British film: A new golden age?

This week marks the release of Elizabeth: The Golden Age. It is a prime example of British heritage cinema, done in the full Working Title style. Cate Blanchett looks resplendent. Clive Owen, as Sir Walter Raleigh, leaps around like a latterday Errol Flynn. Thanks to CGI, the Spanish Armada is satisfactorily sunk.

You could be forgiven for thinking we are in a new golden age of British cinema, and that the Elizabeth sequel is just another sign of the resurgence of our film industry. In recent months, the UK Film Council (UKFC) has made announcements drawing attention to the robust health of Britfilm. "BRITAIN LOVES FILM AND THE WORLD LOVES OUR FILMS" stated a press release for a new report published by UKFC's Research and Statistics Unit. Box-office takings in the UK, we were told, had jumped up 56 per cent in the past decade. Films based on stories by UK writers had earned $13bn in five years. Film exports were at an 11-year high. Meanwhile, a report from Oxford Economics said the UK film industry contributed £4.3bn to UK GDP in 2006.

So there is plenty to crow about. Atonement is being talked up as an Oscar candidate and Keira Knightley is being hyped up as if she were the new Grace Kelly. Simon Pegg is the new Midas of the British box-office, following up the triumph of Hot Fuzz with Run, Fat Boy Run.

Critics have been fawning over such British-made fare as Notes On a Scandal, Control, It's a Free World and And When Did You Last See Your Father?. Old masters such as Nicolas Roeg, Ken Loach and Peter Greenaway have all completed new features. Mike Leigh is at work on a new film. Even Lord Attenborough is still filming.

Meanwhile, newcomers such as Joe Wright, Andrea Arnold and David Mackenzie have emerged. We have Wallace and Gromit, Working Title and James Bond. We make excellent documentaries. Our actors and writers are internationally admired and British studios still have a reputation for technical excellence.

So why do many British film-makers say it is harder than ever to get their movies made. It is little consolation to them that US-backed films based on books by British authors – the Harry Potter and Lord of the Rings series – have been breaking box-office records.

"There is a quantum difference between what is said about how successful the British film industry is and the truth, which is that things have been very flat," suggests film financing expert Heather Mansfield.

Producer Paul Raphael (whose credits include Anita and Me and Under the Bombs) says, "As an independent producer, I wonder how I am going to hold on to my house, not revel in how many movies I am going to make next year."

One of Britain's senior directors, Stephen Frears, recently said, "The British film industry is leaderless. We once had Dickie [Attenborough], then David [Puttnam], to lobby on our behalf."

British film-makers have been bemoaning their lot for as long as British films have been made. And when the industry does complain, it is accused of crying wolf. As the late Alexander Walker (the long-serving film critic of the London Evening Standard) told a 2003 Commons Select Committee when asked how producers might be affected by the disappearance of Section 48 tax relief, a measure the industry had become utterly dependent on: "There will be cries of woe, the begging bowl would be rattled [...] and no one would seem to get poor. I doubt whether the restaurants would suffer all that much."

Nonetheless, there are now signs that the health of the industry isn't quite as robust as some of the boosters proclaim. Ask which new British feature films have recently had prominent slots on TV and you might struggle to name anything beyond Stephen Frears's The Queen. Try to name the recent British independent movies that have emulated the success of The Full Monty, Billy Elliot and Trainspotting and you will find the list is short once projects with US studio backing are removed. Even Elizabeth: The Golden Age scored under $20m in the US.

What outsiders may not realise is how dependent British film-makers are on state support and tax breaks. There are not as many sources of finance as might be imagined. The main funders are BBC Films, Film4 and the UK Film Council, but resources are limited. Earlier this month, it was announced that BBC Films' annual budget was to go up from £10m to £12m a year, welcome at a time of severe BBC cutbacks but far less than promised.

The Section 48 tax relief (introduced in 1997) may have infuriated Walker and alarmed the Treasury, but it did get movies made. This was a tax break that allowed producers to write off 100 per cent of first-year production costs on movies budgeted at under £15m. An initiative designed to help film-makers, it ended up used by the television industry to subsidise everything from soaps to kids' shows. Investors began seeing UK film industry as a new Klondike.

Last year, Section 48 was abolished and replaced by a new UK Film Tax Credit. The idea now is that the credit goes directly to the producer rather than being intercepted by the middlemen who had attached themselves to the industry. Films have to qualify as British under a "cultural test".

What now seems especially at risk in UK is the "mid-level" film. Trainspotting, Billy Elliot, The Full Monty, Brassed Off and The Queen were all "mid-level" films – costing less than £10m and without studio stars.

This style of project is now often considered too risky and too expensive. Instead, producers up the ante, trying to bring in studio backing and Hollywood talent that will guarantee an opening, or make films on micro-budgets.

Some producers claim that the scope for backing offbeat talent has contracted alarmingly. "It is becoming harder to make films about anything that matters because in the end it is just about 'what is the demographic and will it make money?'," says Raphael.

In short, being a film producer in Britain is a far less glamorous occupation than outsiders might imagine. It is about contracts and number-crunching as much as it is about creativity. The legal paper trail left by British films is sometimes so daunting that it makes the interminable suit of Jarndyce and Jarndyce in Charles Dickens's Bleak House look like the model of simplicity. One recent £5m British film, financed by a number of different investors, required 165 legal documents to be completed before it went into production.

Should we be surprised by the producers' travails? Every new generation of British filmmakers has faced the same dilemma: whether to make modestly budgeted movies which have a chance to recoup their costs in the domestic market or to tilt at the world market. The key remains access to international distribution. The two most prominent British production companies, Working Title and DNA, are backed by Hollywood studios and have access to the distribution networks of, respectively, Universal and Fox. That why the Bridget Jones films and 28 Weeks Later were so belligerently marketed.

Smaller outfits continue to struggle. The British film industry remains full of undercapitalised production companies, lurching from one project to another. When the Brits do have successes, they have often signed away their rights and see none of the profits.

In 2002, film-maker Sir Alan Parker, then chairman of the UK Film Council, said, "We need to abandon the 'little England' vision of a UK industry comprised of small British film companies delivering parochial British films."

Today, the picture remains muddied. Selective use of statistics may point to a golden age, producers may grumble they've never had it so bad, but the truth is somewhere in between.

'Elizabeth: the Golden Age' opens today