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U.K. Tax Credit Vital to Film Industry Health: Study

Pinewood Studios - H 2012
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The movie sector contributes $7.4 billion to the British economy, but any threat to tax system would see a collapse in output, according to an independent 100-page report published Monday.

LONDON -- Cut the film tax credit, and the U.K. movie production sector would collapse to be around 71 percent smaller without it, and the contribution made to the British economy would also shrink.

That's the stark warning contained in an independent 100-page report published Monday by Oxford Economics.

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The country's movie sector did deliver the British economy a much-needed £4.6 billion ($7.4 billion) fillip, a small but notable uptick from the $6.5 billion figure heralded two years ago, the last time the research was compiled.

The Economic Impact of the U.K. Film Industry -- commissioned by the British Film Institute,publicly listed studio facilities group Pinewood Shepperton, The British Film Commission and Creative England -- concludes that with the Film Tax Relief in place, the industry should grow over the coming two years and beyond.

The report paints a dark picture of the industry should any government choose to axe the system in place.

The detailed research argues that the tax credit system provides good value for money with a current cost to HM Treasury of about £114 million ($183.7 million) a year.

It means that for every £1 ($1.60) pumped in by the government via the credit, an extra £12 ($19) in GDP is generated.

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Without the film credit, national GDP would be reduced by about £1.4 billion ($2.25 billlion) a year with tax revenues falling by £430 million ($693 million) a year.

Culture, Communications and the Creative Industries Minister Ed Vaizey said the report highlights "the huge contribution that the U.K. film industry makes to long-term economic growth."

The report, published every two years by Oxford Economics, has become a tool for lobbyists looking to ensure government's continue to regard the movie sector here as a big contributor to the British economy.

With the current government pledging to support the existing tax credits over the coming years, the report will help them rest easy with that decision.

The wide-ranging report takes into account the broad contribution from the film industry across employment, production, distribution and the supply chain as well as tourism.

Total exports of the film industry in 2010 stood at £2.1 billion ($3.4 billion) up from the $1.9 billion posted two years.

STORY: British Film Institute Defends U.K. Film Tax Credits as 'Stable and Legitimate'

But last year saw estimated capital investment in the core U.K. film industry plummet to £96 million ($155 million), down from the $213 million estimate of 2009.

But the research says much of this fall may be accounted for by harsh economic conditions that have seen a fall in wages, tightened margins and less production finance swilling around.

The report also notes the number of jobs has risen with the U.K. film industry directly employing almost 44,000 people, up from 36,000 in 2009.

Projected inward investment levels --- cash flowing into production largely from studio-backed projects -- is forecast upwards, giving government bean counters reasons to be cheerful.

Pinewood played host to Les Miserables with Russell Crowe turning out for Oscar winner Tom Hooper before Angelina Jolie and company arrived for Walt Disney's Maleficent to film.

And Shepperton is currently revving with Fast and the Furious 6, while the Tom Cruise starrer All You Need Is Kill is the first production to shoot at Warner Bros.' U.K. studio facility Leavesden Studios.

"We expect the core U.K. film industry to continue to attract around 8 percent of global film production over the period to 2015, with spend on inward investment productions bettering its record 2011 level of £1 billion ($1.6 billion) per year," the report noted.

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With Warner Bros.' $160 million investment in Leavesden Studios and healthy levels of business reported across the major studio facilities including Pinewood Shepperton, trade with the studios and other North American players looks set to continue.

Inward investment alone is estimated to account for about £3.7 billion ($6 billion) of film's contribution to GDP and £1 billion ($1.6 billion) in Exchequer revenues in 2010, up marginally from the last report's levels.

Pinewood Shepperton chief executive Ivan Dunleavy said there is more to be done, despite the promising figures produced during a tough economic climate.

"We now need to look at how to enable further investment in infrastructure and how to build on the U.K.’s growing international reputation to boost exports," Dunleavy said. "By making gains in these areas film can provide more jobs and help play our part in bringing growth to the U.K. economy."

Creative England CEO Caroline Norbury noted the report's findings as a way to figure out where to focus future efforts.

"What is particularly interesting in this report is how together the film, TV and games industries are ensuring the U.K. remains a center for innovation; retaining its competitive edge,” she said.

Adrian Wootton, chief executive of Film London and the British Film Commission, said he was delighted the report "demonstrates not only the value in terms of production spend on inward investment but also the huge revenue generated by film tourism as a result of the U.K. being depicted on screens across the globe."

BFI CEO Amanda Nevill said: "This comprehensive report shows, without a shadow of a doubt, that film is an industry driving growth in the U.K.’s economy. It’s a story of great British talent and sustained investment really paying off."