Report warns against U.K. film tax cuts

Movie sector contributes $6.5 bil to British economy

LONDON -- The U.K. film industry is a driver for the U.K.'s national economy and tax reliefs are benefiting the economy -- but cut the relief and the sector would falter, a report published Monday warned.

The country's movie sector gave the British economy a £4.5 billion ($6.5 billion) shot in the arm in 2009, a small uptick from the £4.3 billion figure trumpeted two years ago, the last year for which such figures were collated, according to an independent report published by Oxford Economics.

The Economic Impact of the U.K. Film Industry -- commissioned by the U.K. Film Council, publicly listed studio facilities group Pinewood Shepperton, Framestore, Cinesite and Double Negative -- con-cludes that the industry here "is substantial, is weathering the recession well, and its long-term trend is one of strong growth and expansion."

But while the report noted that the film tax relief "is vital to sustaining current levels of global competitiveness and job creation" it also said without the U.K. film tax relief in place, U.K. GDP would plummet by around £1.4 billion ($2 billion) a year.

The research argues that the tax relief is providing good value for the economy with a current cost to the government of the film tax relief of around £110 million ($160 million) a year. It means for every £1 ($1.44) put in by the government in tax relief, an extra £13 ($18.80) in GDP is generated.

Culture, communications and creative industries minister Ed Vaizey said the report provided "evidence of how important British film is -- to our economy as well as promoting our cultural life, our identity and diversity on the international stage."

The report is fuel for the need for positive spin in the now frantic world of lobbying for government backing against the current backdrop of public spending cuts and so called austerity measures being introduced to bring the U.K. deficit down.

The wide-ranging report took 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 2008 stood at £1.3 billion ($1.9 billion) and in 2009 capital investment in the core U.K. film industry is estimated to have been £147 million ($213 million), with most of the investment undertaken in the production sector. The report said 36,000 people were directly employed in the movie industry in 2009, up 7% from 33,500 in 2006.

Inward investment levels -- cash flowing into pro-duction from overseas -- should also have the government rubbing its hands with glee. It is estimated to account for around £3.6 billion ($5.2 billion) of film's contribution to GDP and £960 million ($1.4 billion) in Exchequer revenues.

U.K. Film Council chairman Tim Bevan said that the industry's economic contribution is growing in spite of the wider challenges it faces.

"With world-class film facilities, a highly-skilled workforce and effective government support, including a film tax relief that provides certainty for business, the British film industry is firing on all cylinders and is well-placed to play an increasingly valuable role helping the U.K. economy grow in the years ahead," Bevan said.