A new independent report commissioned by the BFI shows that tax reliefs across film, high end TV, Games, animation and kids TV helped generate an economic contribution of £7.9 billion in 2016.
The report reveals that an estimated £632 million in tax relief seeded £3.16 billion in direct production spend in 2016, a 17% increase on 2015. UK-made productions generated £7.9 billion as the screen sector’s overall economic contribution (GVA), including £2 billion in tax revenues. Production spend which would not have taken place without the tax reliefs, known as additionality, was worth £4.1 billion in 2016.
The report, Screen Business: How tax incentives help power economic growth across the UK, analyses the economic contribution of the tax reliefs for film, high-end television and, for the first time, analyses the new tax reliefs for video games, TV animation programmes and children’s TV programmes. The report uses the latest complete dataset available from 2016.
The report has been produced by analysts Olsberg SPI with Nordicity, and commissioned by the BFI, working with industry partners including the British Film Commission (BFC), Pact, Pinewood Group, UK Interactive (Ukie), the UK Screen Alliance and Animation UK.
The report showed that expenditure on feature film production in the UK has doubled in nine years since the film tax relief was introduced, from £849 million in 2007 to a record-breaking £1.72 billion in 2016. High-end television production has also boomed since the introduction of the high-end tax relief in 2013, with expenditure more than doubling over the ensuing three years from £414.9 million to £896.7 million. The video games tax relief which came into effect in 2014 has supported £389.9 million of development expenditure in 2016, up from £228.8 million in 2015. The animation and children’s television tax reliefs have helped generate expenditure of £97.1 million and £61.0 million respectively.
In 2016, screen production supported by the tax reliefs generated £7.91 billion in GVA for the economy and 137,340 full time equivalent (FTEs) of employment in the UK. The employment and economic activity generated by screen production supported by the tax reliefs yielded £2.04 billion in tax revenue in 2016. Production activity across the tax relief sectors generated 48,330 direct and indirect FTEs of employment directly in production in 2016.
Over four years the tax reliefs have driven a 63% growth in production spend and a 62% increase in employment across film, high-end television and animation television programmes. The overall tax revenues across film, high-end TV and animation television programmes have grown by 67% from £1.11 billion in 2013 to £1.86 billion in 2016. All screen sector tax reliefs deliver a consistently growing return on investment through GVA.
Film, high-end TV and animation television programmes, the three sectors with the longest established tax reliefs, have grown their overall GVA contribution by 73%, from £4.19 billion in 2013 to £7.30 billion in 2016. Film was the largest contributor, generating £5.23 billion.
The growth in spend and investment within the UK screen infrastructure is stimulating further need for skilled people. The BFI’s £19 million investment plan supported through the National Lottery, announced last year, is addressing the need for 10,000 new entrants to keep the UK in the vanguard of global film production over the next five years.
The rate of productivity (the amount of economic output, GVA, per FTE across the tax relief screen sectors) across the tax relief supported screen sectors at £75,600 per FTE is higher than for the average for UK economy as a whole (£62,144). Video games delivered the highest rate of labour productivity in 2016 at £83,800 and visual effects (VFX) also generated relatively high labour productivity at £81,300.
Film and high-end television production attracted £1.97 billion of inward investment and international co-production in 2016, including projects from the US, Europe and other markets in 2016; 76% of the total spend on film and high-end television production. Inward investment in UK film production reached £1.38 billion in 2016, the highest ever recorded and a 11% increase from £1.24 billion in 2015. High-end TV attracted £554.2 million of inward investment and international co-production expenditure in 2016, a 28% increase on £431.6 million in 2015. The total amount of inward investment and international co-production spend attracted by all five sectors was over £2 billion in 2016.
Tax relief supported production is also fuelling further private sector investment with more than £850 million identified spend on facilities across the UK since 2013 to service the growth in production. New and developing studio spaces include Wolf near Cardiff, Pentland in Scotland, Church Fenton in Yorkshire, Belfast’s Harbour Studios, Dagenham in London, Shepperton Studios, Longcross Studios, Elstree Studios and the Littlewoods building in Liverpool.
The strength of the UK video games sector has attracted over £1.75 billion of inward investment since the introduction of the VGTR, with creative hubs across the UK including Brighton, Cambridge, Cardiff, Guildford, Glasgow, Edinburgh, Dundee, Liverpool, London, Manchester, Oxford, Sheffield, Leeds, Nottingham and Warwick/Leamington Spa.
For the first time, the impact of the tax reliefs on the vfx sector has been analysed even though vfx is not a direct recipient of its own tax relief. Direct spend on tax relief supported VFX is estimated to have been £275.4 million for 2016, generating £315.1 million in GVA and 6,120 FTEs of employment. This impact increases to £609 million when the impact of VFX content across the screen value chain is included. The impact increases to £773.9 million in GVA when spillover impacts are added.
