Tax woes could ruffle Brit post biz
Brown launched a series of clampdowns on tax breaks
But the boom has come to a halt this year, after Chancellor of the Exchequer Gordon Brown launched a series of clampdowns on the way the Hollywood studios and local producers alike were pillaging the tax breaks, and the dollar weakened dramatically against the pound.
Having invested more than $1 billion to tool up for the extra work, London's post business is now teetering on a knife edge. It anxiously awaits news of the U.K. government's plans to introduce a wholly new system of tax incentives next year. The initial proposals, unveiled a few months ago, fell far short of what the post houses were hoping for.
"It's a difficult time," says Mike Fraser, VP of tech org BKSTS -- The Moving Image Society, "inasmuch as the government has come up with new proposals for inward investment in film production in the U.K., and these proposals are not good enough."
That is already being felt, says Fraser, in London's post-production community.
"We've had in 2002, 2003, 2004, amazing years. We've had a much, much quieter year than we might have because of this uncertainty.
"We're still in business and we're still making films because of the sheer quality of the infrastructure we have."
But he says the films coming to London are "not as big, and not as many as in the past."
Moving Picture Company managing director David Jeffers puts it more flatly. "The U.K. post boom came to a grinding halt when the Chancellor announced the tax re-think," says Jeffers.
"To some degree, the industry is treading water until the tax break pronouncements are made."
Some post work has come back to the U.S. and Canada. At the same time, competition from such low-cost locales as the Czech Republic is becoming more aggressive.
The impact of these changes on the movie community in London could be severe.
Trade body U.K. Post commissioned Oxford Economic Forecasting (OEF) to undertake a detailed study describing the contribution which the U.K. film post-production and visual industry makes to the U.K. economy. The report was published in October.
Among its key findings, the report said that the U.K.'s post-production sector is second only to that of the U.S.; that turnover and employment have quadrupled since 1997; and that the industry directly employs some 4,400 people.
But the report also says the U.K. post industry has been bolstered by significant inward investment from the Hollywood studios.
"Warner Bros in particular has made a massive contribution to the U.K. post industry," says U.K post topper Gaynor Davenport.
This point is echoed by Alex Hope, managing director of f/x house Double Negative. "The U.K. post industry, as is the case with the industry as a whole, is underpinned by inward investment from the Hollywood studios."
Double Negative counts among its recent credits Warner's tentpole "Batman Begins."
Duncan Henderson, who produced the first "Harry Potter" film for Warner, said that while the studio has done the most production in U.K. of any of the majors, it won't do so without the tax subsidies.
"The studios need certainty, and the U.K. situation now is uncertain," he says. At least Warner recently confirmed that it will shoot the fifth Harry Potter movie in England after all, starting next February. But whether the studio will feel impelled to bring less thoroughly British projects to Blighty in future remains open to question.
Henderson spoke in a Hollywood panel discussion moderated by Variety executive editor Steven Gaydos at the U.K. Showcase, an annual trade event where U.K. post companies pitch themselves to the studios.
Tax uncertainty cast something of a pall over the 2005 event.
Meanwhile Double Negative's business is holding steady, says Hope, but he's uneasy about the future.
"The current climate of uncertainty needs to be addressed if it is not to have a serious impact on the U.K. post industry going forward."
Many of the projects in post in London were booked months ago, and Hope fears that post biz will be hit hard in 2006 by the tax hiatus. That said, Hope stresses that "since we worked on our first project -- 'Pitch Black' in 1998 -- Double Negative has always set out to work on projects which are not necessarily dependent on U.K. tax breaks."
The film industry is lobbying Prime Minister Tony Blair's administration for a better incentive package, Fraser says, but it will be weeks or months before the final shape of the new system is revealed.
