The U.K. voted to leave the European Union on Thursday in a historic referendum that shook much of the country to its core, sending economic reverberations into the continent and even across the Atlantic.
While many of those coming to terms with the unexpected result might argue that now isn’t the time to consider the matter of moving pictures or indeed, entertainment, the U.K.’s EU exit could have a seismic impact for Hollywood and its traditionally strong British ties. Just days before voting opened, numerous executives from the British film industry signed a letter urging the U.K. to remain in the EU for the good of the creative industries.
With their voices clearly not being heard by the majority of the U.K., here is a look at five potential consequences of the so-called “Brexit” for Hollywood.
A Weaker Pound Is Good for Producers, Bad for Box Office (Possibly)
News that voters backed the Brexit sent the pound into a tailspin. In just a few hours, the U.K. currency fell more than 10 percent to around $1.35, its lowest level in 30 years. Such a radical shift in one of the world’s most stable currencies was a cause for alarm in the world’s markets, but the messages to Hollywood are mixed.
On the one hand, a weaker pound is good news for runaway productions, which will get more British bang for their American buck when they shoot on London soundstages like Pinewood. “Since breakfast, your $200 million production in the U.K. suddenly got $20 million cheaper,” says Brit producer Jonathan Weissler.
But U.S. studios will also feel the pinch of a weaker pound as British box-office revenue, in dollar terms, will shrink accordingly. Of course, this is assuming they send the money back home. “I’d simply keep it in a U.K. account and pump it into your next U.K. production,” says Weissler.
Co-Productions With Europe Just Got A Whole Lot Harder
Brexit’s biggest impact on the film industry is likely to be felt by European co-productions. Outside the EU, U.K. productions, or U.S.-led co-productions with British and European partners, will not have access to European film subsidies, such as the MEDIA program, which has invested around $180 million into Brit-based co-productions between 2007 and 2015 for support production and distribution.
Some of the titles to have received funding from the Brussels-based initiative include Oscar winners like Room, Slumdog Millionaire and The King’s Speech, recent Cannes victor I, Daniel Blake and even the most successful non-studio family film of all time, StudioCanal’s Paddington.
U.K. Production Tax Credits Could Be Under Threat
Britain’s 25 percent tax credit is one of the biggest draws for international productions — it’s what helped convince Disney to shoot Star Wars (and seemingly half the Marvel universe) there — but there is some question whether the rebate can be maintained post-Brexit. It all depends on the deal Britain signs with the European Union after it gets out.
Many have suggested Britain follow the example of countries like Norway, which aren’t EU members but are part of the European Economic Area (EEA) and so have access to Europe’s common market. But EEA members have to agree to EU regulations, and the EU could view Britain’s tax credit as unfair competition and call for it to be scrapped.
There Might be a Whole Heap More Bureaucracy
Being a producer often entails a fair degree of paperwork, but Britain’s departure from the EU is likely to increase the outgoing mail dramatically. Filmmakers have warned that there could be more red tape when bringing European talent into the U.K., with additional visas more likely, and further complications when trying to qualify productions for U.K. tax credits. This could lead to more so-called “loan out companies” needed to avoid the high fees and mitigate taxes.
The same is expected for British talent, who can currently work in other European countries without a work permit. A group of producers led by Working Title’s Tim Bevan and Eric Fellner said that this, and the ability for equipment to travel without a special passport, known as a “carnet,” would be at risk. “For those of us that remember the horror of carnets, the idea of having them back in our lives is a terrifying thought!,” the group said.
We Just Don’t Know (Which Isn’t a Good Thing)
It will take years — at least two, likely closer to five or six — for Britain to legally untangle itself from European institutions. During that time, legal uncertainty will be the order of the day, making it harder and more expensive to put together independent projects with British involvement.
“Uncertainty is the biggest problem,” says Michael Ryan, chairman, Independent Film & Television Alliance and partner at GFM Films in London. “Getting an independent film financed is risky enough at the best of times, this will mean spending even more on lawyers and accountants to get deals done … in five to six years, I’m sure we’ll be alright, until then, we’re screwed.”
