Creative Industries: Seven of the best for Britain

V&A pioneers a brand new strategy

THE Victoria and Albert Museum in South Kensington epitomises the dilemmas facing Britain's great public museums. While they must exploit the value of their cultural inheritance, they must avoid diluting the scholarly and aesthetic purpose they were built to fulfil.

One of the great national museums, the V&A dates back to 1852 when it was the Museum of Manufacturers, giving it distinctly commercial roots.

It houses the largest collection of decorative arts in Britain. It also has the national collections of British watercolours, miniatures, prints and drawings and the National Art Library, while its collection of Italian Renaissance and Baroque sculpture is one of the best outside Italy.

The V&A's efforts to reduce its dependence on state funding began in earnest in 1986, after Margaret Thatcher made it a trustee-run museum. The trust- ees believed the government grant would never grow in a way that could allow the museum to move forward, so in 1986 they created V&A Enterprises. It was one of the first concerns to seek to make money both in and out of the public sector. It aimed to inject professionalism and business beliefs into the stuffy world of museum curating.

Jim Close, assistant director of administration - effectively the V&A's chief operating officer - lists the three arms of V&A Enterprises, which last year made a net profit of pounds 1m on sales of pounds 4.5m. All profits are ploughed back into the museum and are untaxed. First, retail, which is unlikely to see much more growth, as it is largely dependent on visitor numbers. Special events - hiring out the cavernous halls for corporate events - earns high margins, but has probably peaked. The area Mr Close is most excited by is design licensing, which is growing steadily. Designs owned by the V&A have been licensed from Tokyo to New York. Licensing accounts for pounds 350,000 of profits on sales of pounds 1.3m, and it has almost limitless prospects.

But, with an annual budget of pounds 38m, a surplus of pounds 1m a year from commercial activities is small beer compared with its public funding requirement.

The real value of the V&A is the sheer quality of its resources, making it a vital adjunct to the design and fashion industries, and drawing people from around the world to its doors.