Support for the creative economy

Written evidence submitted by Pinewood Shepperton plc [SCE 019]

Summary

Pinewood Shepperton plc welcomes the opportunity to contribute to this consultation as we believe the growth potential for the UK film, television and screen-based industries is substantial and can play a significant part in driving growth in the wider creative economy.

A. Barriers to growth fall into three main categories-infrastructure, skills and finance. Government has a key role to play in terms of fostering a strategic approach to the sector and ensuring 'joined-up' activity across a range of relevant departments (for example HM Treasury; the Department for Culture, Media and Sport; Business, Innovation and Skills; the Department for Communities and Local Government; and the Department for Education) and agencies (such as UK Trade and Industry and the British Film Institute) with close linkages to the relevant industry bodies and key private sector players.

B. Tax incentives-the Film Tax Relief has played a key role in attracting large, internationally mobile film productions to the UK. We therefore strongly support its continuation, as well as the proposed extension of tax relief to other creative sectors such as animation, high-end television and video games which would increase the level of production, and therefore grow the creative economy in the UK.

C. Skills agenda-we welcome the government's focus on quality and demand-led training provision, including employer-based apprenticeships that provide routeways to careers in the sector. Greater flexibility in further and higher education provision is required to respond to the rapidly changing needs of the industry, underpinned by intelligence gathered from Creative Skillset in conjunction with sector specialists.

D. Clusters and hubs are critical to facilitating the innovation and growth of the creative economy and, more specifically, the screen-based industries. Pinewood is at the heart of the 'London' production cluster. We would strongly contest any proposition that there is "too much focus on hubs at the expense of encouraging a greater geographical spread of companies through effective universal communication".

Introduction

This evidence concerns the importance of the film, television and screen-based industries as key elements of the wider creative economy. The core UK film industry [1] alone supports a total of 117,400 FTE jobs, generating over £4.6 billion of GDP. [2]

Pinewood Shepperton plc is a leading provider of studio and related services to the global film, television and screen-based industries. Our services support film production, filmed television and studio television recording, digital content services and facilities for media-related businesses. Both Pinewood and Shepperton studios attract a wide range of other screen-based activities, including advertising commercials, video games, animation and music videos.

Pinewood Studios is the most important 'hub' within the UK film industry. It comprises over 100,000 sq m of floor space including, as well as studio and other production space and accommodation for some 180 tenant businesses.

Pinewood and Shepperton Studios are recognised globally as 'premier' brands in the film and screen-based industries. Between 2010 and 2012, 42 blockbuster films (over $100 million budget) were produced globally and Pinewood and Shepperton Studios were used either entirely or in part to film 24 of them. In 2011, Pinewood Studios was used, in part, for the production of fourteen feature films including six with estimated budgets in excess of $100 million and with combined box office receipts to date in excess of $3.8 billion.

This response focuses on the following four issues that the Committee wishes to address:

(i) barriers to growth in the creative industries;

(ii) the extent to which taxation supports the growth of the creative economy;

(iii) ways to establish a strong skills base to support the creative economy; and

(iv) the importance of "clusters" and "hubs" in facilitating innovation and growth in the creative sector

Submission

A Barriers to growth in the creative industries-such as difficulties in accessing private finance and the ways in which Government policy should address them. Whether lack of coordination between government departments inhibits this sector.

A1. The creative, film and screen-based industries are global in nature and importance. Over the period 2011-16 total consumer spending on television, film and video games is forecast to increase by 5.3% per annum. The global market was worth around $355 billion in 2011 and is expected to reach $467 billion by 2016. In terms of the film market, global box office receipts amounted to $32.6 billion in 2011, an increase of 65% on levels in 2002. Films wholly or partly produced in the UK accounted for 17% of total box office receipts in 2011, up from 14% in 2010.

A2. The economic benefits associated with the screen-based industries have led to increasingly fierce competition to attract large internationally mobile film and high-end television [3] productions, as well as post-production activity. New studio complexes are being developed globally, including in Australia, South Africa and North America, and the use of fiscal incentives to attract investment is widespread.

