A new BFI report shows that the UK independent film sector is under ‘critical pressure’ and recommends measures including an increase to film tax relief and an increase contributions from streamers.
An Economic Review of UK Independent Film, undertaken by independent research company Alma Economics and published by the BFI, reveals high levels of fragility for UK independent film, from the production stage through to distribution and exhibition to audiences. The review suggests that these are now so significant that the sector’s viability is almost at the point of market failure.
The review’s findings are that the speed and volume of UK production growth has exacerbated the strain on the independent sector which cannot compete with larger budget international productions on a variety of levels from accommodating the rising cost of production to securing cast and crew and ultimately to reaching audiences.
The sustainability of the sector has been under review since the BFI Commission on UK Independent Film report in 2017/2018 which looked at how changes in the wider screen landscape were creating significant challenges for independent film. “Since then, those challenges have only grown more acute.”
The BFI’s recently published Skills Review highlighted that crew shortages at all levels is especially threatening the UK’s independent film sector, which is struggling to compete for crew as well as putting additional pressure on already very stretched budgets. Covid protocols have reportedly added 10-20% to production budgets and for independent films with already tight and limited finances, “that impact is acute to the point of being insurmountable.”
At the same time that UK independent film is struggling with higher production costs and plateauing or declining budgets, it is also experiencing a decline in revenues. This has a knock-on effect by inhibiting investment in new films, largely as a result of stagnating box office and a sharp decline in global sales of packaged media.
Inflation-adjusted revenues from digital media have increased significantly through the past decade, however, the report says they have not been enough to reverse the wider trend of decline.
Inflation-adjusted global box office revenue has been on a gradual downward trajectory since 2010, with total box office revenue having fallen from generating nearly 60% of independent film income in 2010 to around 50% by 2018.
In some years the downward trend has been masked by a small number of very successful commercial hits like Belfast, The Favourite, The Best Exotic Marigold Hotel, The Imitation Game and The Inbetweeners 2.
Despite existing support measures for UK independent film including the role of the BFI, BBC Film and Film4 as key funders, the Film Tax Relief (FTR), the new UK Global Screen Fund (UKGSF), which has just entered its second year, and regional and national funds, and the Government’s Culture Recovery Fund which has ensured that independent cinemas have survived the pandemic thus far – the review has found that market challenges have put independent film activity on a downward trend, “raising concern about the long-term viability as a sector.”
Ben Roberts, BFI Chief Executive says: “As a public funder, distributor and exhibitor of UK independent film, we see the increasing pressures that are coming from all angles and have reached the point of creating a perfect storm for the sector. This review gives us important economic evidence and pinpoints measures as preliminary recommendations which can be unpacked and modelled with the industry in order to enable it prosper and continue.
“UK independent films are a vital part of our screen sector and a powerful contributor our cultural lives, giving us stories and worlds we recognise, as well as new experiences and perspectives. They are part of the UK screen industry’s global success in developing new talent, enabling filmmakers to take creative risks and our crews and crafts people in developing their skills and innovation in their work. Put simply they are an integral part of the diverse ecosystem and the growth and success of the UK screen sector globally.”
John McVay, Chief Executive of Pact says: “The BFI Economic Review findings build on those found by Pact’s The State of the UK Independent Film Sector report in 2017, that the independent film sector needs critical support to be able to continue to produce quality British content for both British and global audiences.
“The report provides clear evidence of market failure and that this has been significantly exacerbated because of the pandemic. The screen industry ecosystem relies heavily on the independent film sector to discover, nurture and sustain talent. Pact continues to proactively support the very diligent, creative and accomplished independent sector we have in the UK and is prioritising work on the case for an enhanced tax credit for independent feature films.”
Eva Yates, Director of BBC Film, says: “As a leading funder of British independent film, the findings of this report are sadly no surprise to us after the increasing challenges faced by so many in our sector in recent years. But there is no doubt that the talent, craftsmanship and ideas are here in the UK and need to be protected and supported to thrive. We will continue to work hard with partners and producers across the industry on ways to enable the very best possible conditions for the creativity and sustainability of the independent film sector.”
Ollie Madden and Daniel Battsek, Director and Chairman of Film4, say: “The Review makes it clear that there are some fundamental threats to the health of the British independent film industry, which is itself a key driver for the screen sector as a whole, and a huge contributor to British culture and the economy. Film4 is one of the biggest backers of independent film in the UK, investing £25m every year, and together with BBC Film and the BFI, we play a crucial role in providing development and production funding to the sector, ensuring we grow and support the next generation of world class talent. However, more needs to be done. We endorse the proposals outlined in the report, and remain committed to taking all steps necessary to maintain the strength and future vitality of our globally admired film industry.”
Joy Gharoro-Akpojotor, producer (Boxing Day, Blue Story, White Colour Black) says: “Independent producers need more support to remain sustainable and competitive in order to go after IP or creative talent. Increasing the film tax relief is a great investment incentive but also allowing producers to be able to access it for the benefit of sustainability would be advantageous to the independent film sector.”
