95.The UK production sector is a national success story. In 2018 the independent TV production sector’s total revenue was £3 billion, which represents a 10 per cent growth since 2017 and is the highest figure to date. The UK is the world’s second biggest exporter of TV and in 2018 the independent production sector (companies not owned by public service broadcasters) received £962 million in international revenue, an increase of 90 per cent over the last five years. The Office for National Statistics found that the Film and TV industry was the sub-sector of the service sector which had made the biggest contribution to GDP growth between June and August 2019.
96.British programming is popular across the world. Claire Enders, Founder of Enders Analysis, told us it is “top-end, globally relevant and always market-leading.”
Public policy has helped to nurture the growth of the production sector in several ways. The Communications Act 2003 required public services broadcasters to commission 25 per cent of their programming from independent production companies and enabled those companies to control and exploit the intellectual property from the programmes they made (see Box on Terms of Trade). This allowed small companies to enter the market and develop long-term sources of revenue. In recent years, however, the market has become more concentrated following consolidation, which has included the acquisition of UK companies by overseas media corporations.
Source: Ofcom, Review of the operation of the television production sector (23 December 2015): [accessed 4 November 2019]
97.In 2013 the Government introduced High-end TV Tax Relief (HETR) to support the production of high-end, culturally relevant TV programmes in the UK. Production companies are eligible for tax relief at 25 per cent on UK core expenditure and up to 80 per cent of the total core budget. Programmes must be a drama, comedy or documentary with a production cost over £1 million per hour and a duration of at least 30 minutes per episode. Programmes must pass a cultural test to show relevance to the UK or European Economic Area. At least 10 per cent of core expenditure must be in the UK and the production company must be liable for UK corporation tax.
98.In 2016 the British Film Institute estimated that £1 of HETR generated £6.10 of value to the UK economy. Production spending directly generated 13,090 jobs and a further 13,580 jobs indirectly. Since 2013 485 programmes have claimed HETR, spending £4.3 billion in the UK. The graphs below show the increase in spending on high-end TV and in the number of hours produced.
Source: COBA, UK drama production 2014–2019 (June 2019): [accessed 4 November 2019]
Source: COBA, UK drama production 2014–2019 (June 2019): [accessed 4 November 2019]
99.We found universal agreement that High-end TV Tax Relief had incentivised investment in the UK. High-profile examples included HBO’s Game of Thrones and Netflix’s The Crown. The market is fast moving and prone to change but spending by SVODs has been a major contributor to growth. In 2018 independent production companies received £280 million in commissions from SVODs in the UK, an increase of 88 per cent since 2017. Netflix told us that the UK was one of its top three production locations worldwide and that it had around 50 projects under way here, at a cost of over £400 million in 2019.
100.Some witnesses were concerned that SVODs did not make distinctively British programmes. Dr Maria Michalis, Reader in Communication Policy at the University of Westminster, told us: “SVOD players target the global market and prioritise content that lacks national specificities.”
101.Similarly, Sir Colin Callender CBE, Chairman of Playground LLC, a TV production company, told us: “the SVODs are not interested in making British programming. The SVODs are interested in using British talent to make American programming”. He gave Netflix’s Sex Education as an example of a programme which looked “entirely like an American show.” However, Dan Cheesbrough, former Managing Director at Eleven Film, which made Sex Education, explained: “A lot of people watched it and, understandably, suggested that this was the strange mysterious hand of the American executive demanding that we made our British show look American by putting English students in baseball jackets. It was a creative decision made out of an office in London that existed here and was imagined by the British creative team.”
102.It is difficult to gather data on how much SVOD programming made in the UK can be considered authentically British as the issue is largely subjective. However, Jane Turton, Chief Executive of All3Media, said that Netflix had moved towards commissioning more local content. Netflix gave examples of “fundamentally British programming” it produced, including a series about east London gang culture called Top Boy and The English Game, a drama about the origins of football filmed in Manchester.
103.Amazon, Apple and Netflix said that programmes which reflect the UK, including programmes from public service broadcasters, had global appeal because viewers around the world were interested in stories from different cultures. Georgia Brown, Director of European Originals at Amazon, explained: “UK content is hugely exportable, obviously. We are commissioning on a local basis, but naturally these shows will travel across the world very well.” Jay Hunt, Creative Director, Europe and Worldwide Video at Apple, told us that two of her first commissions at Apple had been to BBC Studios.
104.It is notable that the each of the commissioners we met from Apple, Amazon and Netflix had recent experience working at a public service broadcaster. We also heard during the inquiry that Netflix had agreed a new deal with Shepperton Studios for a UK hub consisting of 14 sound stages, workshops and office space.