A3. The growth potential for the UK film, television and screen-based industries is substantial. However, there are major barriers to achieving this growth, which the government can help to address. These barriers fall into three main categories-infrastructure, skills and finance.

A4. Ensuring that the infrastructure is in place to accommodate growth is essential. For example, in our industry the lack of studio space in the UK is already resulting in the loss of international inward investment. We are aware of 10 major films that had wanted to shoot in the UK but have been unable to do so in full or part due to capacity constraints. Without new infrastructure and the growth of core assets the sector will not be able to expand to meet growing global demand and to address the significant and increasing global competition. Furthermore, the UK's competitive position will be eroded. Consequently, the government must help to enable the expansion of infrastructure capacity and remove any unnecessary barriers and/or delays that may be created through, for example, the planning system.

A5. The availability of a pool of skilled labour is also critical to the future success of the UK creative economy. Many of those employed in the production sector are highly skilled and qualified. However, on-going training is required to respond to the growing and changing needs of the industry, such as those due to rapid technological changes. We strongly support interventions that further develop the creative industries skills base and discuss this issue further in C below.

A6. Access to funding is also vital. We welcome the extension of Film Tax Relief, which supports economic growth (see B below) and the proposed reliefs for animation, high-end television and video games. In addition, funding for mid-budget films and independent films which rely more on private capital, film funds, government grants and lottery funding is also important to support UK feature film development and production. In recognition of this, we support the recent proposals set out by the British Film Institute in its five year strategic plan to increase funding for the new Film Fund. It focuses on: providing major production awards; introduction of the new International Fund which will include increased funding for the British Film Commission; and proposals to attract new equity partners to British independent films through the promotion of the commercial opportunities in UK film to private and corporate investors. As a sign of our commitment we established a film production fund, Pinewood Films, in 2011 to invest in smaller budget British independent films. This has already resulted in involvement in four films [4] with more to follow shortly.

A7. In addition, if the growth potential of the many emerging forms of content distribution and consumption (such as video-on-demand) is to be realised, successfully implementing measures to combat audio-visual copyright theft and infringement are essential. Succeeding in this area will require early and robust legislation and enforcement, as well as a co-ordinated joint effort between content producers, distributors and the providers of TV and online viewing platforms.

A8. In addressing these barriers, it is clear that the Government will have a key role to play. It will need in particular to foster a strategic approach and ensure 'joined-up' activity across a range of relevant departments (for example HM Treasury; the Department for Culture, Media and Sport; Business, Innovation and Skills; the Department for Communities and Local Government and the Department for Education) and agencies (such as UK Trade and Investment and the British Film Institute) and continue to develop close linkages with the relevant industry bodies and key private sector players.

B The extent to which taxation supports the growth of the creative economy, including whether it would be desirable to extend the tax reliefs targeted at certain sectors in the 2012 Budget.

B1. Since its introduction in 2006, Film Tax Relief has played a key role in enabling us to attract large, internationally mobile productions from the USA to the UK. Since the tax credit was introduced, the level of inward investment has increased, resulting in a significant rise in revenue and market share for the UK, especially from the biggest 'tent pole' productions [5] coming from the US. In the absence of tax incentives, it is estimated [6] that UK film production would be around 71% smaller, reducing GDP by around £1.4 billion a year and employment by 55,200 jobs. Exchequer revenues would be £430 million a year lower. Since the Film Tax Relief costs HM Treasury around £114 million a year, this means it generates about £12 in GDP for every £1 'invested'.

B2. Given the value of film production to the economy, global competition to attract production and post-production activity is increasingly fierce. The availability and accessibility of locations, the costs of labour and renting studios and sets and the relative skills of the film production workforce are all important factors. However the use of the tax system to support film production has become increasingly widespread, and the availability of such fiscal incentives is an important consideration. As a result of previous investment, Pinewood and the UK offer the high quality infrastructure and pool of talent that US studios demand. However, with new studio complexes coming forward in South Africa and other locations, continued support for tax relief will be crucially important in 'levelling the terms' on which the UK can compete internationally and ensuring that it remains at the forefront of global film production.

