Funding, sponsorship and the future sustainability of the arts

The economics of the performing arts has always been challenging.

For orchestras in particular, there is a structural problem at the heart of the business model: putting on the performance normally costs more than can be recovered through ticket sales alone.

‘Every concert loses money,’ says Mark Pemberton, former Chief Executive of the Association of British Orchestras (ABO), who now works independently across consultancy, public affairs, governance and international sector development.

‘The costs of production are in excess of your primary source of income, which is your box office. Therefore, you have to have income from other sources to plug that structural deficit.’

That need for additional income is not new. Public subsidy, philanthropy, commercial activity, tax incentives and corporate sponsorship have long existed alongside earned income.

What is changing, Pemberton argues, is the pressure on each part of that mixed economy.

Public funding under pressure

In the UK, the squeeze on public funding has been substantial. Pemberton points out that Arts Council England has, in cash terms, roughly the same amount available to distribute in its current funding round as it had in 2008-11.

‘It has not increased in 18 years,’ he says, estimating that this represents around a 40% reduction in real terms.

At the same time, the definition of what receives cultural funding has broadened and more organisations are being supported.

The result, he argues, is that public money is being spread more thinly.

That pressure has continued despite the change of government in 2024. Pemberton says that while the current Labour government has announced capital investment, this should be distinguished from revenue funding that supports the ongoing operation of arts organisations.

‘There has been no increase in access to revenue funding,’ he says.

And he sees political risk increasing rather than receding.

Pemberton points to the growth of populist and far-right parties across Europe as a warning that public support for culture cannot simply be regarded as permanent.

‘If we had a Reform government in the UK, I don't think we'd have any arts funding at all,’ he says. ‘We're at pretty critical times.’

His point is not that public funding should be replaced by business. Rather, the possibility of further political and economic shocks strengthens the case for cultural organisations to build more resilient models.

The mixed economy

One response is to rethink how arts organisations describe themselves.

Pemberton argues that orchestras should not be seen simply as subsidy recipients or charities, but as businesses operating with a structural deficit.

His own work at the ABO included helping to establish Orchestra Tax Relief, applying a model similar to tax incentives used elsewhere in the creative industries.

That, he suggests, represents an important shift in language: rather than asking government simply to subsidise an art form, the sector can make the case for policy mechanisms that enable cultural businesses to produce work.

There are also structural options available to organisations themselves. Pemberton points to models in which charitable organisations operate alongside separate commercial entities, allowing parts of their activity to pursue commercial opportunities more directly.

The wider principle is diversification.

Public support remains important, but it sits alongside earned income, tax incentives, philanthropy, private donations and commercial partnerships.

Corporate support is therefore not a substitute for government funding. It is one element within a broader funding ecology.

Sponsorship is not philanthropy

Pemberton is particularly emphatic that corporate sponsorship should not be confused with philanthropic giving.

‘Old-fashioned corporate sponsorship is not philanthropic. It's a transactional relationship. It's a business relationship.’

In the traditional sponsorship model, a company supports an arts organisation because doing so offers something of commercial value: brand visibility, access to an audience, hospitality, reputation or association with a particular organisation, art form or experience.

An orchestra, theatre, festival, choir or venue can therefore create a bridge between a business and the people it wants to reach.

Pemberton believes that this commercial logic was weakened in the UK following the 2008 financial crisis.

As companies came under greater scrutiny over discretionary spending, sponsorship became harder to justify. He also identifies the closure of Arts & Business, the UK organisation established to encourage and develop partnerships between businesses and the arts, as a significant policy mistake.

Its role was transferred to Arts Council England.

Pemberton is blunt about the decision.

Arts Council England, he argues, is fundamentally structured around public subsidy rather than commercial partnership, and therefore was poorly placed to replace an organisation whose purpose had been to connect the arts with business.

A further problem came when government sought to reposition corporate sponsorship as philanthropy.

Pemberton recalls arguing directly against that approach at the time.

The consequence, he says, was that arts organisations found themselves competing for philanthropic resources against areas such as health, social care and social justice.

‘At the end of [the government's year of corporate philanthropy], less money was going into the arts than at the start.’

For Pemberton, the lesson is not that philanthropy has no role in cultural funding.

It is that philanthropy and sponsorship answer different questions.

Giving businesses a choice

That distinction becomes increasingly important as businesses consider environmental, social and governance priorities alongside marketing, sponsorship and philanthropy.

A company may want to support an arts organisation because a project creates social impact.

It may be interested in education, health and wellbeing, community development, environmental sustainability, employee engagement or place-making.

Another business may want to give philanthropically because support for culture aligns with its values.

But another may simply see a strong commercial opportunity: an audience it wants to reach, a brand association it values or an event through which it wants visibility.