105.Sky is also spending more on UK content. Ali Law, Head of Policy for the UK & Ireland at Sky, told us that investing in content which reflected the experiences of people in the UK made sense because it was commercially successful.
106.TV which reflects UK culture is in demand at home and abroad. However, changes in the market may make the future of individual SVODs and TV services uncertain. New entrants complement but cannot replace public service broadcasters, which guarantee continued investment in a wide range of original UK content no matter the state of the global market.
107.To preserve UK programmes for future generations, the Copyright Designs & Patent Act 1980 allows the British Film Institute (BFI) to record programmes for archival purposes. The BFI archives approximately 300 programmes each year which contribute to UK culture and form a part of our screen history. This includes recent series such as Broadchurch and The Great British Bake Off.
108.Public service broadcasters are obliged to provide programmes to the archive and to contribute to its running costs at a level set by Ofcom. However, other commercial broadcasters and SVODs which produce programmes in the UK are not under these obligations. The BFI said that there were approximately 100 more programmes each year it would like to archive and told us: “a gap is rapidly widening in the BFI National Archive, including extremely important titles such as The Crown, Black Mirror, The Grand Tour and Patrick Melrose. “
109.It is important that UK TV programmes of cultural significance are preserved for future generations irrespective of whether they are made by a public service broadcaster. The Government should broaden the requirement to provide programmes to and fund the BFI National Archive to non-public service broadcasters and SVODs which produce content in the UK.
110.We heard that the boom in high-end TV production presents risks for the sector. Although part of the increase in production spending can be accounted for by some top-end productions seeking film-style production values, there has also been inflation in costs.
111.There was a consensus that there was significant cost inflation and that it was concentrated at the high-end of the drama and documentary market. The explanation by Kevin Lygo, Director of Television at ITV, was typical of the evidence we received. He described: “a simple supply and demand issue. There is more money going into drama. People therefore come at a premium. As we have heard, there are not enough good people to go round, so good people can charge good money and the whole thing inflates.”
112.Adam Minns, Executive Director of the Commercial Broadcasters’ Association, warned that the sector was at full capacity and there was now a danger of “overheating”. Mr Minns cited pressure on studio space as another dimension of this, a point made by several witnesses.
113.Andrew Chowns, Chief Executive of Directors UK, explained that mid-budget dramas, which are more expensive than soaps but cost less than £1 million per hour, were an essential stepping stone in training to allow creatives to move to high-budget drama such as Bodyguard. He said that there were now fewer mid-budget dramas and that this had contributed to the skills shortage. This was consistent with Screenskills’ finding that crew members were progressing before they had enough experience.
114.Most witnesses agreed that the High-end TV Tax Relief had been inflationary. In addition to increasing demand at the top of the market it has created an incentive for mid-budget productions to spend more to reach the threshold. Jane Turton, Chief Executive of All3Media, told us: “Some location costs have gone up, because people know that, if it is part-subsidised by a tax credit, we have to reach the £1 million threshold. Therefore they will tend to price accordingly.” Andrew Chowns, Chief Executive of Directors UK, agreed that production companies sometimes spent more than they otherwise would have to reach £1 million per hour.
115.Ms Turton suggested lowering the threshold to around £750,000. However, Mr Chowns believed that this would make the situation worse and shift inflation further down the market.
116.High-end TV Tax Relief has benefited the UK production sector and encouraged high levels of inward investment. However, there is a serious risk of the sector reaching full capacity and overheating. The health of the independent production sector depends on maintaining the supply of production crews to meet demand. The £1 million threshold for tax relief creates an incentive for productions with a budget over £800,000 to spend more to receive up to £200,000 in tax relief. This makes it less attractive to produce mid-budget drama, which is crucial to the development of skills in the production sector. High-end TV Tax Relief should be tapered in from £800,000 to remove the incentive to spend more to reach a cost of £1 million per hour.
117.Public service broadcasters play a key role in training and nurturing talent which underpin the success of the TV sector. Independent production companies benefit from their investment as they rely on a broad pool of skilled workers for the range of roles involved in production. Philippa Childs, Head of Bectu, noted: “it is the PSBs that are providing the training and skills that the likes of Netflix and others are then happily accepting.”
118.Training is essential to tackling skills shortages and cost inflation in the sector. Productions in receipt of the High-end TV Tax Relief can voluntarily contribute 0.5 per cent of their UK production budget, up to a cap of £55,000, to the High-end TV Skills Fund. The fund, which is administered by ScreenSkills, has reached £3.3 million a year and has a high level of compliance. This money supports training and development across a range of roles and levels. We heard about schemes run by new entrants such as Netflix and Amazon.
