The UK’s close ties with Hollywood and the impact of the package of measures for the UK film industry unveiled in chancellor Jeremy Hunt’s spring budget were under discussion as Adrian Wootton, chief executive of the British Film Commission (BFC), Andrew Smith, corporate affairs director at Pinewood and Neil Hatton, chief executive of the UK Screen Alliance faced the UK parliament’s cross-party inquiry into British film and high-end TV today (March 19).
When asked by the committee about the slowdown of inward investment in 2023, in which there was a 39% decline compared to 2022 in the wake of the Hollywood strikes, Smith responded he was confident the UK would remain a popular filming destination, albeit perhaps not producing content at the same rate as the post-pandemic boom.
“The content arms race has come to an end… The number of film and high-end TV productions are probably going to fall back to a more normalised level,” said Smith. “If you read some of the press comments, such as [Disney CEO] Bob Iger’s, who said that we will make less and focus on quality, Paramount recently made a similar statement about improving return on investments by lowering average cost per title There’s been a re-balancing and growth has normalised.
“The good thing is, in the UK, by having permanent homes for the US studios [Disney has a long-term agreement with Pinewood, Amazon leases space at Shepperton, Warner Bros is based at Leavesden], if there is going to be less production, it’s going to be made here [in the UK].”
Wootton echoed this sentiment, recalling a recent trip to LA, a week before the spring budget announcement with a delegation from the UK nations and regions, talking to studios and streamers. “Outside of North America, the place people most want to make content is in the UK… A week later, we just made it more competitive and attractive.”
However, he added: “2024 is not going to be what the beginning of 2023 or 2022 was.”
With rumblings of a US crew strike simmering in Hollywood, what could a third US strike, after the devastation of 2023’s US actor and writer strikes, mean for the UK?
“There is a lot of caution in the US about that,” said Wootton. “They’re making contingency plans because they’re very worried about stopping again, whether they would have to look at production moving further offshore.”
Inward investment from the US specifically makes up “something like 98%” of the total international investment in UK, according to Wootton’s estimates.
The enhanced 40% relief from the Independent Film Tax Credit (IFTC) for qualifying films budgeted under PS15m, Wootton believes, will increase US investment.
“There are a whole range of investors in the US who are making films in the up to PS15m range but making them in different parts of the world,” noted Wootton. “With the new PS15m credit, they’ll be keen to work with British producers, British directors and British writers to make them in Britain.” We’ll probably find more US investment coming into the UK, but around independent film.”
VFX hopes and fears
Hatton, chief executive of the UK Screen Alliance, a trade association that represents visual effects (VFX), TV and film studios, post-production and animation in the UK, welcomed the spring budget changes to the Audio-visual Expenditure Credit, with qualifying VFX spend getting an additional 5% credit rate and removal of the 80% cap for visual effects costs.
However, he outlined how much damage has already been done to the VFX sector in the UK.
“A lot of visual effects companies are really suffering – during the Covid pandemic, we estimated 23% layoffs to the workforce in visual effects. Furloughs helped to reduce the impact. We have had no furlough in the strike period, the layoffs could reach 40%,” said Hatton, with the full impact of the strikes on the VFX workforce yet to be felt owing to visual effects work coming towards the end of a production’s schedule.
Hatton expressed concern that with the VFX relief not coming in until April 2025, production companies might delay spending until that point. He said, “We want them spending now.” “The Independent Film Tax Credit (IFTC) is a very welcome initiative, but it still has a 80% cap on visual effects and post production. It’s unfortunate that this wasn’t discussed when the tax credit was introduced. He said that the UK could still lose out on a tax credit elsewhere if such productions are “serviced by boutique
companies, often in the regions”. That is still at risk of flying out from the UK to go and seek a tax credit elsewhere,” he said.
He also noted that such productions will often be “serviced by boutique [VFX] companies, often in the regions”.
Business rates: “The underlying issue has not been resolved”
As part of the spring budget, a 40% relief on business rates for studio facilities in England was introduced until 2034, after a year in which studios have been subjected to large hikes in business rates from the UK government’s Valuation Office Agency. Northern Ireland and Scotland are not subjected to the same business rate changes as England and Wales.
“Without it [40% relief], the impact on studios, particularly in England, would have been devastating, to be honest. The increase in rates was literally 100s of percent, from the smallest to the largest stages,” said Wootton.
In an earlier committee session today, Bad Wolf’s CEO Jane Tranter had flagged that Wales was not standing to benefit from the spring budget relief, which is only targeted at England.
Wootten described the relief as an “Incredibly welcome sticking plaster… The underlying issue has not been resolved, and it’s not been resolved for Wales. We’ve agreed to use our resources to pay for the rates specialist who has been working with us on our working group to work with the Welsh government for their formulation to respond back on the fact that they didn’t get mitigation.”
He noted, “Ten years sounds like it’s a long time, but it’s not a long-term solution.”
The BFC is funded by the UK government’s Department for Culture, Media and Sport (DCMS) through the BFI and the Department for Business and Trade, as well as industry sponsors. The British Film Commission does not have long term funding. Wootton said: “I do not encourage any film companies to go to Sunderland or London.” He added, “I don’t promote any film companies to go to Sunderland or London.” The British Film Commission offers
choices, which it says is done in a fair and objective way.
