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Producers plan for life beyond Brexit

Blog
01 August 2016

A month since Britain backed Brexit, the mood among the creative industries has moved on from the profound shock of the days after the vote.

Many producers had loudly and vociferously called for the UK to Remain in Europe (85% of TV producers association Pact said they planned to vote Remain). They feared that leaving Europe would lead to a swift downturn in production levels – for film, TV, commercials or corporate production.

With the immediate post-Brexit shock now over, the mood has morphed into one of uncertainty about what the impact of the leave vote will really have on production companies.

Most believe that Brexit will make business more challenging. But, entrepreneurial by nature, producers also say they are determined to adapt to the new landscape and make a success of it.

The industry is already starting to face up to the challenges of Brexit. Early in July, a new Creative Industries Council working group was set up to assess the impact of Brexit on the UK TV and media sector.

John McVay, CEO of Pact, is chairing the group, which will identify the challenges and opportunities arising from Brexit. The group will report its findings to government.

“This is a key moment for the creative industries to create concrete proposals that can bring benefits to the UK’s creative industries and ensure that one of the UK’s most successful sectors remains at the top table,” said McVay.

Very little is expected to change in the next two years, the time period that Britain has to negotiate its exit from the EU after triggering Article 50.  However, this long period of uncertainty is not helpful for the creative industries, which relies on strong investor confidence to back projects. 

“As producers we need to be incredibly vocal and, through Pact, make sure the DCMS doesn’t allow the industry to fall into the English Channel,” says Laurence Bowen, CEO of drama indie Dancing Ledge Productions.

The big immediate fear is that Brexit will spark an economic downturn that will hill hit production levels; only last week ITV said it will need to cut costs by £25m in 2017 to prepare for economic uncertainty sparked by the UK's decision to quit the EU.

Beyond worries about a Brexit recession, though, the concerns – and opportunities – about Brexit centre on five key areas:

1. Loss of EU Funding: The UK receives a share of funding from the EU’s Creative Europe programme, which has Euros 1.46bn to invest between 2014-2020.  For example, seven UK film producers – including See-Saw, Origin Pictures and Recorded Picture Company – recently shared £1.2m in slate funding from Creative Europe. Creative Europe Desk UK says there would be no change for those who have applied or are planning to apply for Creative Europe funding in 2016 and 2017. If UK indies can no longer access Creative Europe funding, the UK government will be under enormous pressure to replace it.

2. Quotas British films and TV shows have, until now, qualified as European works. This is important as some EU countries have quotas on the amount of European content their broadcasters must show.   This has helped to boost the demand for UK films and television shows as well as making UK / US co-productions more attractive.

“Brexit will not in itself change the status of UK productions as ‘European works’, but co-productions will be affected,” says Jeremy Roberts, a senior partner in the TV team at law firm Sheridans. UK productions will still be classified as European because the UK is party to the European Convention on Transfrontier Television of the Council of Europe, which is separate from EU membership.

Post-Brexit, Roberts says that because the UK will nolonger benefit from co-production treaties between the EU and third countries, UK co-productions that do not fulfill the requirement of “originating in the UK” will no longer qualify.

To be deemed to have ‘originated’ in a state, a production must be mainly made with authors and workers residing in one or more of the states that are a party to the Convention. Says Roberts: “So, under the Convention alone it is still possible for a UK-US co-production to come within the definition of a ‘European work’, but it will be much harder in practice.”

However, Roberts says it is important for the UK industry not to overreact.  “Until the formal cessation of the UK’s membership of the EU, the existing regime remains in place.  Thereafter, the most likely outcome is that the UK will negotiate some form of status akin to what we have now as part of any new deal with the EU.  Finally, while the ‘European work’ designation is undoubtedly important, it is not the be-all and end-all.  European broadcasters did not acquire The Night Manager just because it is a ‘European work’; they acquired it because it was a great show.”

3. Tax credits Tax credits for film, drama, kids and animation programming are a vital subsidy for UK producers. If the government no longer has to adhere to EU state aide rules, there is the possibility that the UK could offer more generous subsidies to shore up production.

4. Exchange rate The fall in the value of the pound is likely to make the UK more attractive as a base for international shoots. Pinewood Shepperton said last month that it expected to host a greater number of film and TV projects as a result of the favourable exchange rate. Chief executive Ivan Dunleavy called it “undoubtedly positive for our international customers.” However, the weaker pounds makes it more expensive for UK producers filming abroad, such as Sid Gentle Films. The drama indie is currently in pre-production for the second series of The Durrells, which is filmed in Greece.

5. Talent The UK is a magnet for international talent, in front of and behind the camera. The free movement of European cast and crew as well as production kit throughout Europe has helped to underpin the success of the UK creative industries. Production companies will fight hard to retain free movement protections the creative industries have so far enjoyed.

Throughout the industry, there is a desire for a positive Brexit deal with the EU. Camilla Deakin, joint md of Lupus Films, says: “We’ve co-produced with France, Germany, Denmark, Ireland and Luxembourg as well as with territories outside the EU, so we’ve learned to collaborate and co-operate with producers from other countries to get the best talent combined with the maximum financing. So it seems completely counter-intuitive to turn our backs on Europe and try to pull up the drawbridge.”

Producers and studios on the impact of leaving the EU


“A lot of false allegations were made by the Leave campaign about businesses like mine being forced to go through lots of paper work due to our being part of the EU.  In fact the reverse is true – we had less paperwork as part of the EU and now we have left, we are likely to have to get carnets whenever we film in Europe.”
Cat Lewis, CEO, Nine Lives Media
 
 “Having recently filmed one drama in Lithuania and Malta [The Eichmann Show] with financing tax schemes in place in both countries that were critical to our budget, any step away from Europe feels like a huge mistake. The MEDIA programme invested almost Euros100m in the UK audio-visual industry from 2018-13.  Will that investment continue at the same level?  Unlikely.”
Laurence Bowen, CEO of Dancing Ledge

“The immediate challenge for independent producers like Sid Gentle Films is coping with the volatility of exchange rates. The fall of the pound against the euro has come at a particularly bad time for us as we are in pre-production for the second series of The Durrells which is of course filmed in Greece. Ultimately, it is just another production variable. It will have an impact but we will find a way around it and still deliver the ambitious series that we had planned to.”
Lee Morris, md, Sid Gentle Films

“In the context of our business, the decline in the pound sterling exchange rate is undoubtedly positive for our international customers.”
Ivan Dunleavy, CEO, Pinewood Shepperton

“There is still a lot of uncertainty about what will happen next and it could affect the ability of the US based children’s channels (Disney, Cartoon Network and Nickelodeon) to produce series in the UK that would then count as EU content in the rest of Europe, which would definitely hit our business hard. However, as a producer it’s my job to find solutions in difficult situations, so I am optimistic that whatever happens we will adapt and survive” 
Camilla Deakin, Joint MD, Lupus Films

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