119.Although the High-end TV Skills Fund has been successful, we encountered widespread dissatisfaction with the Apprenticeship Levy. This is the Government’s scheme to raise a levy on businesses which they can use to support apprenticeships. In our reports on the theatre and advertising sectors we found that, although the levy has great potential to provide a route into the creative sector and to improve social mobility, the way that it is currently constituted means that it is not suitable for the creative sector as it comprises small businesses, highly specialised roles and short-term jobs. The levy was introduced in 2017 and applies to businesses with an annual pay bill over £3 million. Witnesses drew attention to an estimate by ScreenSkills that £55 million of the £75 million the creative industries have paid into the Apprenticeship Levy would not come back into the industry. Adam Minns, Executive Director of COBA, estimated that £15 million of the £75 million had been lost from the television sector specifically. ITV told us that it had paid £2.2 million and received only 11 per cent of that back.
120.The main complaint with the levy was that it is inflexible. Apprenticeships must last a minimum of 12 months, which is often too long a commitment for businesses in the creative industries. The Government said that it had responded to concerns by raising the percentage of funding which one business can transfer to another from 10 to 25 per cent. The Government undertook to consider enabling businesses to pool vouchers and share apprenticeships through a specialist agency. Seetha Kumar, Chief Executive of ScreenSkills, said that pooling vouchers through training agencies would be the best use of the levy and that it would be preferable if the funds could be spent on training at all levels. She felt the levy could be improved if funds could be used to pay apprentices’ wages.
121.The Government and Screenskills announced a pilot scheme in July 2019 to support 25 apprentices through a training agency. Margot James MP, then Minister for Digital and the Creative Industries, told us:
“Our intention is to prove that the concept works and delivers value. We hope not only that it will prove all that but that it will act as an example that will bring forth a great deal more such apprenticeship activity in the broadcast sector, and indeed in other parts of the creative industries.”
122.The Apprenticeship Levy’s flaws are not limited to the creative industries. The average number of people starting an apprenticeship fell by 31 per cent between the two years prior to its introduction and the following two years. The CBI concluded: “Without urgent action, the Apprenticeship Levy risks becoming a roadblock to the Government’s wider and welcome efforts to modernise the skills system.”
123.The Apprenticeship Levy has failed the creative industries. Its inflexibility leaves significant amounts of money unspent which could otherwise help to address skills shortages in the production sector. We welcome the Government’s pilot with Screenskills but fundamental reform of the Apprenticeship Levy is necessary and urgent. The Government should introduce greater flexibility such as allowing businesses to use the levy to fund training programmes at work and apprentices’ wages, and to pool vouchers through training agencies.
124.The Government should make contributing to the ScreenSkills High-end TV Skills Fund a condition of receiving High-end TV Tax Relief. The Government should consult ScreenSkills on increasing productions’ per centage contribution to the fund.
125.Many witnesses told us that the Terms of Trade were one of the main reasons they work with the public service broadcasters.
Ofcom requires PSBs to draw up codes of practice setting out principles for agreeing terms for the commissioning of independent productions in accordance with the Communications Act 2003. In line with these codes Pact negotiated standard ‘Terms of Trade’ with the PSBs.
The Terms of Trade require separate negotiations for primary and secondary and international rights. This means that public service broadcasters cannot make acquiring the secondary and international rights a precondition of buying the primary rights to a programme. Independent production companies can therefore negotiate a better deal for secondary and international distribution with another broadcaster or SVOD if they do not wish to sell those rights to the primary rights-holder. For example, series 1 of Derry Girls was made by Hat Trick Productions which sold the primary rights to Channel 4 and the secondary and international rights to Netflix.
126.Dan Cheesbrough, Commercial Director of Hartswood Films, said:
“I will die in a ditch for the Terms of Trade. They need to be protected. Anything that is going to compromise or erode or challenge them needs to be resisted desperately. Ironically, there is a large voice within the BBC that would love to see the Terms of Trade overturned. I do not think it is in its own interests to see the Terms of Trade overturned, now more so than ever.”
127.Flexibility is crucial to ensure that the Terms of Trade continue to work in the interests of public service broadcasters and independent producers. In its 2015 review of the production sector Ofcom concluded that negotiation between broadcasters and producers continued to be the best way to reach a balance between both parties’ interests In June 2019, Pact and Channel 4 agreed revised Terms of Trade which expanded the broadcaster’s on-demand rights. Clintons Solicitors suggested that the Terms of Trade could be revisited to ensure that programmes for which public service broadcasters hold primary rights are attributed to them in secondary and international media.
