Memorandum by the UK Screen
1.UK Screen Association
(UK Screen) is the trade body that represents the commercial interests
of the UK facilities sector. The range of activities covered by
the facilities sector is diverse but broadly speaking it includes:
post production, visual effects, physical special effects, equipment
hire, outside broadcast and studios. We have more than 150 member
companies across the UK, providing creative and technical expertise,
equipment, and accommodation to producers of moving image media.
2.Turnover in the facilities
sector represents £2.4 billion per annum.
The UK facilities sector services an estimated £5 billion
domestic television, film, commercials and corporate production
core sector. It also supplies overseas television, film and commercials
3.This document responds
to each of the Select Committee's questions as laid out in the
"Call for Evidence: The British Film and Television Industries"
as they relate to the UK facilities sector.
What do the UK film and television
industries contribute to the UK economy and British culture? In
what ways might this contribution be enhanced?
4.The film and television
industries contribute significantly to the economy and culture
of the UK and as such are at the centre of our creative industries.
5.The UK film and television
industries are of the most prodigious and well respected in the
world. To enhance their contribution both culturally and economically
we must ensure we: retain a high level of commercial and non-commercial
UK originated content; continue to attract overseas work to the
UK and export content and services globally; retain a critical
mass of infrastructure and a strong creative and technical skills-base;
create stability and certainty through a long-term commitment
to film funds, film tax incentives and public service broadcasting;
align Government policies to encourage innovation, SME growth,
connectivity and international competitiveness.
6.In October 2008 UK
Screen commissioned a study into the UK facilities sector. The
purpose being: to identify the economic characteristics of the
sector together with its key market segments (size, structure,
profitability); to quantify the contribution of the sector to
the UK economy as a whole (direct, indirect and wider spill-over
impacts); to understand better the role of facilities sector in
the broader television, film, commercials and corporate markets
within which it operates; to articulate the prospects and challenges
for the sector over the coming years.
7.To our knowledge this
is the first time anyone has attempted to comprehensively map
the UK facilities sector. Therefore, we believe this will be a
vital piece of research not only for the UK facilities sector
but also the wider film, television and screen-based industries.
The report will be published in April 2009 and we will be
happy to supply copies of the UK Facilities Report as soon as
it is available.
How do the current UK arrangements
for distribution and exhibition of films affect the commercial
success of the film industry? How might long run changes in international
film production and distribution affect the UK film industry and
its export potential over the next decade? To what extent is the
raising of finance an inhibiting factor in UK film projects?
8.The current UK arrangements
for distribution and exhibition of films restrict commercial success
in the sense that the physical delivery of 35mm film to cinemas
is costly, resource intensive and not eco friendly. Delivery to
Public Entertainment Centres by satellite and digital distribution
will solve these problems by making content freely available at
a fraction of the cost and impact on the environment. Financial
backing for UK film projects has been adversely affected by the
"credit crunch" and incentives need to be reconsidered
by the Government.
Have the 2006 changes to the
tax credit system been of benefit to the UK film industry? Have
they had a perceptible effect on UK film production? Are the qualifying
conditions, including the "Britishness" test, for the
tax appropriate? Are any types of film or types of commercial
arrangement unreasonably excluded?
9.Inward investment films
(big budget films that are financed from overseas but are made
wholly or partly in the UK) account for the majority of the total
UK production spend, for example 68%, 69% and 58% respectively
in 2006, 2007, 2008.
There was a significant decrease in inward investment films in
2008 to £338 million compared to £523 million
in 2007 and £558 million in 2006, however we believe
this drop relates to a number of exceptional factors (US writers
strike, threat of screen actors strike and adverse exchange rates)
and is not a reflection of the new tax credit system. In 2009 opportunities
for inward investment films are looking more favourable.
10.The UK facilities sector
is one of the main beneficiaries of inward investment given its
world-class visual effects, post production and studios. The changes
to the tax credit system have brought stability and increased
confidence in the UK as a destination for inward investment production
and post production which has been received positively by the
facilities sector. Furthermore, a high level of inward investment
is critical in sustaining a meaningful level of infrastructure,
including our creative and technical skills base, which in turn
underpins domestic film production.
11.Co-production films (made
both in the UK and abroad using UK crew, expertise and services)
account for the minority of the total UK production spend, representing
just 8% of spend in 2008 (£48 million). The attractiveness
of the UK as a co-production partner has been diminished as a
result of the new tax credit system which does not recognise production
outside the UK.
12.For the UK facilities
sector there has been a detrimental impact on the physical special
effects, lighting, camera and crewing companies where deployment
of their services on productions shooting overseas is no longer
considered "good spend" and is not eligible for the
UK tax incentive. Additionally, lower budget co-production films
have historically been the mainstay for many small-to-medium post
production companies, with fewer co-production films over the
last few years there has inevitably been less of this type of
work available to facilities in the UK.
13.Domestic UK film production
has grown considerably in 2008 now representing 33% of total
UK production spend up from 21% in 2007 (£192 million
and £158 million respectively).
14.Domestic films are a
very important to, and are well supported by, the UK facilities
Is the UK Film Council meeting its
objectives of giving support to production and export of British
films? Could it do more to assist the UK film industry's contribution
to the UK economy?
