British film industry fights back after disastrous 2005

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The British film industry has bounced back from tax break paralysis to secure the second highest production spending figures on record thanks to a string of big Hollywood productions.

After the disaster of 2005, when a Government crackdown on abuse of the tax system and uncertainty over new tax breaks caused a slump in film-making, the industry has staged a miraculous recovery with investment up 48 per cent on 2005.

New figures from the UK Film Council published today show that £840m was spent on making movies in the UK last year including the first part of Philip Pullman's His Dark Materials trilogy, the latest Harry Potter and an adaptation of Ian McEwan's family drama, Atonement.

Only in 2003 were figures higher, at £1.17bn, but that was a year of swords and sandals epics as well as a new Bridget Jones and Harry Potter - and tax relief abuse. But the agreement of a new tax deal, combined with a transitional extension of the old break, appears finally to have settled industry nerves about working in the UK.

The amount of inward investment from international film-makers was particularly strong, up 83 per cent on 2005 to £570m, as Hollywood studios filmed several major productions in Britain.

They included The Bourne Ultimatum starring Matt Damon and directed by the British director Paul Greengrass, His Dark Materials: The Golden Compass with Nicole Kidman and Daniel Craig, Matthew Vaughn's Stardust starring Robert De Niro, Claire Danes and Sienna Miller, and Fred Claus with Kevin Spacey and Kathy Bates.

The amount of money spent on home-grown films fell by 11 per cent to £148m. But the Film Council believes that was because the use by some financiers of certain loopholes - later and controversially closed down by the Treasury - had artificially inflated the cost of making British films for a while.

The number of British movies made last year rose from 37 in 2005 to 50. They included adaptations of the books Atonement with James McAvoy and Keira Knightley, The Restraint of Beasts, with Rhys Ifans and Ben Whishaw, And When Did You Last See Your Father with Jim Broadbent and Colin Firth and Brick Lane, the novel by Monica Ali.

Kenneth Branagh filmed the opera The Magic Flute in English, Rowan Atkinson made a new Mr Bean movie and Robert Carlyle starred in 28 Weeks Later, a sequel to the surprise hit 28 Days Later. There were also 57 co-productions with a combined UK spend of £122.5m, including Closing the Ring, directed by Richard Attenborough, Death Defying Acts with Catherine Zeta-Jones and Guy Pearce about Harry Houdini's love affair with a psychic, and the Jane Austen biopic, Becoming Jane.

John Woodward, chief executive officer of the UK Film Council, said: "We are back in business with British film-makers winning international awards, a crop of great British films produced and British talent and facilities in demand from film-makers around the world.

"The new tax credit which came into force this year will ensure that the UK stays one of the best places in the world to produce a film."

Films such as The Queen and the lottery-funded The Last King of Scotland and Venus are tipped to do well in the forthcoming awards season, he added. And this year sees the release of a number of exciting new films including This is England, Notes on a Scandal and The Other Boleyn Girl.

Paul Brett, a film financier with Prescience Film Finance, said the effect of £3.5bn in tax relief from the Treasury since 1997 and investment in skills training had been to create a "really substantial film industry" as confirmed by the latest production statistics.

Films were now being "commissioned like they're going out of fashion" because there were excellent projects around and the money to back them.

The only "slightly disappointing" issue was the possibility that the new rules governing what qualified for tax relief were discouraging international co-productions.

Reel figures

134 feature films were produced by the UK in 2006, up from 124 in 2005, including 27 inward investment films and 57 UK co-productions

£840.1m was spent on film production in the UK, up 48 per cent in the disastrous 2005

£569.9m The amo-unt of investment from international film-makers, such as the major Hollywood studios locating productions in the UK

50 indigenous UK feature films were produced in 2006, a rise of 35 per cent from 37 in 2005