These motivations can overlap.

Pemberton's argument is that they should not automatically be collapsed into one approach.

‘There's sponsorship and there is philanthropy, yes, of course. But you need to give corporates the choice and the sell as to which is right for them.’

A company may be looking to strengthen its environmental, social and governance activity, he says, but that should not mean forgetting ‘the value that comes from sponsoring an arts organisation for just putting on art’.

The growth of social-impact language has encouraged cultural organisations to articulate additional outcomes around education, wellbeing, inclusion, communities or the environment.

Those outcomes can create powerful new forms of partnership.

But Pemberton warns against allowing them to obscure the fact that art and culture themselves can also offer commercial value to businesses.

The ethics of sponsorship

That commercial case does not make every potential partnership straightforward.

Arts organisations are increasingly expected to consider the ethical and reputational implications of the businesses they work with, particularly in sectors such as fossil fuels and tobacco, or where there are wider concerns about corporate conduct.

For Pemberton, this has become a significant part of the sponsorship debate.

He argues that organisations can find themselves under intense pressure to distinguish between what critics regard as ‘good sponsorship and bad sponsorship’, with protest, reputational risk and stakeholder expectations shaping decisions about whether money should be accepted.

He points in particular to controversies surrounding sponsorship by oil companies.

‘Our organisations are being crippled by shame and turning down sponsorship opportunities,’ he says, describing what he sees as ‘the whole cancel culture’ surrounding some corporate relationships.

Pemberton does not argue that ethical concerns should simply be ignored.

Arts organisations, he says, have to make judgements about risk, reputation and compatibility with their values.

The difficulty lies in balancing those concerns against the need to maintain financially sustainable organisations.

It is also a question of mission.

Pemberton cautions against allowing funding opportunities to determine what an organisation exists to do.

‘Money follows mission, not the other way around.’

For arts organisations seeking new partners, that distinction may be crucial: corporate relationships can support the mission, but should not reshape it simply in pursuit of funding.

Hong Kong and the mixed model

The same debate looks different in different cultural systems.

Pemberton points to Hong Kong as a particularly interesting example because its funding environment retains elements of the mixed-economy model inherited from the UK.

He contrasts this with the Chinese mainland, where cultural funding has traditionally been much more state-driven.

That history means Hong Kong cultural organisations have developed around a more diverse combination of public, commercial and private income.

‘Corporate sponsorship and private donations are so absolutely vital to [the] business model,’ he says.

That is significant at a time when Hong Kong is investing heavily in cultural infrastructure and strengthening its role as an international performing arts centre.

A mixed model creates opportunity, but it also requires arts organisations to build strong relationships beyond government.

That means understanding not simply how to ask companies for support, but what businesses are trying to achieve and where the arts can create genuine value in return.

Sustainability means more than carbon

This leads to a wider meaning of sustainability.

Environmental sustainability is increasingly important across the performing arts, particularly around buildings, energy use, production, travel and international touring.

But organisational sustainability is just as fundamental.

For a cultural organisation, sustainability also means maintaining a funding model capable of supporting artistic activity over the long term.

That may require a combination of public investment, commercial activity, sponsorship, philanthropy, tax incentives and other forms of partnership.

It may also require a change in mindset.

Rather than treating business simply as an alternative source of money, cultural organisations can think more broadly about what companies are trying to achieve – and where genuine mutual value might exist.

Environmental priorities can create partnerships around buildings, transport, technology and production.

Education programmes can connect arts organisations with businesses interested in young people and skills.

Cultural participation can contribute to health and wellbeing, communities and place-making.

Companies can contribute expertise, networks, technology and in-kind resources as well as funding.

And alongside all of this sits conventional sponsorship – still capable of creating value precisely because a cultural organisation can connect a brand with an audience.

From funding to partnership

The challenge is therefore not simply to secure more corporate money.

It is to build relationships that are clear about purpose, value and expectations on both sides.

That requires arts organisations to understand what potential partners are trying to achieve, rather than treating business as a substitute for diminishing public subsidy.

It also requires clearer language.

Sponsorship is not necessarily philanthropy.

Philanthropy is not CSR.

Environmental, social and governance activity is not simply another name for corporate giving.

And different companies may legitimately want different kinds of relationships with culture.

At a time of pressure on public funding and growing political uncertainty, that clarity matters.

The future sustainability of the arts will depend not on replacing one source of income with another, but on building a genuinely mixed model: public support, earned income, private giving, commercial activity and business partnerships working alongside each other.

For Pemberton, the case is ultimately one of resilience.

The arts need to become better at explaining not only why they need support, but why they matter to the organisations, communities and businesses around them.

That may prove to be the more important conversation.