House of Commons - Culture, Media and Sport

Select Committee on Culture, Media and Sport Sixth Report

4 ATTRACTING INTERNATIONAL PRODUCTIONS

87. Attracting investment from overseas, especially the US, is of vital importance to the sustainability of the British film industry by maintaining a throughput of large projects giving British talent and technicians the opportunity to practise their skills as well as remain within the industry. As shown above, inward investment in 2002 constituted £234.30 million of the £533.34 million total investment in film in Britain (approximately 44%).[147] The figures for inward investment since 1992 are shown below, Table 7 clearly shows the importance of inward investment to the film industry in the UK as each year more has been spent on inward investment features compared to indigenous production:Table 7: The numbers and value of inward investment and domestic UK productions. The table does not include co-production information

Year	Number of inward investment features	Inward investment Total (£m)	Number of UK domestic features	Domestic UK features Total (£m)
1992	8	58.50	22	39.98
1993	15	127.74	25	30.34
1994	17	201.97	33	59.51
1995	18	241.30	34	94
1996	30	409.30	73	172.20
1997	21	276.90	84	202.89
1998	24	250.60	67	174.96
1999	28	404.06	70	170.31
2000	37	539.44	52	211.70
2001	38	230.46	51	180.12
2002	30	267.84	42	165.25

Data Source: DCMS (see Volume II)

88. One of the biggest attractions for overseas investors is the world renowned pool of expertise, and the excellent infrastructure available for both production and post-production, to which we have referred earlier in this Report. This was emphasised to the Committee by many of those involved in the industry, here and especially in the US. The Committee visited some of the facilities available in the UK, including Pinewood Studio, Leavesden Studio, Ealing Studio and Framestore CFC in Soho and were shown their involvement in inward investment features such Harry Potter and James Bond (see colour pages). The Committee were impressed by the world-class facilities they were shown and glad to hear of continued inward investment into the industry.[148]

89. Equally important to the attraction of investing in Britain is abundance of creative talent in areas such as acting, directing and script-writing. Stars such as Hugh Grant, Ewan McGregor, Helen Mirren, Rowan Atkinson, Judi Dench and Kenneth Branagh have ensured that Hollywood studios fund British films and produce foreign films in Britain. This, and expertise in areas such as costume, have meant that 82 Academy Awards have been won by the British since 1974.[149]

90. The shared English language is an obvious element that encourages partnership with the US as the main source of film production investment.[150] Softer factors such as the comforts and amenities available in London and elsewhere in the UK can also play a role in persuading key personnel on overseas productions to lend their weight to a UK location. We are, however, aware that basic facilities, previously lacking in competing locations, will not continue to be so for very long and competition for overseas productions is always increasing. The British film industry cannot, therefore, rest on its laurels.

91. The Department for Culture, Media and Sport also has a significant role in attracting international productions, for example by encouraging co-operation between London boroughs to provide street closures where needed.[151] DCMS were instrumental in gaining a change in employment law that encouraged the makers of Harry Potter to film in Britain.[152] The Secretary of State told the Committee that "if there are ways in which we can make the UK more attractive by measures like that, then of course we would look at that".[153] With regard to such wider factors we heard in the US that it was the availability of the Irish Army, in marked contrast to lack of co-operation in the UK, that settled the question of where to make Braveheart.

92. An important element to attracting overseas productions to Britain was, as discussed above, undoubtedly the tax incentives available to companies working in the UK. Throughout the inquiry the Committee were continually told of the importance of the tax incentives to the continuation of inward investment into the UK. All the US studios predicted a significant loss of investment if the Section 48 tax break were to be abandoned in 2005.[154]

Balance of trade

93. The balance of trade (positive balance of exports over imports) for film in the UK was positive in 2001 by £245 million, which is the second highest for the period 1995-2001:

Figure 1: Trade Surplus of UK Film Industry, 1995-2001

Data Source: UK Film Council (See Vol. II)

94. Co-production treaties have been set up between the UK and Australia, Canada, France, Germany, Italy, New Zealand and Norway (with negotiations with South Africa and India underway).[155] They have enabled co-production films to be eligible for benefits available for national films in those country.[156] This means that overseas film producers are keen to work in Britain and in partnership with British production companies in order to benefit from the incentives available to British films. Tables 6 and 7 below show the number and value of British co-productions both shot in the UK and overseas:Table 8: UK co-productions shot in the UK included as inward features and domestic UK features, 2002

Classification of UK co- production shot in the UK	No. of films	Value (£ m)
Inward feature (UK spend shown)	7	19.58
UK domestic feature (total budget shown)	5	8.89
Total	12	28.47

Data source: Film in the UK 2002, Statistical Yearbook, UK Film Council, 2003 p 70, Table 12.7Table 9: Budget analysis by nationality of principle non-UK co-production partner, UK co-productions shot abroad, 2002

Nationality of principal partner	No. of co-productions shot abroad	Total Budget (£ m)	UK spend (£ m)	UK spend as % of country total
Canada	12	44.34	13.08	29.5
Republic of Ireland	7	56.16	22.35	39.8
Germany	6	58.01	23.37	40.3
Australia	3	19.87	6.59	33.2
Hungary	2	22.9	9.87	43.1
Spain	2	10.44	4.03	38.6
Others	8	109.54	43.8	40.0
Total	43	372.26	133.79	35.9