Underlining the potential impact of the threatened Hollywood production hiatus, the volume of overseas-financed production in the UK rose 33% last year, according to the British Film Commission's annual report.

Overseas-backed feature and high-end TV production hit $788m, eclipsing last year's $591m with such high-profile studio-backed fare as Harry Potter And The Sorcerer's Stone, Band Of Brothers, The Mummy Returns and Tomb Raider. UK-produced films proved fewer in number (52 compared to 70 in 1999) but bigger in budget (total budgets hit $308m compared to $248m in 1999). Overall production volume broke the $1 billion barrier.

While the rise gives local companies servicing studio-level fare a cushion, most UK studio facilities and post houses are bracing themselves ahead of the threatened strike by US actor's union SAG. Although companies are outwardly upbeat about their 2001 rosters for the upcoming year, few expect to repeat last year's growth.

The rise in budgets for locally-produced films, suggesting that UK film-makers are increasingly using more expensive US talent, may force UK productions to scale back during a strike.

Also looming is the prospect that the UK government will not renew the production tax breaks launched in 1997, although their loss would not impact until 2002 when they run out. Film minister Janet Anderson said that the tax incentives introduced in 1997 have yielded more than $146m of direct benefit to the film production sector in the UK during the last few years.

Steve Norris, the British Film Commissioner, warned that last year's success "may be short-lived" without the tax incentives. He added that global competition to house US productions was rising, a factor cited by Pinewood chief Michael Grade in the proposed merger of Pinewood and Shepperton, the UK's most renowned facilities.

Norris hopes the weakness of the pound against the dollar will continue to help attract US productions to the UK. "The combination of the weaker pound against the dollar and fiscal breaks have proven to be major incentives," he said.