Cinema: The cameras may be rolling again. Just don't mention 'Tulip Fever'

On the eve of the Cannes film festival Tim Luckhurst reports on how the UK industry got over its Gordon Brown crisis

Cursory perusal of the programme for the 57th Cannes International Film Festival, which opens this week, might induce panic about the state of British film. Only one UK production, The Life and Death of Peter Sellers, starring Geoffrey Rush and Charlize Theron, is in competition for the celebrated Palme d'Or. Most of its funding came from the US company HBO.

Cursory perusal of the programme for the 57th Cannes International Film Festival, which opens this week, might induce panic about the state of British film. Only one UK production, The Life and Death of Peter Sellers, starring Geoffrey Rush and Charlize Theron, is in competition for the celebrated Palme d'Or. Most of its funding came from the US company HBO.

Back in February such pessimism would have been supported by many leading figures in the industry. British producers were predicting a crisis for their industry. 2003 had been a year of triumph, with a cumulative total of more than £1bn spent on the production of 177 films. Revenues from DVDs were outstripping box office receipts for the first time and Britain's solid base of creative and technical talent was ideally placed to win investment.

Then, without warning, the Treasury closed a tax loophole that ministers claimed was being exploited by film investors who were "drawing up complex and abusive schemes". The Inland Revenue said the "sideways loss relief" was being targeted by investors who routinely pulled out of film projects before the films could make profits so as to maximise their eligibility for relief. The Paymaster General, Dawn Primarolo, said: "These schemes exploit tax reliefs that are intended for people who risk their own money in running genuine businesses."

The Treasury said the scam was blatant. It proclaimed its duty to be consistent in closing abusive schemes and insisted closure of the loophole did not prevent film-makers benefiting from legitimate tax breaks.

Film-makers were incensed. Russ Smith, executive producer of Johnny Depp's British-based project The Libertine, warned that his movie could be moved out of the UK within weeks. Smith said: "Britain will become a no-go area for film-makers."

He was not alone. The government-backed UK Film Council (UKFC) sent ministers a list of 40 films it thought could be affected. There was industry talk of 40 more that might never get beyond the planning stage.

The most high-profile casualty was Tulip Fever, the film version of Deborah Moggach's novel about romance and the flower business in 17th-century Amsterdam. Starring Jude Law and Keira Knightley, Tulip Fever was already in production when the tax rules changed. Producer Alison Owen of Ruby Films was forced to shut down production. Eighty jobs were cut and a source close to Ruby Films estimates the loss to their budget at £6m. Owen warned that she might move to America because it was "too difficult to make movies here".

Four months on, and tempers have cooled. The Libertine was refinanced immediately, and began filming on the Isle of Man last month. The losses to Tulip Fever were real but it, too, is being reorganised and Ruby Films expect to complete the project. A spokesman for the UKFC says: "With the benefit of hindsight, people over-reacted. It felt like a crisis at the time. To people with films in production it did set things back a long way. A certain amount of money was lost. It was the sudden nature of the change that was a disaster. When it was announced nobody knew precisely what it meant."

Film-makers remain angry about the sudden disruption to financial plans. One explains: "Changing the tax loophole knocked investor confidence." It seems to have been largely restored by the Chancellor's decision to introduce a new tax credit for movies made in the UK.

In March, Gordon Brown announced that future tax relief will typically finance 20 per cent of the production budget for British-made films. That is an increase of 5 per cent on an existing scheme due to end in July 2005. The new scheme, which replaces relief granted under section 48 of the Finance Act, is specifically designed to limit the role of film-financing firms. Ministers believe that such firms have been active in using the film industry as a mechanism for tax evasion.

The tax credit system appears to work. Since 15 per cent relief was introduced in 1997, the number of films produced in Britain has doubled. Films such as Gosford Park, Calendar Girls, Bend it Like Beckham and Girl With a Pearl Earring were all made using Section 48 financing.

The message that UKFC staff will take to Cannes this week has very little to do with the competition for the Palme D'Or. Working from their temporary UK Film Centre on the beach, they will proclaim that Britain is up and running as a film-producing nation. A spokesman explains: "Cannes is not just a festival. It's a market, and the market side of the business in Britain is buoyant. The commitment from Gordon Brown to fund a new tax credit settled the industry. It reflated confidence."

The UKFC says there are 22 major productions filming in Britain at the moment. The core attributes of the industry, which attracted £409m of overseas investment in 2003, remain strong. The continuing strength of the pound against the dollar may result in costs rising this year, but Britain remains one of the few countries with the craft and post-production skills to support a large range of film-making at the same time. The panic over sudden changes to investment rules has not changed that. Insiders suspect it has not changed the French reluctance to award prizes to British films either.