128.John McVay, Chief Executive of Pact, argued that the independent production sector would “collapse” without the Terms of Trade because independent producers relied on intellectual property rights for asset value to grow their businesses. However, whereas the Terms of Trade were originally intended to protect smaller independent production companies they also benefit larger companies. There are now ‘super-indies’ such as All3Media, which comprises 28 production and distribution companies and is jointly owned by two multibillion dollar global companies: Liberty Global and Discovery. Inc. In 2018, 41 per cent of revenue in the independent production sector was for companies with a turnover in excess of £70 million, while only 15 per cent was for companies with a turnover of less than £10 million.
129.Andy Harries, Chief Executive of Left Bank Pictures, warned that if independent producers had no choice but to sell all intellectual property up front they would effectively become on the payroll of global studios. However, Mr McVay noted that independent producers sometimes preferred to receive a premium on the cost of production up front in exchange for all rights. This model had the benefit of removing risk for the independent producer.
130.Apple, Amazon and Netflix told us that they were willing to be flexible when negotiating different rights agreements. Georgia Brown said that Amazon had bought the global rights to only three of its co-productions in 2018.
131.Public service broadcasters are essential to the independent production sector and the Terms of Trade encourage independent production companies to work with them. Their success relies on both PSBs and the production sector being willing to update the Terms of Trade as the market changes.
132.As part of its review of public service broadcasting, Ofcom should consider whether the Terms of Trade unfairly disadvantage public service broadcasters in a competitive market. The Terms of Trade were originally introduced to protect independent production companies from the dominance of public service broadcasters. Given the degree of consolidation in the market, in order to uphold their original purpose of protecting small and medium sized independent production companies, Ofcom should review whether the Terms of Trade should still to apply to larger companies.
133.We heard concern that in the changing market public service broadcasters had been crowded out and were no longer able to make high-end drama. The amount of first-run original drama programming on PSB channels fell from 627 hours in 2008 to 338 hours in 2018. Peter Kosminsky, Director of Stonehenge Films, told us: “if, as producers like us, you have a highly commercial programme idea, you don’t bother with the PSBs anymore; you just take it straight to Netflix, Amazon or Apple.”
134.However, Jane Turton, Chief Executive of All3 Media, said: “We value those relationships [with public service broadcasters] enormously. We will trot to see Piers Wenger, Polly Hill or the guys at Channel 4 first every time. It is because of the British storytelling and the British talent”.
135.We asked Ms Turton whether she was concerned that public service broadcasters would no longer be able to make high-end programmes. She said: “No, because as long as they come in to develop early, to partner with us early, to commission and to work up these shows, we will always go to them first”.
136.Mr Kosminsky believed that public service broadcasters could no longer afford to make high-end drama. He said:
“A programme that would have cost about £1.2 million an hour three years ago will now cost about £2 million an hour or more. Of course, PSB drama tariffs cannot keep pace with that. Of that £2 million an hour cost, the PSBs can only contribute about £800,000. If you add the Government’s tax breaks—what we call the soft money—that will take it up to about £1 million an hour. If costs are £2 million an hour and input £1 million an hour, the shortfall is £1 million an hour—half the budget.”
137.We found that production budgets for public service broadcasters’ drama series had risen along with the rest of the sector. The budget per hour of Channel 4’s commissioned drama rose from £750,000 to £1.5 million between 2013 and 2017, while the BBC told us that the budgets of its high-end dramas had risen by 60 per cent over the last five years. However, Ofcom found that between 2016 and 2018 the amount of money public service broadcasters contributed rose only marginally: from £764,000 per hour to £771,000. The rest of the production cost came from third-party funding.
138.In addition to tax credits, the two main forms of third-party funding are co-production and deficit financing. Co-production involves two or more broadcasters or SVODs partnering to fund a production in development. Recent co-productions have included Victoria (ITV/PBS) and Good Omens (BBC/Amazon). Deficit financing involves a broadcaster commissioning a programme and paying less than the cost of production for the primary rights. The production company makes up the rest of the production cost, such as through a bank loan, and pays off the deficit by selling the secondary and international rights when the programme is finished. An example of this is Bodyguard, for which ITV Studios sold the primary rights to the BBC and the secondary and international rights to Netflix.
139.There was a consensus that public service broadcasters were now reliant on third-party funding for the most expensive drama series. Alistair Law, Head of Policy for the UK & Ireland at Sky, described a new category of “super-premium” drama such as The Night Manager, a co-production between the BBC and HBO. The cost of these can be driven by location shoots and visual effects.
