Getting the most out of economic impact

This article offers tips covering how to plan for success, how to deliver credible results and suggestions for maximising the advocacy value.

Economic impact investigates how an organisation contributes to the local economy (or the regional or national economy). Many arts organisations use economic impact to demonstrate that they deliver economic benefits as well as social and cultural benefits. This helps them to strengthen their argument for receiving public support, and potentially to gain access to other funding sources.

While there are several economic impact methodologies, the ‘economic impact assessment’ is by far the most popular in the arts sector. This starts from the recognition that an arts organisation attracts audiences who spend money on their ticket or entrance fee but also buy meals in local restaurants, visit local shops or stay in local hotels as part of their trip. These people might never have come to the local area without the draw of that arts organisation. What is the economic value to the local area of this ‘pulling power’? The arts organisation is also likely to procure some supplies and services locally and to pay some staff based in the local area. This spending benefits the local economy too.

The effects of these three types of spending (visitors, supplies/services and wages) go beyond the first round of purchases. For instance, some of the money that visitors spend in local shops finds its way into the wage packets of shop staff. They in turn spend some of their wages locally. Thus the effects of the initial spending are ‘multiplied’ as the money passes through each pair of hands.

The economic impact assessment usually culminates in a figure in pounds expressing the total Net Economic Impact of the arts organisation on the local economy. This figure might also be expressed as Gross Value Added (GVA) or a number of jobs being supported.

As the tips below explain, the economic impact process is usually strengthened by building in discussions with local stakeholders and businesses. Apart from supporting advocacy, economic impact also equips organisations to plan for the future, for example how they procure and recruit.

1. Know your target audience

Start by identifying who you are trying to reach through your economic impact study. For instance, is it the local authority? If so, which teams – the friendly culture team or the tougher tourism, economic development or planning teams? Take time to research each team’s objectives and to consider which of their objectives your arts organisation helps to deliver. This will enable you to focus your study on the most relevant themes.

You may in effect be trying to convince one or two key people. Find out their personal priorities and interests, and the type of evidence that they respond most strongly to.

Don’t forget the cultural and social impacts of your organisation, as some people (and you) may prefer a broader case for investment. An economic impact study often incorporates a visitor survey, so why not use this survey to explore cultural and social impacts as well? Alternatively, you can summarise existing evidence on cultural and social impacts within your economic impact report.

2. Choose the right methods

Consider which research methods you need to generate the most convincing evidence for your target audience. You will probably combine the following methods – with the flexibility to find your own ‘right’ balance between each method:

• Detailed research into your visitor profile and behaviour, sometimes it’s useful simply to prove that you attract people who’d otherwise not visit or spend money in your area
• Economic impact calculations based on your organisation’s spend and visitor spend
• Interviews with respected local stakeholders to uncover less measurable impacts, such as how your organisation helps project a positive image of your area to visitors and investors
• Interviews with local businesses to understand their perspectives and how they benefit
• Testimonials, quotes and case studies that bring the above numbers to life.

When choosing your methods, bear in mind that your study is an opportunity to start (or re-start) conversations with local stakeholders and businesses. You can begin to discuss how your organisation creates value and how you could work together in future to maximise that value.

3. Commit to robust evidence

Don’t be tempted to cut corners or to present a partial account based on inflated figures. The most effective advocacy is built on credible evidence and consistent messaging, not short term opportunism. The best economic impact calculations follow HM Treasury Green Book standards.

The need for robust research methods is why many arts organisations commission specialist consultants to do this work. Another reason is consultants provide a certain critical distance and objectivity (and thus credibility). But there is no reason why you cannot perform an economic impact yourself, or at least gather much of the evidence in-house.

4. Make a communications plan

It’s a good idea to bring in colleagues with communications experience once you have a reasonable idea of the findings. They can help you to devise advocacy messages. Think about how to contextualise the numbers to bring them to life. For instance: “Every £1 of funding we receive puts £4 into the local economy”.

Plan a mini-campaign to reach your target audiences. The ideal is to discuss findings face to face, rather than sending an email they may not read. Why not invite target audience or visitors to a launch event with some of the stakeholders or businesses who contributed to the study?

Don’t forget your visitors and supporters may also be interested in the findings.

5. Follow through. Even with the difficult stuff

Your study will suggest where you can do more to increase your local economic impact. There will be some quick wins with obvious benefits for everyone. For example, your visitors may express interest in knowing about other quality local attractions, bars and restaurants – and these businesses may also turn out to be keen to design co-promotions, deals and packages with you.

Some discoveries will be less positive or harder to address. For example, you might find some of your staff members are quietly trying to ‘buy local’ but others are opposed to making this an explicit policy. Or you might discover that key external stakeholders believe your staff and visitors travel into the area and out again without creating any benefits.

Negative PR needs addressing too, and making difficult choices demonstrates your commitment. You probably won’t make radical decisions just on the basis of your economic impact study – but do consider how the desire to increase your local economic impact might align with other motivations, e.g. minimising your carbon footprint.

6. Commit to ongoing monitoring

If you’ve presented a compelling story about how your organisation creates economic value, your audiences will want to follow that story – through your communications, and through ongoing discussions and joint planning sessions. You can draw on your economic impact study for a few years but it will need refreshing after that, or in response to changes in your operations or finances.

The Audience Agency's economic and social impact toolkit is designed to estimate the economic impact of cultural events and activities that take place across the UK.

These reports provide useful further information:

BOP Consulting Measuring the Economic benefits of the Arts and Culture, Arts Council England, 2012.

ERS Economic Impact Toolkits for Archives, Libraries and Museums, ALMA UK, 2011

O’Brien, David Measuring the value of culture: a report to the Department for Culture Media and Sport, DCMS, 2010