Mike Elliott, producer, EMU Films (Benediction, Small Axe, Dirty God) says: “Lack of crew, spiralling wages, location and supplier costs resulting from the streamer boom, alongside agents, financiers and governing bodies not distinguishing between independent and streaming projects, is all an issue.
“On the financing side, limited MGs2 and equity make it a question about whether we value culture and small businesses. If we do, increasing the tax credit to 33% for independents would achieve a third of the Finance Plan, allow for greater flexibility with partners – and see more films achieving a net profit position.
“The producer tax credit revenue stream has been subsumed as finance, so financiers need to remove the cap of 10% for Production company fees. Our European partners have a bigger allowance – it would help sustain companies, giving them working capital for development.
“If we want diversity and for the people who put films together to reflect society, then rewarding producers and enabling them to be entrepreneurial, will encourage more people from different walks of life to take on the challenge and tell stories that inspire and define us.”
Faye Ward, producer Fable Pictures (Rocks, Stan & Ollie, Wild Rose), says: “I’m not sure we’d be able to make Rocks today or many of our other films and this would be a profound loss. Rocks showed an authentic slice of life in the UK – one that is rarely depicted on screen and was brilliantly received at home and internationally. Financing on these indie films are nearly impossible to put together, and that is even with a star.
“We need films that represent manifold aspects of the world we inhabit and particularly situations and people whose voices are least heard. Films like Rocks, Promising Young Women, Saint Maud, Boiling Point all reflect the amazing UK’s talent.
“Something has to change because it’s not just the films we lose – in the case of Rocks, the film also started and nurtured so many careers both in front and behind the camera.”
Marc Samuelson, producer/executive producer Samuelson Productions (The Midwich Cuckoos (TV), Stormbreaker, The Disappearance of Alice Creed, Me And Orson Welles) and Pact Council/ BAFTA Film Committee, says: “The pressures on independent film production have always been there of course but for a while now we have been looking at reaching a point risk to its continuity. With extremely high costs and really low returns on investment for independent films, for an independent producer diversifying out of film has become the only way to survive.
“Directors, writers and actors are already moving away from filmmaking and as a result we now face a huge reduction in the talent pipeline which underpins the success of the wider production sector and an inevitability in which British audiences are deprived of British films.
“Now is the time to act and a carefully targeted expansion of the UK tax credit as proposed in this report will be inexpensive and highly effective, bringing us into line with support in such countries as Italy and Australia.”
Andy Leyshon, Chief Executive, Film Distributors’ Association, says, “The BFI’s Economic Review offers a holistic vision of the independent film sector, and how important its ongoing health is to the entire film industry.
“Distribution is the often invisible glue that binds the different parts of the film ecosystem together, so the report’s focus on independent film distributors is welcomed. The FDA and its members now look forward to engaging further with the BFI on specific areas of how to best support independent film distribution.”
Phil Clapp, Chief Executive, UK Cinema Association says: “Recent years have shown more than ever the important role that UK independent films can play in helping to attract the widest possible audience back to the big screen.
“First and foremost that relies upon the production and distribution of a quality and diverse slate of titles, but there is undoubtedly more that cinemas could do to promote and present those titles. We look forward to working with the BFI and other partners in exploring the practical implementation of the recommendations made in the review document.”
The review recommends four interventions to be explored further as offering potential solutions to address these challenges. These prioritise support directly to producers of UK independent films and options for supporting independent films reaching audiences.
An increase in film tax relief for all films (up to a budget cap), incentivising investment but which could also include a budget floor, limiting the relief to films assessed as ‘independent’. A portion of the uplift could be linked to shooting location to support UK-wide screen sector development.
An extended film tax relief to include Prints & Advertising (P&A) for small films and/or UK independent films, making them more marketable in domestic and international markets.
The introduction of a new zero rate of VAT on the exhibition of UK independent films, incentivising exhibitors to showcase films, thus exposing them to a wider audience and larger income streams.
An increase in the financial contribution from large streaming services to UK independent films (including SVoD, AVoD3, and potentially television broadcasters), either through a voluntary commitment or a requirement for large streaming services to make a modest contribution to a pot of funding that they can reclaim for creatively driven UK filmmaking (subject to a budget cap).
The review recommendation to consider additional film tax relief suggests that adding 20% to tax relief for UK independent films within a relatively low budget range would have a low cost compared to the total cost of film tax relief4. For example, in 2018, total film budgets in the range up to to £10m represented only 16% of total budgets for UK-based films. In addition, the review considers that investment in independent film could result in greater returns to the UK economy by developing on- screen and off-screen talent, ultimately resulting in higher overall spend on Film and HETV production. Industry organisation Pact is exploring further how tax relief modelling could be more supportive to independent filmmaking.
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