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

Economic Contribution of the UK Film Industry
July 2007
The importance of the Film Tax Relief to supporting the continued success of the core UK film industry is
clear when we consider how UK competitiveness would be affected if there were no tax incentives from
2008 onwards. In this case, the UK’s cost advantage vis-à-vis the US would fall to 15%. And UK film
costs would be almost 25% higher than those in the Czech Republic over the remainder of the decade
(Charts 11.3 and 11.4). We estimate that this loss of competitiveness would reduce the UK’s share of
global film production by around 9% points by 2010, to around 2%. That would be equivalent to a loss of
inward investment of about £650 million a year by 2010. In addition, investment in domestic production
and co-productions would also be seriously undermined. Overall UK film production might be reduced by
at least 75% by the abolition of the Film Tax Relief.
11.3. The economic impact of the abolition of Film Tax Relief
A decline in film production of that scale would have substantial economic effects:
• It would reduce the direct contribution of the core UK film industry to GDP by about £1.1 billion and by
£2.25 billion taking account of impacts on the supply chain and on the spending of workers who lose
their jobs. Similarly, employment in the core UK film industry would be expected to fall by around
25,000 jobs directly and 50,000 taking account of multiplier effects.
• While many of those currently working in the core UK film industry would find jobs elsewhere and so
continue to pay taxes, our research suggests that perhaps one-quarter of the most highly skilled would
move overseas to be based in or near film production centres. As a result, UK GDP would be directly
reduced by around £200 million a year.
• Over time, tourism and exports would be undermined as they lose the promotional support provided
by UK films.
• In addition, the UK’s cultural life would suffer as a result of the loss of UK films.
• Overall, UK GDP would in the medium term be reduced by around £1.3 billion a year.
• These losses in turn would reduce Exchequer tax revenues by about £350 million a year, taking
account of multiplier impacts and effects on merchandising. That compares with an estimated cost of
the new Film Tax Relief to HM Treasury of around £120 million a year.
11.4. Conclusions
The Film Tax Relief is vital to the continued success of the core UK film industry in a global environment
characterised by stiff tax competition as countries seek to attract inward investment because of the
economic and cultural benefits that the film industry generates. The new Film Tax Relief provides the
basis for the continued growth of the core UK film industry. Without it, the core film industry would be
expected to be 75% smaller, at a cost of £1.3 billion of lost GDP a year and around £350 million a year of
lower Exchequer revenues.
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