Successes like Slumdog are 'a thing of the past'

Box office success has never come easy for independent films made on a shoestring budget but there have been notable triumphs such as the Oscar-winning Slumdog Millionaire.

However industry insiders are warning that successes like that could be a thing of the past. Independent film companies in Britain are now facing the "perfect storm", as a report reveals that 59 such companies have folded over the past 18 months, with more struggling for funding in the most hostile climate for years. Many businesses that have become insolvent are small indie companies. The recession has discouraged banks and high risk investors who might otherwise have taken a punt with their money on these film projects.

A report by PricewaterhouseCoopers reveals the companies that have collapsed included Lucky 7, responsible for making the film Modigliani about the life of the Italian artist, as well as Palm Tree UK, whose feature films Lost in Landscape and Winter Warrior were screened at the Cannes Film Festival in 2001 and 2002 respectively. The company Stormrider Films which had scheduled to bring out "a British sci-fi feature film like no other ever produced in the UK" with CGI effects, called Kaleidoscope Man, also went bust.

The PwC report stated that while big studio blockbusters were drawing huge audiences to cinema multiplexes, indie films were flagging. It said: "The recession has sent hoards of consumers to the cinema and therefore large scale, expensive films such as Harry Potter remain in production and eagerly awaited. However, due to the credit crunch, sources of financing for smaller indie films have dried up – meaning many plots remain on the story board."

John Woodward, chief executive of the UK Film Council, conceded that independent film companies "are facing something of a perfect storm".

"The debt which essentially financed their films is harder to secure... and the transition to digital has prompted a rise in piracy – so there's a real strain on traditional fund raising," he said, but added that despite these challenges, the best projects were "still getting financed".

Christian Colson, producer of Slumdog Millionaire, warned that the trend might ultimately leave Britain drained of creativity. "It will be easier to get a $100m film made than a really good $15m film," he said.

Andrea Calderwood, an independent film producer with Slate Films who won a BAFTA for the film The Last King of Scotland, said the financial climate was – for TV as well as film – harder than ever. "Investors are more risk-averse than usual, so are either looking for more genre-driven material, more established directors, or bigger name cast before they'll invest... Films are also taking longer to come together – either because the top talent is not available, or because financiers are taking longer to make decisions."

She added that the likely effect of the current climate meant "less opportunity for newer talent and for a range of voices to be heard".

Kevin Loader, an indie film producer at Free Range Films who made Nowhere Boy, a film about John Lennon, said the independent sector was further affected by the shrinking budgets of broadcasters such as Channel 4 that fund films. As a result, he said, "many of my colleagues in television who have often cast an eye across the film world are not expanding into film". He said those setting up a television production company were more likely to attract city funding than their counterparts who were looking to do the same in film.

Recession gloom has not left bigger companies immune to financial hardship either. Working Titles, the company responsible for such global hits as Bridget Jones and Four Weddings and a Funeral, has laid off staff in the UK.

Ali Jaafar, from Variety magazine, suggested that the trend was part of a natural "correction" after a glut of films financed in recent years.