The Economic Impact of the UK Film Industry - BFI - British Film ...

Economic Contribution of the UK Film Industry
July 2007
representation of British culture and national identity. Films can help reflect, explore and challenge
our diverse history, cultural beliefs and shared values. In doing so, the best British films not only help
us to reach a better shared understanding of Britain and its place in the world, but are also
instrumental in spreading awareness and appreciation of British culture around the world. As such,
British films are an important part of our cultural heritage and a significant channel for the continuing
expression and dissemination of British culture.” 53 Since these cultural benefits are unlikely to be fully
reflected in the price that cinema-goers are likely to be willing to pay to see a film, there is potential for
a market failure which would result in too few UK films being produced if the government did not
provide support to the core UK film industry.
• The economic benefits generated by the film industry - As highlighted in this report, these
benefits include not only the direct impacts of the film industry but also the multiplier effects through
the supply chain and the role of film in attracting tourists and helping to promote UK trade.
In addition to these factors, we would highlight that the Film Tax Relief can be justified by the absence of a
level playing field in the international film industry. Competition to attract film producers to shoot their film
in a particular country is fierce. This competition partly focuses on the physical attributes of a country; the
costs for labour and the renting of locations and sets; and the relative skills of the film production
workforce. But a key element is tax competition. As Appendix A highlights, the use of the tax system to
support film production is widespread, including in countries which benefit from low labour and other costs,
such as Hungary. Given that the film industry is highly internationally mobile and dominated by the US
major studios, the Film Tax Relief is important in levelling the terms on which the UK can compete with
other countries in attracting inward investment productions.
Given this context, the Treasury’s aims in designing the new Film Tax Relief are:
• Encouraging the production of films that might not otherwise be made;
• Promoting sustainability in British film production; and
• Maintaining a critical mass of UK infrastructure, creative and technical expertise, to facilitate the
production of culturally British films.
11.2. The importance of the Film Tax Relief to the competitiveness of the core
UK film industry
We have assessed the importance of the Film Tax Relief to the cost competitiveness of the core UK film
industry by updating and extending a detailed modelling of the costs of film production in a range of
countries undertaken by the UK Film Council in 2005. The Film Council’s research suggests that, for high
budget films, the costs of production in the US in 2005 were about 12% higher than those in the UK
before making allowances for fiscal support, while costs in the Czech Republic were around 19% lower
than UK costs. After taking into account the Section 42 support available in 2005, however, (and the
53 HM Treasury (2005), ‘Reform of film tax incentives: Promoting the sustainable production of culturally British films’, July.
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