140.Last year third-party funding contributed a record £455 million to PSB productions, which took total expenditure on PSB programmes to its highest since 2010: £3.041 billion. The majority of third-party funding, £311 million, was for high-end drama. Ofcom noted that third-party funding had allowed public service broadcasters to spend less on drama and more on other genres.
141.However, Peter Kosminsky argued that the co-production model was under threat:
“PSBs have been closing the gap with co-productions with the SVODs, shows such as ITV’s Vanity Fair, Channel 4’s Kiss Me First and BBC’s Collateral, but in the last few months that situation has started to change. There is evidence both here and from the agents in Los Angeles that the SVODs are less and less interested in co-productions with our PSBs.”
142.Figure 8 uses data from the BFI to show trends in PSBs’ co-production of high-end drama over the last five years, up until June 2019, with both SVODs and non-SVODs.
Source: COBA, UK drama production 2014–2019 (June 2019): [accessed 4 November 2019]
143.Apple told us that it was “not averse to co-production”. Netflix said that co-production:
“works extremely well for us as a model and it seems to work extremely well for the rest of the industry as well. If you look at the BFI data on this, the indications are that the volume of co-commissions up to this point in 2019 is already the same as it was for the entirety of 2018. Netflix is a major partner in that story, as is the BBC by and large. Co-commissioning as a model seems to be alive and well.”
144.Dan Cheesbrough, Commercial Director of Hartswood Films, also thought that co-production would continue, although he foresaw a small overall decline and suggested that some SVODs would co-produce more than others. He said: “There is always going to be a need for innovative deal-making, which essentially means co-production.” In September 2019 the BBC and Netflix announced their first natural history co-production, Life in Colour.
145.Jane Turton, Chief Executive of All3Media, said that the co-production model works well for independent producers too: “we have the benefit of a UK relationship and the UK editorial input, which is very valuable and not something that one should underestimate; you have a commissioning editor at ITV who sends notes, is involved and understands the market, casting, writing and so on. We make it as a British programme but for a combination of different funders.”
146.Several witnesses noted that SVODs were not the only co-production partners for PSBs. Adam Minns, Executive Director of the Commercial Broadcasters’ Association, cited AMC, which co-produced McMafia, and HBO, which co-produced His Dark Materials, as examples of “companies queuing up to co-produce with the PSBs.” Ampere Analysis forecast that co-production would increase but that public service broadcasters would co-produce more with other broadcasters.
147.Alastair Fothergill, Company Director of Silverback Films, explained that deficit financing allowed the BBC to contribute as little as 20 per cent of the production cost for series such as Blue Planet II, with the rest of the funding coming from international rights. Ali Law, Head of Policy for the UK & Ireland at Sky, said that big budget programmes had a strong potential for deficit financing as they sell well abroad.
148.We encountered a widespread view that it was not a problem if public service broadcasters could not match the per-hour budgets of some SVOD programmes. Most witnesses felt that public service broadcasters could still produce high-quality and distinctively British programmes. John McVay, Chief Executive of Pact, said that his advice to public service broadcasters was that they should focus on being more distinctive and more British than SVODs. He cautioned: “It should not all be pegged on this idea that because Netflix can spend £6 million an episode, we must be able to spend £6 million an episode.”
149.Andy Harries, Chief Executive of Left Bank Pictures, which makes The Crown for Netflix, told us:
“on the whole the BBC is doing a pretty good job. Much of its successful drama, such as Line of Duty, is not expensive to produce. It is about £1.5 million, which is pretty low. If you want a comparison with The Crown, The Crown is between £5 million and £10 million an hour. It is one of the most expensive shows in the world and we would probably never have got it made had we not sold it to Netflix.”
150.Kevin Lygo, Director of Television at ITV, said that ITV was still able to fully fund 84 per cent of its programmes and he was “amazed” by the amount the BBC spent on co-productions. He warned: “Some producers love to have a budget of £4 million an hour or something like that. We do not do very much of that. You can get seduced into chasing after a look that is closer to a movie experience … we make the sorts of programmes I cannot imagine anyone but a PSB making”. He cited Butterfly and Little Boy Blue as examples of “completely affordable productions”.
151.Andrew Chowns, Chief Executive of Directors UK, also dismissed the idea of an existential threat to public service broadcasters’ ability to produce high-end programmes and suggested that there was “a danger of people overreacting”.
152.Three Girls, the BBC’s 2017 drama about child sexual abuse in Rotherham, was cited by both sides of the argument. Peter Kosminsky said: “If it was commissioned today, it would struggle to get made.” However, the BBC and Pact said that Three Girls exemplified what public service broadcasters could afford.
