is the basis of long-run improvements in material living standards. Even de-growth advocates have reason to care about productivity growth, since it can free up resources for investment in more socially and environmentally valuable activities. In the UK, despite successive policy strategies to address the UK’s productivity problem, performance remains obstinately poor, which is of considerable embarrassment to the economists who have devised them.

Traditionally, the arts have been seen as a drag on productivity growth, an effect even earning the title ‘Baumol’s cost disease’ – the tendency for the cost of providing labour-intensive services like the performing arts to rise without a corresponding increase in productivity – named after the economist, William Baumol, who first wrote about it in the 1960s. But every cloud has a silver lining and, in the UK’s case, it may lie in the relationship between the arts and commerce, or the creative industries.

Creative supply chains

In the UK, productivity statistics – how much output is produced per hour – at the industry level are notoriously uncertain, and classed as ‘Official Statistics in development’. DCMS estimates for the creative industries are currently only available for five years and, reliant as they are on detailed estimates of output and hours worked by the workforce, are highly volatile. This limits their usefulness for understanding productivity trends and obscuring assessment of the sector’s potential to address the UK’s productivity problem.

More fundamentally, they omit the indirect contributions made by creative businesses – such as those in advertising and design – through the provision of productivity enhancing intangible assets like brand and design capital to other sectors. The general point is that they exclude the positive impacts from the creative industries on innovation in other parts of the economy through the different supply chain linkages that exist between sectors.

Together, these channels suggest that the overall contribution of the creative industries to UK productivity growth is likely to be substantial.

Learn more

Learn more about the Royal Society of Arts’ partnership with PEC

Growth questions

Certainly, the official estimates of the value the creative sector adds to the UK economy, which is easier to measure than productivity, show that, since 2010 (the earliest year for which consistent data are available) the creative industries grew at 3.4% per year on average, more than double the rate of the economy as a whole.

Contrary to what is sometimes claimed, this growth is not all due to the government’s inclusion of fast-growing IT, software and computer services activity in the creative industries definition. Even excluding this sub-sector, the latest estimates suggest that value added by the creative industries grew by 39.1% in real terms between 2010 and 2024, compared with 24.3% in the whole economy.

This strong performance suggests that the creative industries could play a central role in improving the UK’s productivity growth in the years ahead. It helps to explain why the UK government has chosen to include the sector as one of eight priorities for its industrial strategy, and why the Arts and Humanities Research Council funds a dedicated research centre hosted by Newcastle University Business School in partnership with the Royal Society of Arts – the Creative Industries Policy and Evidence Centre, of which I am Director – to develop the evidence base on its growth needs.

Perhaps the question is not, then, whether the arts need economics or economics needs the arts – but how much longer we can treat them as separate conversations at all.

Professor Hasan Bakhshi, MBE is Director at the Creative Industries Policy and Evidence Centre

Fien Jorissen is an illustrator living and working in Antwerp. Her surrealistic, playful works have appeared in publications including Wired, El País, de Volkskrant, The Financial Times, The New York Review of Books and The New Yorker.