B3. We would strongly support the proposed extension of tax relief to other creative sectors such as animation, high-end television and video games and in particular the aim of the policy which seeks to 'create the necessary critical mass of infrastructure and skills to enable and support production in the UK both today and in the longer term' [7] . The UK would benefit from these incentives in three ways:

(i) increased spend on content currently produced in the UK-the tax credit will allow producers to increase spend on production in the UK, enhancing the quality of output;

(ii) prevention of UK production moving overseas-incentives are already offered by countries including France and Canada. A similar scheme will allow the UK to compete globally, thereby retaining production in the UK; and

(iii) increased investment from overseas-through levelling the field with other countries, levels of new inward investment should increase as the tax credit allows producers to exploit the quality of infrastructure and talent available in the UK.

B4. Such an extension of tax relief would increase the level of production and therefore demand for studio facilities in the UK. For example, it has been estimated that a tax incentive targeted at scripted television productions budgeted at £1 million per hour or more would attract over £350 million of additional spend in the UK per year.

C Ways to establish a strong skills base to support the creative economy, including the role of further and higher education in this.

C1. As well as being a key criterion for producers when they are deciding where to shoot a particular film or television programme, the availability of world class skills is vital more generally to the UK's creative industries' future competitive advantage. Pinewood and Shepperton Studios plays a key role with regard to both the demand for, and supply of, such skills-both through 'hosting' productions that demand these skills and through actively supporting the development of training within the industry.

C2 Production of a film or major television programme will often require the skills of hundreds of people across a wide range of different specialisms. The skills demanded will vary across the different phases-including pre production (proposal development, script development, finance, casting), production (production design, set and costume design, studio and location filming, sound recording), immediate post production (editing, content formatting, archiving), distribution and exhibition - and will often have relevance to the wider creative economy (and,

indeed other sectors).

C3 The sector's workforce contains a high and increasing proportion of highly qualified and skilled people. The 2010 Skillset Creative Media Workforce Survey estimated that 70% of the film production workforce in the UK held a degree and a further 6% had technical or vocational qualifications. The proportion of graduates has increased significantly-from 45% in 2005. However, as well as degree level or above skills, the industry also relies on vocational and craft skills. The recent Film Policy Review highlighted these as a key area of focus, recommending the continued creation of apprenticeships and internships.

C4 Those working in the sector recognise and value the need for continued improvements in skills. The Skillset Survey indicated that 54% of respondents identified that they had personal learning or skills development needs and that 45% had received learning or skills development in the previous year. Film and TV production therefore supports a significant level of workforce training activity.

C5 The nature of the industry with its rapidly-evolving needs-given, for example, high levels of technological innovation-means that skills development must continue to be a key priority. Businesses have important roles to play, for example through:

· working closely with Creative Skillset [8] and other organisations to identify skills requirements and ensure adequate lead time to design new curriculum and standards;

· direct involvement in the delivery of training;

· offering apprenticeship schemes to employees;

· working closely with key education and training facilities and providers to offer 'hands on' experience and industry expertise; and

· hosting events aimed at promoting training, for example, helping young people break into the film industry.

Government should seek means to further encourage businesses to engage in such activities and should also support the development of relevant further and higher education demand-led provision (including employer-based apprenticeships that provide routeways to careers in the sector).

C6. Pinewood Shepperton plc recognises the importance of this obligation and has a strong track record of promoting training and education. We have a close working relationship with Creative Skillset, as well as other organisations such as the National Film and Television School (NFTS) and Amersham and Wycombe College. Pinewood offers its own apprenticeship programme to employees across a range of occupations such as sound maintenance, drapes and media and digital. It has also hosted a range of events aimed at promoting training. For example, First Light recently put on an intensive one day workshop for 17-25 year olds offering practical advice on breaking into the film industry while the studios also regularly hosts the Pinewood Young Filmmakers' Group.

D The importance of "clusters" and "hubs" in facilitating innovation and growth in the creative sector. Whether there is too much focus on hubs at the expense of encouraging a greater geographical spread of companies through effective universal communication.