Start your day with The Independent, sign up for daily news emails
News
Sir David Attenborough
people
Life and Style
Young girl and bowl of cereal
food + drink
News
Comic miserablist Larry David in 'Curb Your Enthusiasm'
peopleDirector of new documentary Misery Loves Comedy reveals how he got them to open up
Arts and Entertainment
Henry VIII played by Damien Lewis
tvReview: Scheming queens-in-waiting, tangled lines of succession and men of lowly birth rising to power – sound familiar?
PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Sport
football
Arts and Entertainment
'The Archers' has an audience of about five million
radioA growing number of listeners are voicing their discontent; so loudly that even the BBC's director-general seems worried
News
i100
Arts and Entertainment
Ready to open the Baftas, rockers Kasabian are also ‘great film fans’
musicExclusive: Rockers promise an explosive opening to the evening
Life and Style
David Bowie by Duffy
fashion
Arts and Entertainment
Hell, yeah: members of the 369th Infantry arrive back in New York
booksWorld War Z author Max Brooks honours WW1's Harlem Hellfighters in new graphic novel
News
advertisingVideo: The company that brought you the 'Bud' 'Weis' 'Er' frogs and 'Wasssssup' ads, has something up its sleeve for Sunday's big match
Arts and Entertainment
tv
News
i100
Environment
Dame Vivienne Westwood speaking at a fracking protest outside Parliament on Monday (AP)
environment
Life and Style
tech
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Media

Ashdown Group: Marketing Manager - Manchester - Urgent Requirement!

£30000 - £35000 per annum + 20 days holidays & pension: Ashdown Group: Marketi...

Sauce Recruitment: Senior Management Accountant

£35000 - £40000 per annum: Sauce Recruitment: Working for a independently owne...

Sauce Recruitment: Senior Management Accountant

£17 - £20 per hour: Sauce Recruitment: Working for a independently owned and c...

Guru Careers: Mac Operator / Artworker

£Negotiable (DOE): Guru Careers: We are seeking a Mac Operator / Artworker to ...

Day In a Page

Isis hostage crisis: Militant group stands strong as its numerous enemies fail to find a common plan to defeat it

Isis stands strong as its numerous enemies fail to find a common plan to defeat it

The jihadis are being squeezed militarily and economically, but there is no sign of an implosion, says Patrick Cockburn
Virtual reality thrusts viewers into the frontline of global events - and puts film-goers at the heart of the action

Virtual reality: Seeing is believing

Virtual reality thrusts viewers into the frontline of global events - and puts film-goers at the heart of the action
Homeless Veterans appeal: MP says Coalition ‘not doing enough’

Homeless Veterans appeal

MP says Coalition ‘not doing enough’ to help
Larry David, Steve Coogan and other comedians share stories of depression in new documentary

Comedians share stories of depression

The director of the new documentary, Kevin Pollak, tells Jessica Barrett how he got them to talk
Has The Archers lost the plot with it's spicy storylines?

Has The Archers lost the plot?

A growing number of listeners are voicing their discontent over the rural soap's spicy storylines; so loudly that even the BBC's director-general seems worried, says Simon Kelner
English Heritage adds 14 post-war office buildings to its protected lists

14 office buildings added to protected lists

Christopher Beanland explores the underrated appeal of these palaces of pen-pushing
Human skull discovery in Israel proves humans lived side-by-side with Neanderthals

Human skull discovery in Israel proves humans lived side-by-side with Neanderthals

Scientists unearthed the cranial fragments from Manot Cave in West Galilee
World War Z author Max Brooks honours WW1's Harlem Hellfighters in new graphic novel

Max Brooks honours Harlem Hellfighters

The author talks about race, legacy and his Will Smith film option to Tim Walker
Why the league system no longer measures up

League system no longer measures up

Jon Coles, former head of standards at the Department of Education, used to be in charge of school performance rankings. He explains how he would reform the system
Valentine's Day cards: 5 best online card shops

Don't leave it to the petrol station: The best online card shops for Valentine's Day

Can't find a card you like on the high street? Try one of these sites for individual, personalised options, whatever your taste
Diego Costa: Devil in blue who upsets defences is a reminder of what Liverpool have lost

Devil in blue Costa is a reminder of what Liverpool have lost

The Reds are desperately missing Luis Suarez, says Ian Herbert
Ashley Giles: 'I'll watch England – but not as a fan'

Ashley Giles: 'I'll watch England – but not as a fan'

Former one-day coach says he will ‘observe’ their World Cup games – but ‘won’t be jumping up and down’
Greece elections: In times like these, the EU has far more dangerous adversaries than Syriza

Greece elections

In times like these, the EU has far more dangerous adversaries than Syriza, says Patrick Cockburn
Holocaust Memorial Day: Nazi victims remembered as spectre of prejudice reappears

Holocaust Memorial Day

Nazi victims remembered as spectre of prejudice reappears over Europe
Fortitude and the Arctic attraction: Our fascination with the last great wilderness

Magnetic north

The Arctic has always exerted a pull, from Greek myth to new thriller Fortitude. Gerard Gilbert considers what's behind our fascination with the last great wilderness