The UK media industry's role on the global stage

18 June 2024

The UK media industry is a dynamic one which is continuously evolving to meet ever-changing consumer demands. 

The UK media and entertainment sector could be worth a staggering £53bn by 2033, and is renowned globally for the quality of content it produces. It is imperative then, that the UK continues to invest and grow the sector to meet new digital demands, stay ahead of technological advancements and consumer appetites, and to uphold its reputation. 

Our findings from a survey of 300 UK media business leaders, spanning sectors including agencies, television, gaming, audio and publishers, highlights the challenges and opportunities the sector is currently facing and how businesses plan to stay ahead in 2024 and beyond.

Media businesses should harness power of generative AI to create immersive experiences

Consumer appetite for immersive storytelling experiences is growing, with audiences increasingly expecting personalised entertainment. Emerging technologies, including virtual and augmented reality, will help media and entertainment businesses deliver these experiences and push the boundaries of what is possible in media consumption. Linked to this is the ability to harness the power of generative AI. It was therefore promising to see that 59% of businesses were either actively using or experimenting with generative AI.

By leveraging generative AI, creators will be able to craft dynamic narratives that adapt to audience interactions, offering a personalised experience. Generative AI can analyse viewer preferences to customise content in real-time, creating unique storylines and visuals that resonate on a personal level. Furthermore, it can generate high-quality assets at scale, reducing production costs and time. This fusion of AI with traditional media could redefine storytelling, making it a collaborative journey between the creator and the consumer, fostering a deeper connection and a truly immersive experience.

UK media businesses optimistic for the future

It is interesting to compare our survey results to our 2023 survey of 200 business leaders across the media and technology sectors. Last year’s survey found that over 81% of our media respondents felt optimistic about the next 12 months for their business, dropping to 68% when looking more long term. In this year’s survey with 300 media business leaders, we found that 59% were optimistic about the next 12 months, compared to 55% when looking longer term. Although we cannot make direct comparisons due to the change in sample size, it is interesting to explore and understand what might be driving this change in attitude.

Given the improvement in the economy over the last year, the fall in optimism seems counter-intuitive at first glance. However, this may have much more to do with base effects than a change in the economic outlook for this year. During the economic doldrums of last year, the economy was expected to pick up sharply. Some of that improvement has already occurred. And, even though we expect growth to improve over the next two years, the contrast won’t be as stark as the difference between 2023 and 2024. 

Bar chart titled 'How do you feel now, about the future of your business in these timeframes?' Most popular replies: 'Somewhat optimistic' and 'neither optimistic nor pessimistic'. More replies mentioned in the text.

How is the UK government supporting creative industries?

60% of our respondents agreed that the UK government is supportive of the creative industries. However, complexities with the changing research and development (R&D) landscape and wider innovation reliefs available could cause some complications for businesses looking to unlock funding to grow their business. 

Our survey results indicate that media businesses are struggling to make successful claims for R&D tax relief. Meanwhile, it was surprising to see that only 46% were claiming creative tax reliefs, as we would expect this to be higher. The government continues to invest in the media sector, and this could be an area for businesses to explore not only during more challenging times, but in the longer term, as it makes good business sense. 

When looking at R&D specifically, these reliefs provide a vital lifeline to encourage businesses to develop new innovative ways of working. Sky has encouraged the government to ‘regularly benchmark UK incentives against competing jurisdictions’ to ensure we continue being an attractive place for the industry.

Despite the recognition of the support offered, it is worth noting the particularly high rate of enquiries by HMRC on media businesses. With a 33% rate of enquiries reported by our respondents, it is of course well in excess of the 20% average rate quoted by HMRC. 

It is important that the UK remains an attractive place for media businesses to call home. R&D specialist Constantine Costas recognises that: ‘Increasing complexity in the application process for R&D and other creative tax reliefs may be holding the UK media industry back from competing internationally. We would urge the government to consider simplifying the application process and raising awareness of what’s available to businesses to encourage more innovation in the media industry.’

