From Harry Potter to Sunshine, the UK's post houses are creating world-class effects work. But how is the sector being affected by the exchange rate and increasing competition from India' Geoffrey Macnab reports.

The past 12 months has been something of a banner year for the UK post sector. From creating the breathtaking space-scapes of Sunshine and the fantasy world of Paramount's Stardust, to the intricate world of Harry Potter And The Order Of The Phoenix, the work of the UK's post artists has broken new ground. And they are working their magic on a range of ambitious projects, including New Line's The Golden Compass, Warner Bros' The Dark Knight, and Walden Media and Walt Disney's The Chronicles Of Narnia: Prince Caspian.

UK companies are now at the forefront of a dynamic, resourceful industry that is one of the three largest in the world, alongside the US and New Zealand. Since 1997, employment at the UK's four largest companies - Framestore CFC, Double Negative, Cinesite and Moving Picture Company - has increased by 440% while turnover has shot up by 540%.

A decade ago, as Cinesite's head of production Courtney Vanderslice notes: 'America was the big place. The UK was just this tiny little place fighting very hard to get work.'

That has clearly changed. The UK post-production sector was given a massive fillip in 2001 by the first Harry Potter film, Harry Potter And The Philosopher's Stone. In its wake, a rush of big-budget Hollywood films brought their post work to London, drawn to the UK by generous tax breaks.

But with the UK production sector in flux the question now is whether those major projects will continue to turn to London for so much of their visual-effects work.

Chief among the concerns is the exchange rate. As the pound continues to climb against the dollar, the fear remains that the Hollywood studios will have no compunctions about moving their blockbusters elsewhere.

As British film commissioner Colin Brown acknowledges: 'The studios, generally speaking, respond with horror to the idea of a $2 pound.' (Brown does point out, however, that the UK is far from unique in seeing its exchange rate shoot up against the dollar.)

Another concern is that the UK's new tax credit system is still bedding down (click here for more details). Representatives of the leading post-production companies acknowledge there was a downturn in 2005-06, as the industry tried to adjust to the end of the sale-and-leaseback era.

Last year, when various big-budget movies that had looked likely to shoot in the UK went elsewhere - Universal's Wanted, for example, which is shooting in the Czech Republic - the nerves jangled again. Rivals such as Canada were giving incentives not just on principal photography but also on post-production. It did not help that in the UK, employment costs had shot up.

As a result, the sector began to look further afield for clients, courting productions that were not shooting in the UK. 'We were forced to compete globally,' says Vanderslice.

There is evidence that London is seen as one of the best places in which to post - even if production is not taking place in the UK. For example, Double Negative is working on Guillermo Del Toro's Hellboy 2: The Golden Army, which has been shooting in Budapest.

Enter India
The US studios look at three key economic factors when deciding where to take their projects: labour costs, exchange rates and tax incentives. The UK's post industry faces increasing competition on all three, not just in Eastern Europe and from rivals such as Vancouver and Weta, Wellington, but also from newcomers, among them India.

Eyebrows were raised in Soho last year when Indian company Prime Focus Ltd bought a 55% stake in the UK's VTR Group. Many believed - as one observer puts it - that Prime Focus was buying 'a shop front in order to move the work slowly and strategically off shore'.

'We can't hide the fact a simple wire removal will be cheaper in India or various other Asian or Eastern European countries,' acknowledges Alex Hope, managing director of Double Negative.

Simon Huhtala, managing director of Prime Focus London, suggests the arrival of a major Indian player in the UK visual-effects sector has provoked ambivalent reactions. 'Most people are looking at it intently while being quite dismissive at the same time ... I don't know whether people see us as a threat or as a potential future partner.'

There is a certain schadenfreude in the tales UK visual-effects specialists recount of substandard work done outside the UK that has to come back to London for improvements.

'I don't think any of my clients want to go and work in Mumbai or Chennai,' says the head of a leading London visual-effects company. 'In the long term, perhaps, economics will dictate that large parts of the grunt work is done elsewhere, but at the moment that's not part of our business model here.'

At present, the UK post sector appears as busy as it has ever been. 'We're not in a bad position, comparatively speaking,' insists Brown. He points out that the UK's post sector has 'tons of horse power'.

At a time when post-production schedules are growing ever shorter and the studios are making decisions where to take their post work at the last minute, UK post houses are big enough and flexible enough to take on daunting projects at short notice - and to deliver in time for release dates that are written in stone. As Brown puts it, Soho has 'skills and scale'.

Producers wax enthusiastic about the reliability of the leading visual-effects houses. Last year, DNA Films' Andrew Macdonald oversaw two UK features that were heavily reliant on effects work: Sunshine and 28 Weeks Later.

'We looked at filming Sunshine in other places, particularly Canada and New Zealand, because of their benefits,' Macdonald recalls. 'The overriding thing is that we thought we would make a better film by being based in London. The visual-effects business here is second to none.'

He adds that some of the post work on 28 Weeks Later was done in Australia and Canada. On Sunshine, The Moving Picture Company (MPC) took the entire job.

In London, all the rival companies have offices within walking distance of one another. 'People who haven't experienced that before love it,' Macdonald says of the close-knit UK post-production community. 'Post is one of the things that keeps the whole (UK) industry together. We are the leader in Europe.'

'We focus on maintaining business at the leading edge of what we do,' says Double Negative's Hope. 'That's why post-production work comes to London. They know the quality will be up there with the best in the world and it is going to be priced competitively. What our clients are looking for is groundbreaking work done at a reasonable budget.'

'The work is all about quality at this moment in the evolution of the business,' says Steve Norris, managing director of Framestore CFC. 'Only a limited number of companies can work at the level we (in Britain) are trying to occupy.'

'We have never been busier. We're absolutely running at capacity and we have work through until April of next year,' says Michael Elson of MPC.

London's big post-production outfits are intensely competitive with one another, but they are also ready to collaborate when necessary. At the moment, Cinesite and Framestore CFC are working on The Golden Compass while Double Negative and MPC are joining forces on Warner Bros' 10,000 BC. The joint philosophy is, let's get the projects into the UK. Once they're there, the companies can fight among themselves over who will do what. 'We need to be seen as UK plc,' suggests Vanderslice.