153.Some expressed concern about the ability of public service broadcasters to attract the biggest stars to their productions. Jane Turton, Chief Executive of All3Media, envisaged a threat from an “arms race for talent”. However, Claire Enders and Kevin Lygo said that a benefit of top talent being engaged by SVODs was that public service broadcasters were forced to nurture new talent. Ms Enders added that the large audiences public service broadcasters can reach made them appealing to actors.
154.In 2018 public service broadcasters spent £2.58 billion on original UK content, excluding third-party funding. This is considerably more than SVODs. However, Figure 9 shows that this figure has declined in real terms.
Note: Spend figures are in 2018 prices. BBC portfolio figures include BBC Three, BBC Four, CBBC, CBeebies, BBC News and BBC Parliament. Figures do not include S4C, BBC Alba, BBC HD or nations’/regions’ programming.
Source: Ofcom, Communications Market Report 2019 (July 2019): [accessed 4 November 2019]
155.Declining spending is not necessarily a bad thing if broadcasters are getting more for their money, as Margot James MP, the then Minister for Digital and the Creative Industries, noted. The BBC spent as much on 18 series, which were seen by 74 per cent of the population, as Netflix did on two series of The Crown. Nevertheless, public service broadcasters’ ability to produce high-quality programmes depends on their funding. We discuss this in Chapter 4.
156.Peter Kosminsky, Director of Stonehenge Films, advocated a new levy on SVODs. He said:
“If the SVODs wish to broadcast to the UK audience of 60 million-plus, they should be obligated to pay a levy per head on all their UK subscribers. That would create a pot of money available exclusively to UK PSBs to compete for, programme idea by programme idea, to replace the shortfall caused by the SVOD decision to withdraw from co-productions with the PSBs.”
157.Several witnesses supported imposing a levy but disagreed on how best to spend it. Others argued that there was no need for a new levy and it could undermine the success of the production sector. Adam Minns, Executive Director of the Commercial Broadcasters’ Association, warned: “If I were brainstorming ways to deter investment in the UK post Brexit, a levy would probably be right at the top of the list. It would go straight to companies’ margins.” He said that a levy would force SVODs to cut their content budgets, meaning that they would have less money with which to co-produce programmes with public service broadcasters.
158.Public service broadcasters are vulnerable to cost inflation if skills shortages are not addressed, but they can still afford to make high-quality, distinctive British programmes. Public service broadcasters have benefitted from record levels of third-party funding: from co-productions with SVODs, co-productions with non-SVODs and deficit financing. However, we heard concerns from industry figures that third-party funding could decline in future once broadcasters have become dependent on it. Losing this funding would pose a serious danger to public service broadcasters and impair their ability to produce high-quality programmes. It would also damage the independent production sector. In a fast-changing market public service broadcasters’ access to third-party funding for programmes for UK audiences should be kept under review. We do not support proposals for a levy on SVOD subscriptions at this time, but we would expect Ofcom to assess the merits of a levy if the situation changes and to make recommendations accordingly. With the support of the Government, Ofcom should closely monitor emerging data and the impact of similar measures in other jurisdictions.
159.Public policy on the production sector must consider all the regions and nations of the UK. TV production brings great benefits to the economy and it is important that these are spread across the whole of the country.
160.In 2017, 90 per cent of independent production revenue was generated in London. With expertise concentrated in the capital and the south east, Deborah Williams, Chief Executive of the Creative Diversity Network, said that it was necessary to develop a “critical mass” in a given region to act as a sustainable skills base.
161.Two-thirds of productions made outside London are made by companies based in London. STV explained: “In recent years, investment in “nations and regions” programming has been frustrated by the practice of “lift and shift” production—where, for example, a London-based producer will temporarily re-locate a production team in the nations to make a show rather than investing in local talent.”
162.Different types of programmes have different effects on local skills bases. John McVay, Chief Executive of Pact, argued:
“the way you drive production economies in centres such as Newcastle and Birmingham, which used to have thriving production economies, is through returning series—long-running work in which you can retain talent and develop the high-level skills needed. Short runs and singles do not do that”.
163.Mr McVay suggested that the Treasury should make it easier for local authorities to use capital investment funds to support the creative industries by introducing greater flexibility. Margot James MP, the then Minister for Digital and the Creative Industries, said:
“Some of the things we are doing include encouraging the development of studio space outside London and the south-east. That is a big opportunity and ties into [the] suggestion about local authorities and their flexibility over capital allowances. The mayor of the West Midlands, in trying to support the need for greater studio space, is looking at the potential of a piece of land.”
