New tax breaks see British film industry firing on all cylinders

It was not so long ago that the British film industry was regarded as a national embarrassment, churning out little but turkeys, and barely registering at the Oscars. But in 2006, according to a study from the UK Film Council, the British film industry contributed £4.3bn to the economy - up 39% on 2004. It also contributed, overall, £1.1bn to the exchequer in tax revenues - reports The Guardian.

"The British film industry seems to be firing on all cylinders," said John Woodward, the council's chief executive.

"On one end of the spectrum we have smaller films like [Andrea Arnold's] Red Road and [Ken Loach's] The Wind that Shakes the Barley that get us prizes at Cannes. Then there are the medium-size films like The Queen and The Constant Gardener that get us to the Oscars. Finally, there are the juggernauts, like Harry Potter and James Bond, the real blockbusters."

By 2010 it is estimated that 11% of global film production will be sited in the UK.

Oxford Economics, which was co-commissioned by the council and Pinewood Studios to produce the report, attributed the leap in success to the introduction this year of new tax incentives for those making films in the UK.

Mr Woodward said: "The system was turbulent in terms of its creation in 2004 but it works. People are using it and the cheques are coming back from the Inland Revenue."

Studio scenes in the next Bond movie are likely to be shot wholly at Pinewood Studios (Casino Royale was partly shot at Barrandov studios, Prague) as a result of the UK's tax incentives.

Oxford Economics found that the UK film industry employs 35,000 people, and directly contributes £435m gross in tax. It costs the tax payer £120m in tax relief and £55m in direct support to film-makers through the Film Council.

The report estimated that if tax relief were abolished the industry would, in the medium term, atrophy, causing the exchequer a loss of about £350m a year. The number of films made would drop by 75% and GDP would be reduced by £1.3bn. The skilled workforce that the industry attracts, many from overseas, would melt away to find employment elsewhere.

The report covered economic activity arising from film production in the UK; and from distribution and exhibition of films made in the UK. But it also looked at wider economic effects such as the benefits to tourism. It attributed one in 10 visits to the UK to the impact of films, from Harry Potter to Miss Potter.

Merchandising - books, games and toys associated with UK films - was worth £345m, the report said.

Piracy was the biggest challenge to the industry, according to Mr Woodward, with 20% of all viewings of films based on pirated material.

Eric Fellner, who with Tim Bevan runs the UK's most successful production company, Working Title, said: "It's a shame that while there's such a massive increase in tax revenue from films, on the cultural and artistic side of our business the government is threatening 5% cuts to Arts Council England."

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