D1 We believe that clusters and hubs are critical to facilitating the innovation and growth of the creative economy and, more specifically, screen-based industries. We would therefore strongly contest any proposition that there is "too much focus on hubs at the expense of encouraging a greater geographical spread of companies through effective universal communication".

D2 Research [9] shows that there are major advantages associated with clustering for the creative industries, including the ability to share ideas and collaborate with like-minded people, develop new products and services, and to identify, respond to and create new market opportunities. It also helps to reduce risk in a high risk industry by providing in effect a 'one stop shop' that offers real practical advantages in terms of having accessible sources of services and expertise.

D3 These advantages in turn lead to wider economic benefits including increased competitiveness, higher productivity and profitability, increased innovation, employment growth, and new business creation (agglomeration effects). The key distinguishing feature of a successful cluster is interconnectivity between individuals and businesses through supply chains, informal networks, recruitment practices, or formal collaboration processes. Notwithstanding the growth of new information and communications technologies, geographical proximity remains a key factor in supporting the development of such linkages.

D4 There are two scales of agglomeration in the UK film industry-regional (cluster) and local (hubs). London and adjoining areas have established themselves as a global centre or cluster for film and screen-based industries. The area has a significant depth of skilled crew and specialists, including, for example, in visual effects and post production.

D5 Pinewood, and its constituent facilities, is at the heart of this Global centre. Without Pinewood other facilities within the wider cluster would underperform or fail. It has developed a unique 'hub' comprising its studio and post-production facilities plus accommodation for some 180 tenant companies on its Pinewood site with over 750 employees. Almost 70% of these businesses are directly involved in production activity with the remainder (30%) providing support goods and services to the film, media and screen-based industries. Recent consultation [10] and survey work has highlighted the importance of this 'hub' in terms of offering a 'one stop shop' to Studios and production companies.

D6 This distinguishes Pinewood from any of its UK competition and most of its international competitors. The hub of facilities and services provides a cost effective location for international film and TV production. It also acts as a focus for innovation. A recent example involved Glen Freemantle (an independent Sound Designer) working with Pinewood sound mixers and technology to create the Oscar winning Slumdog Millionaire sound track. This, in turn, created revenues to invest in the UK's first Dolbey Atmos theatre, giving clients access to the next generation of sound mixing-thus further enhancing the UK's competitive edge.

D7. From the original growth of Hollywood onwards, all the evidence suggests that clusters and hubs are essential in facilitating growth and promoting innovation in the film, television and screen-based industries. The UK is the only real international destination for English language filming outside of Hollywood. The UK cluster is focused on London and adjacent areas. Pinewood is the core and essential component of this cluster and is recognised as a unique hub of international significance. There are significant opportunities to further enhance the hub (and, thereby, the cluster and its contribution to the UK economy) through the stimulation of greater networking, knowledge transfer and more effective joint marketing and promotional activity as well as through expansion of the site. We believe that an expanded Pinewood is the most logical and cost effective way to meaningfully grow the UK's screen based economy.

November 2012


[1] The core UK film industry includes companies and individuals involved in all film production in the UK, but only includes the activities in the distribution and exhibition sector associated with UK-made films.

[2] Source: Oxford Economics (September 2012), The Economic Impact of the UK Film Industry .

[3] High-end television is defined as high quality television drama costing £1m per hour of programme running time

[4] 'A Fantastic Fear Of Everything', ' Last Passenger', 'Belle' and 'Dom Hemingway'.

[5] 'Tentpole' productions hold up the smaller less commercial movies made by studios. They refer to the most promising projects and generally receive the most attention and highest production and marketing budgets.

[6] Oxford Economics, 2012

[7] HM Treasury, Consultation on creative sector tax relief, June 2012

[8] The industry body which supports skills and training in the UK creative industries

[9] Creative Clusters and the Changing Economy: A Review for Pinewood Studios, the Work Foundation (2011), P.17

[10] All of the major US Studio Executives interviewed to inform the recent market analysis underpinning the development of the Pinewood Studios Development Framework commented on the benefits of Pinewood offering a 'One Stop Shop'.

Prepared 17th November 2012