164.It is unclear how much of the production spending by new entrants is being spent outside London. However, Benjamin King, Director of Public Policy for the UK at Netflix, told us that Netflix had productions under way “not only in and around London but in Wales, Manchester and other areas. We are also currently filming in Norwich and have been in Bristol and Scotland recently. Our ambition is to make a meaningful and measurable contribution not only to the continuing success but to the longer-term sustainability of the creative industries here.” John McVay, CEO of Pact, added: “Sunderland ‘Til I Die was Netflix’s top documentary last year, a brilliant piece of work about a very special local football team, and all that money was spent in Sunderland.”
165.Public service broadcasters play a crucial role supporting regional production. They are obliged by Ofcom to do so. Table 2 shows the requirements on public service broadcasters for programming from the nations and regions. However, the effectiveness of these quotas has been questioned. Campaigners noted that one third of ITV’s qualifying regional hours in 2017 were ‘Nightscreen’—which shows still images of ITV programmes—as it is produced by a small team in the midlands.
Production in the UK outside the M25
% of network programme hours
% of production spend
Production in the Nations outside of England
% of network programme hours
England outside M25: 30% (37.1%)
Scotland: 8% (16.7%)
Wales: 4% (4.6%)
Northern Ireland: 2% (2.4%)
% of production spend
England outside M25: 28% (28.4%)
Scotland: 8% (10.4%)
Wales: 5% (6.3%)
Northern Ireland: 3% (3.1%)
Actual 2018 figures in brackets
Source: Ofcom PSB Annual Compliance report 2019: [accessed 4 November 2019]
166.Dr Caitriona Noonan argued: “TV production in the nations and regions has been driven by investment from PSBs. In the last decade, the production sector in the nations and regions has increased its share of PSB programming with more active local production companies in the nations making network programmes for the PSBs.”
167.Ofcom noted that the BBC had made progress, due particularly to its investment in Salford:
“While 62 per cent of the BBC’s qualifying hours were made in London in 2010, this was down to 40 per cent in 2017. The north of England—driven by the relocation of departments such as BBC Sport and Children’s to Salford in 2012—has been the main beneficiary, producing nearly a quarter (24 per cent) of the BBC’s qualifying hours in 2017 compared to 5 per cent in 2010.”
168.We also heard support for ITV’s presence in Salford and Channel 4’s decision to move its headquarters to Leeds, with new hubs in Bristol and Glasgow. Channel 4 said that over half of its existing nations and regions suppliers would be within a one-hour train journey of one of its offices. However, Faisal Qureshi, Chair of the Black Members’ Committee at Bectu, argued that more must be done to devolve commissioning power to a regional level.
169.Only 47 per cent of people believe that public service broadcasters portray their region or nation fairly to the rest of the UK. Charles Lauder, Chief Executive Officer, Indie Club, told us: “audiences value content that reflects their experiences. That will not happen if they are not made by the people who actually have lived those experiences and understand them. One thing that would help that … is about where the commissioners are based.”
170.Research for Ofcom by Kantar Media found that audiences believe that TV often focuses too much on London and the South-East and, where it does not, ‘hub’ locations such as Glasgow and Cardiff are over-represented. This view was echoed by witnesses. The Institute for Practitioners in Advertising stated that a survey they conducted last year found that those in Yorkshire and the north west expressed more negative views towards the BBC whereas those in London and the south east were more positive. Equity were concerned about declining PSB investment in the West Midlands, East Midlands and east of England. Ofcom data from 2015 showed that these regions accounted for only 2 per cent of production spending between them. Lord Hall of Birkenhead told the Committee that better serving the regions of England was a priority for the BBC; he gave the example of programmes such as Question Time and Springwatch which move around the country.
171.Producing programmes across the UK spreads the economic benefits of TV production and helps to ensure that viewers feel represented. Public service broadcasters have a crucial role in supporting regional production. Progress has been made and centres such as Salford, Cardiff and Glasgow have been highly successful. However, it is important to develop further production beyond metropolitan hubs. Regional production must support production companies whose main office is not in London and involve commissioning decisions being made in the regions and nations themselves.
172.Ofcom should ensure that public service broadcasters uphold the spirit of regional production quotas to aid the development of regional skills and production companies based in different nations and regions.
173.The Government should review regional investment funds to determine how they could be made more flexible to work better for the creative industries. This must be part of a comprehensive strategy to include all regions and nations in the success of the TV production sector and make sure the benefits of growth are spread across the country.