Rt Hon. Philip Hammond MP, Chancellor of the Exchequer says: “From TV shows like The Crown, to films like Darkest Hour, and animations like Peppa Pig, our creative industries are intrinsic to the rich cultural fabric of the UK. But they’re also an important part of a dynamic and diversified economy, and a key component of our great, global trading nation. That is why this government is committed to supporting our highly-skilled and innovative creative industries through creative sector tax reliefs. I am confident that the creative industries will continue to grow, provide strong employment and be the face of British culture to the world in future years.”
Minister for the Creative Industries, Margot James says: “The UK is a creative powerhouse for producing many award-winning films, shows and video games enjoyed by millions globally. It is home to incredible success stories such as James Bond, Batman Arkham, The Crown and Horrible Histories demonstrating that Britain is a hub for creativity. These fantastic statistics show investment in our screen industries is booming and government is committed to supporting their continued success through our tax reliefs and modern industrial strategy, which is helping our creative sectors go from strength to strength."
Amanda Nevill, BFI CEO says: “Screens of all sizes are now central to our daily lives and today’s report shows the UK as a global leader in creating the content for those screens. This new report endorses the huge part the government’s tax incentives play in our success story, creating a fiscal environment that’s boosting the economy, creating jobs and supporting our outstanding talent and infrastructure. The reliefs are also of huge cultural importance, enabling talent to produce the richest possible range of films, television programmes and video games, which create IP, and are loved by audiences both at home and around the world. It is the BFI’s mission to maintain and improve this globally competitive environment for the future and the BFI stands ready to work with government and industry to help continue this growth in the years ahead.”
John McVay, Chief Executive of Pact says: “Yet again the research shows how much return on investment the creative industries and the screen sector in particular produces for the UK economy. Using the tax relief to maximise opportunities and growth across the UK is vital to help the UK screen sector achieve the high quality needed to compete globally.”
Adrian Wootton, Chief Executive of Film London and the British Film Commission says: “Film and high-end TV are big business, and the record-breaking inward investment figures demonstrate outstanding growth and the success of the UK in continuing to meet increasing demand, delivering world-class skills, talent and technical expertise. This fantastic achievement also spans animation and games, seeing the entire screen sector delivering at the highest level throughout the UK’s nations and regions, and translating to economic growth, job creation and training opportunities. It is wonderful to see these figures clearly demonstrating the value of the tax reliefs in reaping incredible dividends for our economy and also for industry in terms of boosting infrastructure and opening up new business opportunities.”
Dr Jo Twist OBE, CEO Ukie, says: “The ‘Screen Business’ report proves what an economic, cultural and technological powerhouse the UK games industry is. The video games tax relief is an effective incentive to companies making games with a uniquely British and European flavour and UK-based talent, that otherwise might not have been made. The report is important in showing the return on the investment that the VGTR makes to the economy in employment, and enrichment of our cultural output. The video games tax relief is so important in providing confidence and certainty to the ecosystem we have in the UK and we look forward to its continued influence.”
Andrew Smith, Corporate Affairs Director, Pinewood Group says: “The UK’s consistent success in delivering world-class films, television and video games is testament to our creativity, highly skilled workforce, state of the art facilities and fiscal incentives. This report from the BFI provides the evidence needed by business to attract continued private investment in the screen industries and generate further growth. Pinewood’s confidence in the UK as a leading player in this global industry and the opportunities we have for growth underpin our own increased investment in new and expanded production facilities.”
Producer Iain Smith, Applecross Productions (Mad Max: Fury Road, Children of Men), Chair of the British Film Commission, Film Skills Council and the Film Industry Training Board says: “The consistently high quality of technical innovation achieved by UK film and television crews is unrivalled. Their efficiency and creativity sets the bar for those international executives who only want to work with the world’s best. In this fast moving and highly competitive sector, the UK’s tax reliefs are crucial, enabling the industry to compete successfully in the global marketplace. The government’s ongoing support enables our crews to showcase their skills and talents on an impressive scale. Alongside this, ongoing government support and continuing investment from industry, improves and broadens our skills-base and prepares us well for the future. In this way we shall continue to increase productivity, encourage creativity and create jobs.”
Neil Hatton, Chief Executive, UK Screen Alliance says, “The UK’s VFX industry has seen a significant growth as a result of the changes made in 2014 to the qualification threshold for tax relief which has allowed productions to qualify on the basis of VFX work alone. This has brought in more productions across both film and HETV and in recent times the UK’s VFX companies have been able to attract significant work for SVoD platforms.”
Jon Creamer
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