U.K. Independent Film Sector Strained to Market Failure Level, Grim BFI Report Finds

A perfect storm of flatlining production budgets, galloping costs and declining revenues have led to the U.K. independent film sector being strained to the point of market failure, a report commissioned by the British Film Institute (BFI) has found.

The report, An Economic Review of U.K. Independent Film, undertaken by independent research company Alma Economics, makes for grim reading, with the key and ironic takeaway that the overall unprecedented growth boom in the country’s film and high-end TV sector has led to a corresponding negative impact on the independent sector.

Film and high-end television production spend reached record levels in 2021 at £5.64 billion ($6.8 billion), a rise of 63% since 2017 and is poised to grow to £7.66 billion by 2025. The report finds that the speed and volume of this growth has strained the independent sector so much that it cannot compete with larger budget international productions on several levels — from accommodating the rising cost of production to securing cast and crew and ultimately to reaching audiences.

Specifically, flatlining production budgets paired with increasing crew, cast and studio space costs are adding a further 20% to U.K. independent film budget bottom lines, and revenues for U.K. independent films have declined over the last decade and are projected to be over £100 million lower per year if the market only reverts to 75% of pre-pandemic levels.

“The numbers show that the model is challenged in three critical areas: budgets are not growing at a market rate, revenues are showing signs of stagnation and costs are escalating. Left unchecked, these threats are likely to draw away investment and the ability for producers to sustain their creative risk-taking, which would ultimately lead to a future where the full breadth and success — and the very independence — of independent film will not endure,” the foreword to the report by BFI chief executive Ben Roberts, states starkly.

In addition, U.K. crew shortages will reach a breaking point unless 1% of production budgets go toward training, as another BFI study found last month. This directly impacts the U.K.’s independent film sector, which is struggling to compete for crew as well as putting additional pressure on already very stretched budgets. Further, COVID-19 protocols have 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,” the new report finds.

The report has four recommendations to improve the situation:

• An increase in film tax relief for all films (up to a budget cap), incentivizing 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 U.K.-wide screen sector development.

In response to this recommendation, the BFI has committed to working with Film4 and BBC Film to review processes and support for independent film production; and use the models and evidence revealed in the report in creating their 10-year strategies and, within funding limitations, seek to create ways to support better long-term sustainability for film producers.

• An extended film tax relief to include Prints & Advertising (P&A) for small films and/or U.K. independent films, making them more marketable in domestic and international markets.

The BFI response to this is to open discussions with the Film Distributors’ Association to explore how support for distribution could bolster independent film, including both public policy and industry-led measures.

• The introduction of a new zero rate of VAT on the exhibition of U.K. independent films, incentivizing exhibitors to showcase films, thus exposing them to a wider audience and larger income streams.

In this regard, the BFI will open discussions with U.K. Cinema Association to explore the best measures to support the exhibition of independent film.

• An increase in the financial contribution from large streaming services to U.K. independent films (including SVOD, AVOD 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 U.K. filmmaking (subject to a budget cap).

“Through our ongoing discussions with the streamers, the BFI will establish the intentions of the streamers in terms of their support for independent producers, question how the gaps identified in this report can be closed and discuss industry-led and policy solutions,” is the BFI response to this recommendation.

Roberts said: “As a public funder, distributor and exhibitor of U.K. 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.”

John McVay, chief executive of producers’ body Pact, said: “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 U.K. and is prioritizing work on the case for an enhanced tax credit for independent feature films.”

Eva Yates, director of BBC Film, added: “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 U.K. and need to be protected and supported to thrive.