Perhaps 200 British artists live by their work alone. But there are alternatives to starvation in a garret for the latest art graduates. Helen Hague reports

Even before the Royal College of Art's final show opened to the public on July 5, Marilene Oliver's startling image of a digitally reassembled murderer who bequeathed his body to medical research was snapped up by a West End gallery. Oliver downloaded images of the dissected remains of Joseph Paul Jernigan from a medical website and scanned them onto see-through acrylic plates.

I Know You Inside Out is on sale for ?16,000 at the Beaux Art Gallery's Summer Show of Modern British and Contemporary Art in Cork Street, alongside work by Elizabeth Frink and Terry Frost. Not yet 24, Oliver has an MA from a highly prestigious institution, a high profile and ?8,000 - her cut of the ?16,000 price tag - to clear her debts and help fund studio space in North London.

For the thousands of young hopefuls emerging this summer from Britain's art colleges, it is the stuff that dreams are made of. But even for those artists picked up so soon out of college, the market is extremely tough. Sir Christopher Frayling, rector of the RCA, reckons that only about 200 British artists make their living entirely through their art. There are 60,000 students on art and design courses in the United Kingdom - equal, says Sir Christopher, to the entire population of Renaissance Florence. And while there is a career structure in design, trying to make it as an artist is "very much more of a lottery" Sir Christopher says. Not everyone can be the next Damien Hirst. And even Tracey Emin does gin adverts as well as rumpled sheets.

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David Hancock is a 28-year-old artist with an impressive CV who earns so little that he has to claim housing benefit. The winner of a BP Portrait Award, his powerful paintings chronicle the lives of disaffected young people. He has also had 11 solo shows and a residency at the Walker Art Gallery in Liverpool, but for ?20 a week, he shares studio space with 20 other artists in an old building in a run-down part of Manchester. There is no advice he feels able to give young artists intent on success. "If you are going to do it, you will. You've got to be really driven, ambitious and lucky - being in the right place at the right time."

He says he got little help from Manchester Metropolitan University in honing his self-promotion and entrepreneurial skills before finishing his fine art degree in 1996. "They didn't even teach us how to present a CV or pitch a proposal." Hancock, who has just started working a few hours a week as a curator at the Chinese Art Centre, tried teaching but it was not for him. He can cite only two of his contemporaries still attempting to make a living through art. "You've either got the mindset or not," he says.

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Next week, Hancock will be among selected young artists taking stands at Fresh Art at the Business Design Centre in Islington, selling work direct to the public - a new event scheduled to become an annual fixture.

Henry Bird, due to finish his MA in fine art at Central St Martins College of Art and Design next summer, will also be there. He is already networking assiduously, has sold work to Richard Branson's business partner and sports a red flower-spattered Moschino jacket at the private views he likes to frequent. At 31, Bird has amassed an impressive-sounding CV that includes being jailed for freedom fighting in Zaire and practising insight meditation in a Buddhist monastery in Burma. But perhaps even more impressive, he has managed to raise sponsorship for A Secret Career in Counter-Espionage , the ambitious computer-generated resin sculpture marquette he plans to make in cast aluminium. He will be showing it at Fresh Art alongside dyed beetle faeces paintings on steel.

Penury, artistic oblivion or grudging submission to the wage-slave rigours of a regular day job are the underbelly of artistic ambition left to fester unfulfilled or unacknowledged. But artists who do not give up disheartened have a way of continuing to make work, whatever the whims and blandishments of the art market.

Robin Bales, a fine art graduate from Falmouth College of Arts, imagined he had "joined the bourgeoisie and the possibilities were infinite" when he first went to college. But down in Cornwall after graduating, those "infinite possibilities came down to snagging a teaching job in a further education college and working as a gallery technician". Bales moved to London - a magnet for many aspiring artists - where the "smugness of the art scene makes me want to hurl". He has a day job engraving awards for industry on glass, a passionate credo "against blandness" and a penchant for making "perverse works that will not sell". Consider Glut/Purge - a pond filled with blue bubble bath and half bananas and plums left to rot - his take on the bulimic nature of late capitalism. "It feeds us this stuff and then throws us up. At college I worked with sperm, pubic hair and jam. Now I'm a corporate cheerleader," he says, quaffing wine at a private view. Bales could go far if Charles Saatchi ever catches up with him.

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Galleries are deluged with slides and CVs from artists trying to break out of obscurity. But the glitzy world of your own private view is not the only route: residencies, community arts projects and further study are all ways of consolidating skills and building a portfolio to hawk around.

Many colleges are teaching their students to survive and thrive after leaving. The London Institute, which encompasses Central St Martins, Camberwell, Chelsea, the London College of Fashion and the London College of Printing, has data showing that ten times as many of its graduates are self-employed or freelance six months after leaving than the graduate average. The institute tries to ensure that students are exposed to a range of career choices and accept that modifying a long-held ambition to make a living as a practising artist does not constitute failure.

Head of careers Valerie Rowles says: "Our students have many transferable skills that are highly desirable to employers who are looking for freshness and imagination - lateral thinking, problem-solving, good visual promotion and communication skills." The blurring of disciplines between fine art, design, graphics and installations - and employers' hunger for creative people on the pay-roll has, Rowles says, opened up many new opportunities such as web design. A fine art graduate can sell ideas and engage in tasks from a different standpoint from team members steeped in facts and figures.

Sir Christopher believes the sector should take stock of the huge growth in undergraduate art courses and ask itself "whether producing so many people who think they are going into the profession is a very ethical or sensible thing to do", particularly given that it is increasingly the institutions offering postgraduate courses that provide a launch pad for practising artists and designers. He adds that "dangling the carrot" of life as a full-time professional artist will leave many disappointed. But, like Rowles, he is a vociferous advocate of the kind of education art colleges can offer. Encouraging flexible thinking and creative problem-solving "is the kind of mode of ÖйúAƬ that other subjects could look at with profit'', he argues. For those determined to make it, portfolio careers - stitching together income-generating packages of teaching, consultancy and commercial work - have become the norm for artists who choose to carry on painting and making.

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Oliver, buoyed by her recent successes, has no illusions about making a full-time living out of her art. She is happy to sign up to a portfolio career, has applied for a six-month residency at the Wellcome Trust and is considering part-time college teaching. She might travel or try for a PhD to explore her take on the body - how digital processing links into Egyptian mummification, embalming corpses and cryogenics. Or she might move on. But making new work will undoubtedly remain her bedrock. "Creative work is everything - even if I have to work for a year to make enough money to fund a new project," she says.

Fresh Art is at the Business Design Centre, Islington, July -29.
More details on 0870 7363108.

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