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 look at some of the comments in the press by the likes of [Disney CEO] Bob Iger, who said we are going to make less, and focus more on quality; Paramount made a similar comment recently about improving return on investment by lowering the average cost per title; others have made similar comments. 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 £15m, Wootton believes, will increase US investment.
“There are a whole range of investors in the US who are making films in the up to £15m range but making them in different parts of the world,” noted Wootton. “Now with the new £15m tax credit they’ll be very keen to work with British directors, British producers and British writers, to make them in the UK. 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. That was lessened by furlough. 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. “We want them to get spending now,” he said.
He also said the budget “missed a trick” by keeping the 80% cap in place for the IFTC. “The Independent Film Tax Credit is very welcome, but in terms of visual effects and post-production, it still has the 80% cap in it. I think it’s unfortunate that that wasn’t talked about when it was introduced. A £15m film could easily have half a million pounds of visual effects in it. 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 business rates 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. However, the organisation itself does not have funding support beyond 2025. The BFC received a three-year enhanced settlement in 2020, which was extended to 23/24, then a further £1m announced in the last autumn statement for 24/25. A funding settlement from 2025 onwards now needs to be negotiated.
“We are making an argument to the government that we want to try and find a long-term funding settlement for the British Film Commission and have had a tremendous amount of support from DCMS,” said Wootton.
John Nicolson, a member of parliament from the Scottish National Party who sits on the CMS committee, challenged Wootton on how he can promote production across the UK as the chief executive of the BFC while also championing London as a filming destination through his other role as chief executive of Film London.
“In terms of the structure, that was a decision of the UK government, when the UK Film Council was dissolved,” responded Wootton.
He added: “I don’t encourage any film company to go to Sunderland vs London. What the British Film Commission does is we offer [production companies] choice,” maintaining that happens in a “completely fair and objective manner”.
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