UK co-productions are down by 78% over the first half of 2009 with just three shooting so far compared with 14 over the same period last year.  

It has led to a steep drop in the level of co-production spend from $68.4m (£41.6 million) to $14.6 million (£8.9 million) over the period.

The figures reflect issues around the British film tax credit, which was introduced in early 2007. It is widely acknowledged that the tax credit system works well for UK films, set in the UK, which pass the cultural tests.

But it has been criticised for making the use of UK talent, crews and equipment unattractive when producing films abroad. The effect of the legislation is such that where British crews and actors are working abroad but being paid in the UK, the tax credit will not apply. Similarly the tax credit does not apply where equipment is purchased in the UK but used abroad.

John Woodward, chief executive of the UKFC said there was a need to revisit the film tax relief “which stifles UK filmmakers from building international film partnerships and disadvantages them when filming abroad.”

The three co-productions that have been made so far in 2009 are Outcast, Mr Nice and The Ghost. Meanwhile, the number of inward investment titles, such as Harry Potter And The Deathly Hallows Part 1, Clash Of The Titansand London Boulevard, are also down, having dropped from 17 in the first half of 2008 to 12 in the same period of 2009 but spend is up from $339 million (£207.6 million) to $711 million (£436.2 million).

David Steele, head of research and statistics unit at the UKFC, puts this change down to the exchange rate. “The value of the pound was extremely high late last year and since then it has fallen steeply.”

The tax relief has helped to boost local productions, which are up 13% over the period. There were 33 UK domestic productions in the first half of 2009 with a total spend of $147 million (£89.9 million), which includes films such as Chatroom, Centurion and Nowhere Boy. In the same period in 2008, there were 29 films in production.

The House of Lords communications committee launched an inquiry into the contribution of the UK film and television industries to the British economy in January. The peers are also examining the effectiveness of the tax credit system. Lord Fowler, Chairman of the Committee, said at the time “We will look into the financing of the film industry, and in particular how the 2006 changes to the tax regime have affected it.”

The review came in the wake of a report prepared by Oxford Economics which warned that the UK film tax credit has created adverse effects for co-productions and offshore activity.

A House of Lords spokesperson described the inquiry as a ‘scoping exercise’. She said ‘the plan would be to finish the inquiry by the end of the year’. The committee will then prepare a report for the House of Lords and may make recommendations or could call for a debate in the house. Any recommendations could be implemented by the Government.