15.The UK Film Council had
a pivotal role in the review of the film tax incentives. It continues
to work well with the industry as a whole, consulting every part
of the production chain, sharing expertise and encouraging the
alignment of interests (insofar as was possible) in order to positively
impact public policy for British film.
16.UK Screen works mainly
with the Office of the British Commissioner (OBFC) which focuses
on inward investment opportunities. The OBFC has made good progress
in building relationships with the US major studios and independents
and in promoting the value, accessibility and simplicity of the
new film tax incentives. It creates research and statistical production
data which is useful to the industry; for example its support
of research into the post production sector and more recently
the cost comparative work. Its role in helping industry understand
the Managed Migration Points Based System, and helping HMRC understand
the exceptional nature of the film production was also important
and continues as the new system beds down. As inward investment
accounts for the majority of UK film production spend, and given
its vast contribution to helping to sustain the UK film infrastructure,
we believe an increase in the allocation of UK Film Council resources
to the OBFC would significantly enhance the film industry's contribution
to the UK economy.
17.The UK Film Council works
closely with Skillset, The Sector Skills Council for Creative
Media, and has been instrumental in supporting the creation of
"A Bigger Future" the film skills strategy which has
invested some £28 million in the last four years.
Given the importance of the facilities sector to film production,
especially in this digital age, it is surprising that such a small
proportion (about 0.3%) has gone directly to companies to support
their in-house skills and training development needs. We believe
an increase in resources targeted in this area would enhance the
film industry's contribution to the UK economy.
Is the current business infrastructure
in the UK conducive to the acquisition of the managerial and technical
skills required by the film and television industries? Is the
business environment conducive to the emergence of entrepreneurial
talent, which can take advantage of the opportunities in the creative
18.To create truly sustainable
production of British films and television we must continue to
develop the infrastructure with an emphasis on those businesses
which support and nurture the screen-based industries as a whole.
19.There are a relatively
small number of large world-class companies operating in the facilities
sector for both film and television. The vast majority are SME
owner managed companies which have grown organically through creative
endeavour rather than business prowess. In general terms it is
true to say there has not been a structured approach to leadership
20.We must encourage rigorous
business practises which allow people to run successful and profitable
companies in order that they can invest in skills (creative, technical
and managerial) and be internationally competitive.
21.We need to encourage
training initiatives and apprentice schemes by reducing the bureaucracy
and apportioning financial benefits to the companies supplying
22.We need continuity and
stability in Government interventions, incentives and policy making
as this gives the market the confidence it needs to be bold and
build for the future in a challenging economic climate.
How successful has the regulatory
system been in supporting UK content in television? Are there
particular types of programming, such as drama, children's or
factual programming, for which more support is needed? Could more
be done through regulation or incentive, for example, to encourage
non-public service broadcasters to commission original UK content?
Might financial measures, such as industry levies, be feasible
23.The regulatory system
has been hugely successful in supporting UK content in television.
Production quotas for independent production, original commissions,
regional production and regional programmes have encouraged a
rich diversity of British content for terrestrial television.
24.Within this framework
and through the operation of the Terms of Trade with the Broadcasters,
the independent production sector has flourished and achieved
commercial success (reporting a £156 million increase
in UK commissions in 2007).
25.There has been no such
Government intervention in support of the facilities sector. Given
the contribution this sector makes (especially in this digital
age) we believe any regulatory system supporting UK content in
television should be extended to include the deeper supply chain
which underpins the creation of that content
26.Specifically this should
include a commitment by Broadcasters (and by association independent
producers) to: procure services from the independent facilities
sector and procure regional facilities and services.
27.Support is evidently
needed to ensure high quality British programme making in factual,
children's and drama.
28.Any measures that encourage
non-public service broadcasters to commission original UK television
content would be welcomed by the facilities sector.
How will the structural changes facing
the UK television industry, and particularly the public service
broadcasting component, affect UK originated television content?
To what extent are these effects irreversible? To what extent
are they being offset by changes elsewhere in the creative industries
sector? What re the implications for television content creation
of digital switchover and widespread broadband availability?
29.There are profound challenges
facing the UK television industry (decline in advertising spend,
proliferation of digital television channels, growth in new platforms,
approach of digital switchover etc) which will out of necessity
drive new business models and impact on the levels of investment
in, and quantity of, UK originated television content.
30.Despite increases in
some digital channels' investment in UK programming in recent
years the main public service channels (BBC channels, ITV1, Channel
4, S4C and Five) "account for over 90% of investment in new
networked UK-originated television content."
Therefore, the UK facilities sector is to a great extent dependent
not only on the continuance, but the growth of, public service
channels originated television content. Similarly, in this digital
age the facilities sector is crucial to any ambitions that the
UK may have for its broadcast industries as its technical and
creative expertise is unparalleled.
31.Access to compelling
content will continue to be the key driver to broadband take-up
and consumer engagement with digital services.
23 March 2009
1 UK Facilities Sector Report 2009 (as yet
unpublished) Olsberg SPI for UK Screen Association. Back
UK Film Council Statistical Yearbook 2008. Back
UK Film Council/Skillset -A Bigger Future"-The UK Film
Skills Strategy. Back
Independent Production Census, Pact 2007-08. Back
Ofcom's Second Public Service Broadcasting Review-Phase One:
The Digital Opportunity. Back