A BFI-commissioned report critical of UK film companies and UK funding mechanisms has surfaced three years after it was delivered.
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The report, authored by chartered accountant Northern Alliance, reveals widespread financial frailty within leading independent film companies from the production, distribution and sales sector.
Titled ‘The Corporate Finance Of SMEs (small and medium-sized enterprises) in the UK Film Industry’, the report examined the financial health of 108 companies who ”made, sold or released the most successful independently produced and distributed British films between 2006 to 2013.”
The Northern Alliance analysis, which will not be published on the BFI’s website, was based on the latest accounts filed by the UK film companies to Companies House.
Northern Alliance also carried out a similarly structured report for the UK Film Council in 2009 in which UKFC CEO John Woodward admitted “concern” over the “generally frail state” of many UK film companies’ balance sheets.
Key findings of the 2014 report:
- accounting among distributors and producers ‘remains inconsistent and typically falls far short of US accounting requriements’
- a widespread failure to appreciate and accurately value intellectual property created by the UK film industry
- an almost systemic reliance on dilatory payment of creditors with some companies continuing to take over six months to settle debts
- few instances of private investment in film businesses and the ‘equity gap’ in the UK film industry appears as wide as it was in 2009
- public sector investment in film businesses, as opposed to film projects, continues to be nugatory [ie, of no value or importance]
- almost half of the businesses originally identified [in 2009] as producing, selling or distributing the best British films have subsequently ceased trading or appear to be in decline
No specific companies or individuals were named in the report, which also highlights that film companies best insulate themselves by simultaneously producing TV and through vertical integration.
The report highlighted the scale of the challenge facing new producers hoping to get ahead in the business:
“Whether this reflects an industry that is resistant to ‘new blood’ or simply that there is no substitute for experience in a highly complex area such as film production is beyond the scope of this study, but it appears that in terms of personnel the churn rate of producers within the upper echelons of the UK film industry is fairly low.”
It also found that having the support of a Hollywood studio can in fact be damaging:
“Whilst on a personal level working for a studio might be profitable, at a corporate level, the majority of the companies that enter into long-term arrangements with MPAA companies generate significant losses.”
The report, which is unusual for a BFI-commissioned study for the consistency of its criticism, only surfaced after it was brought to the attention of researcher Stephen Follows who was sent it by the BFI following a freedom of information request.
A BFI spokesperson commented to Screen on the report’s findings:
“The research that makes up the report’s findings are almost four years old and the issues that it raised are well-known, long-term and reflect the general pattern of the creative industries themselves.
”Both Film Forever (2012-2017) and BFI2022, BFI’s five year strategic plans are the result of extensive UK-wide industry consultation and address this holistically from education to audience development and supporting emerging talent, acknowledging that the UK film industry is highly complex and faces many challenges but that it also holds great potential, opportunity and is growing.
”As referenced in the introduction to BFI2022: ’While recognising the successes, we are aware that British film’s future is a complex one of great potential but also many challenges. For many UK filmmakers it can feel like tough going. There are genuine questions for us to consider about how independent British film can be supported to take advantage of its creative success to scale up and better compete in what should be an age of opportunity. Future economic value will come from more and better UK content being created, owned and then exported by UK businesses.’”
In response to a question from Screen asking why the report hadn’t been published, the organisation said:
“In order to fulfil our role as the lead organisation, the BFI needs to commission a variety of research to inform future policy development and understand the industry. Sometimes these are specifically commissioned for publication, for example our Statistical Yearbook, at other times research is commissioned which we don’t intend to publish, but, unless there are commercial sensitivities, we are always very happy to share them as we did in this case. This piece of research, commissioned more than three years ago, has been supplied to a number of researchers since that time.”
However, the fact the report wasn’t published by the BFI “surprised” its author at Northern Alliance. “It was surprising that the BFI didn’t publish the report, as the UK Film Council had published the original. I can’t recall receiving any formal explanation as to why the report wasn’t published,” Mike Kelly of Northern Alliance told Follows.
Since the report’s delivery the BFI has progressed sustainability initiatives including the Vision Awards and the ‘locked box’ scheme. It recently launched a commission on independent film which includes a number of key UK industry stakeholders.