123 Oliver & Ohlbaum, UK Television Production Survey: Financial Census 2019 (September 2019) p 8: [accessed 16 October 2019]
124 Written evidence from Pact () and Oliver & Ohlbaum, UK Television Production Survey: Financial Census 2019 (September 2019) p 8: [accessed 16 October 2019]
125 Office for National Statistics, GDP monthly estimate, UK: August 2019 (10 October 2019) p 6: [accessed 16 October 2019]
127 BFI, Screen Business: How screen sector tax reliefs power economic growth across the UK (October 2018) p 3: [accessed 6 August 2019]
128 UK Screen Alliance, Tax reliefs provided £1.1 billion boost to creative sectors (7 August 2019): [accessed 4 November 2019]
129 Oliver & Ohlbaum, UK Television Production Survey: Financial Census 2019 (September 2019) p 3: [accessed 9 September 2019]
130 Written evidence from Netflix (), and Mark Sweney and Tara Conlan, ‘Netflix to spend $500 m on British TV shows and films’ The Guardian (20 September 2019): [accessed 16 October 2019]
131 Written evidence from Dr Maria Machalis ()
139 Supplementary written evidence from Netflix ()
141 Written evidence from the British Film Institute ()
145 Written evidence from Clintons Solicitors (), written evidence from techUK () and
147 ScreenSkills, High-end television UK workforce in 2018 research report (March 2019) p 10: [accessed 20 August 2019]
153 ScreenSkills, High-End TV Skills Fund (July 2019): [accessed 20 August 2019]
155 and written evidence from Netflix ()
156 Select Committee on Communications, (1st Report, Session 2017–19, HL Paper 116) p 42, Select Committee on Communications, (3rd Report, Session 2016–17, HL Paper 170) pp 17–19 and Select Committee on Communications, (1st Report, Session 2017–19, HL Paper 116) p 42
157 ScreenSkills, ‘£55 million a year wasted in creative apprenticeship levy payments’ (26 October 2018): [accessed 20 August 2019]
159 Supplementary written evidence from ITV ()
161 HL Deb, 4 June 2019,
163 Jonathan Moules, ‘UK relaxes apprenticeship levy rules to help film industry’, Financial Times (4 July 2019): [accessed 20 August 2019]
165 CBI, Learning on the job: improving the apprenticeship levy (September 2019) p 15: [accessed 17 September 2019]
166 CBI, Further reform urgently needed for effective apprenticeship levy (17 September 2019): [accessed 17 September 2019]
168 Ofcom, Review of the operation of the television production sector (December 2015) p 31: [accessed 9 October 2019]
169 Channel 4, Channel 4 and Pact agree landmark Terms of Trade deal for new digital era (11 June 2019): [accessed 20 August 2019]
170 Written evidence from Clintons Solicitors ()
172 Oliver & Ohlbaum, UK Television Production Survey Financial Census 2019 (September 2019) p 13: [accessed 16 October 2019]
177 Ofcom, Media Nations: UK 2019 (7 August 2019) p 44: [accessed 9 August 2019]
182 Written evidence from Channel 4 () and
183 Ofcom, Media Nations: UK 2019 (7 August 2019) p 58: [accessed 19 August 2019]
185 and ScreenSkills, High-end television UK workforce in 2018 research report (March 2019) p 11: [accessed 20 August 2019]
186 Ofcom, Media Nations: UK 2019 (7 August 2019) pp 54–55: [accessed 19 August 2019]
187 Ofcom, Media Nations: UK 2019 (7 August 2019) p 57: [accessed 19 August 2019]
189 Supplementary written evidence from COBA ()
192 Jake Kanter, ‘BBC and Netflix team up for natural history first with David Attenborough series “Life in Colour”’, Deadline (27 September 2019): [accessed 9 October 2019]
195 Ampere Analysis, The UK VoD market (2019) p 14: [accessed 20 August 2019]
208 Written evidence from HM Government ()
210 Written evidence from Clintons Solicitors (), written evidence from Professor Diane Coyle () and
211 , ,
216 Written evidence from STV ()
222 David Collins, ‘Up next for our regional viewers—the ITV test card’ The Sunday Times (20 October 2019): [accessed 24 October 2019]
223 Written evidence from Dr Caitriona Noonan ()
224 Written evidence from Ofcom ()
225 Written evidence from HM Government ()
226 Written evidence from Channel 4 ()
228 Ofcom, Media Nations: UK 2019 (7 August 2019) p 36: [accessed 19 August 2019]
230 Kantar Media, Representation and portrayal of audiences on BBC television (25 October 2018) p 52: [accessed 19 August 2019]
231 Written evidence from the Institute for Practitioners in Advertising ()
232 Written evidence from Equity ()