Talent matters persist

Having the right workforce is vital to achieving success, but securing and retaining the best talent continues to be a top challenge for the industry. 

Our survey showed that 60% have found it challenging to recruit staff over the last 12 months, compared to our research last year for our media and technology survey of 200 businesses, where we found 79% of our respondents expressed difficulties with recruitment over the same period. While recruitment challenges appear to have eased, a result that really stood out was that an overwhelming 99% of the 300 respondents had made redundancies in the past 12 months. 

While appearing contradictory, this highlights the demand for recruiting skilled talent, balanced with a challenging economic environment that has resulted in a significant level of redundancies. 

To overcome the skills shortage, businesses must be creative in their recruitment endeavours. Finding new ways to attract and retain top talent will be imperative to ensuring business success when market conditions stabilise.

 

'Despite recruitment difficulties, almost all media businesses surveyed (99%) have made redundancies over the past 12 months. Media businesses need to find alternative ways to attract and retain staff and this is an avenue that should be explored to not lose the best talent when this is a challenging market to recruit in.'

Mandy Girder, Head of Media

The bigger picture – D&I, ESG and other incentives

Improving diversity and inclusion (D&I) continues to be an area of focus. Our survey indicated that only 59% of businesses currently have policies in place to ensure that D&I is being discussed at a senior level. This is disappointing to see and demonstrates the inconsistency across the industry group. While there has been a drive to bridge this gap in recent years, these results highlight that, in this very key area, much more needs to be done and on a more consistent basis.

Bar chart on policies about diversity and inclusion at senior level. 59% of businesses said they have policies. 30% do not.

Environmental, social and governance (ESG) is an important subject, and it is imperative for businesses to have a meaningful impact over the longer term. British Film Institute (BFI) are committed to this agenda item and recognise the importance of leading the way by committing to reach net zero ahead of the 2050 government deadline. With this being such an important area, it was surprising to see that 31% believed little or no progress was being made by the sector group to effectively develop and implement ESG policies. 

 

'Given the importance of the environmental, social and governance (ESG) agenda, it was disappointing that 31% considered that little or no progress was being made by the media and creative sector to effectively develop and implement policies in this area. This is an alarming statistic which needs to be acted on.'

Mandy Girder, Head of Media

A focus on the UK gaming industry

The UK video games market continues to grow, reaching a value of £7.82bn in 2023. While this is a positive statistic, the gaming industry has too faced challenges, which in some cases are inconsistent with the wider media industry group.

For instance, our survey included a sample of 50 gaming businesses and revealed that only 32% feel the UK government is supportive of the media and creative industries. This is of course a stark difference to the other media sub-sectors. However, the gaming industry is in agreement on the state of the workforce, with 96% having made redundancies, resulting in an explosion in the number of newly incorporated gaming companies.

It is a challenging time. It was reassuring to hear, however, that despite this, 62% feel optimistic about the future of their business over the next 12 months. Thrive in ’25 is a term that has been banded around the industry over the past few months.

Overall, while the gaming industry faces its share of challenges, including evolving consumer preferences and regulatory issues, its resilience, adaptability and capacity for innovation show an optimistic future for those in the industry. 

 

'Our survey highlighted that 84% of business leaders from the video games industry were planning a funding round, with 48% in the next 2 years. Although we are starting to see activity, I’d expect funding continuing to be a challenge in 2024, with VCs feeling less pressured to invest and move at speed. Once interest rates start to fall, consumer cost pressures ease, and there’s greater economic and political certainty, I would expect investor wallets to open up again in 2025.

This is really encouraging for the UK games industry with businesses wanting to scale and grow here.'

Richard Heap, Head of Interactive Entertainment

Mandy  Girder
Associate Director, Head of Media
Richard Heap
Richard Heap
Partner, Media and Technology
Mandy  Girder
Associate Director, Head of Media
Richard Heap
Richard Heap
Partner, Media and Technology

Media industry outlook 2024

Explore results from our survey with 300 media industry business leaders focusing on workforce, sustainability, innovation reliefs, funding and exit planning.