How the British film industry came back from the brink

Thirty years ago it was as if someone had shouted "Cut!" over the entire British movie business. Luckily, a Chancellor of the Exchequer, a boy wizard and six Hollywood studios rode to the rescue, paving the way for a spectacular comeback.

by Paul Simpson
Last Updated: 16 Apr 2019

Who is the most successful British businessman of the 21st century? None of the usual suspects – reality TV star Lord Alan Sugar, the officially inspirational Sir Richard Branson or the irrepressibly inventive Sir James Dyson – have done quite as much for UK plc as a resilient, creative, British schoolboy called Harry James Potter.

On any given day, hundreds of Potter fans – many of them from Japan – can be seen queuing on the concourse at London’s King Cross station to have their photographs taken in front of the sign for Platform 9 ¾, the magical departure point for the train that shuttles Potter and his fellow pupils to Hogwarts School of Witchcraft and Wizardry in Scotland.

That is merely one exotic glimpse of what the wizard franchise has done for the UK. Aside from the books, the films have earned more than $7.7bn at the global box office; at least $3.7bn in merchandising revenue; $2bn in DVD sales; $600m in video rental and more than $435m in ticket sales for the behind-the-scenes tours at Leavesden Studios where all eight films were made. With two Fantastic Beasts spin-offs earning more than $1bn in ticket sales, Harry Potter is the gift that, as far as the British film industry is concerned, just keeps on giving.

Thousands of British crew, accustomed to the feast and famine of freelance life, worked for nine straight years on the Harry Potter films. The franchise has also worked its magic on the industry’s infrastructure. As Sir William Sargent, CEO of British computer graphics giant Framestore, told Management Today: "Harry Potter was the final piece of the jigsaw. It meant that we, in the British film industry, could prove ourselves as a community."

The clinching evidence that the industry had proved its worth came in 2010 when Warner Bros, one of Hollywood’s most storied studios, completed its purchase of Leavesden Studios, rebranded them and announced a £100m expansion.

Booming industry

The other person who deserves a lot of the credit for the revival of the British film industry – but seldom receives it – is Gordon Brown, who as Chancellor of the Exchequer, overrode the ferocious opposition of Treasury officials to introduce a tax relief scheme for the film industry in his first budget in 1997.

Outside the Treasury, it was clear that without some kind of support, the British movie industry might go the way of coal, shipbuilding and steel. The brief success of Goldcrest Films, which made Chariots Of Fire, Gandhi and The Killing Fields, had proved a false dawn. Stephen Follows, the creative director of Catsnake Film who analyses industry data, says: "When Danny Boyle was making his first movie, Shallow Grave, with Ewan McGregor back in 1994, they had to sell the props they used in the early scenes to buy the props they needed later on."

Brown’s policy shift can be indirectly traced back to a legendary summit in June 1990, in which Prime Minister Margaret Thatcher enjoyed a meeting with the industry’s leading lights so much she asked them: "Why didn’t you come here years ago?" To which Richard Attenborough replied, as only he could: "Because I wasn’t asked, darling." Officials and ministers had been shocked to hear that Attenborough had shot Chaplin overseas because, as he said, "there was hardly any British movie industry left".

Though it remains unclear what concrete measures emerged from the summit, the thaw in relations between film-makers and officialdom – and the industry’s recognition that it could make more of its soft power – paved the way for a closer, more productive rapport with Tony Blair’s government.

New Labour’s "Cool Britannia" shtick has been much derided, but it did partially reflect the fact that Brown and Blair recognised the creative sector’s value. It helped that the British public fell in love with movies again – cinema admissions topped 139 million in 1997, compared to just 54 million in 1984. Last year, they reached 177 million, the highest since 1970.

Tom Cruise filming The Mummy in Oxford in 2016

The rules surrounding tax relief have been amended under successive governments, but have never – yet – seemed under serious threat of being abolished. As Follows says: "The financial incentive is substantial: producers can get around 20 per cent of their money back in cash."

With 202 films entering production in the UK last year, according to the British Film Institute, it would seem the industry, which generates around £5.2bn a year for the economy – more if you include service exports – has seldom been more vibrant. Yet Follows adds a note of caution. "There are three lenses through which to judge the success of the British film industry: industrial, artistic and cultural.

"From an industrial perspective, the industry is doing very well. In just under 20 years, the amount spent on feature film production in the UK has, taking inflation into account, almost tripled to £1.9bn. Companies financed and controlled from outside the UK invested around 89 per cent of that, while six major US studios accounted for 71 per cent of the total spend. If you wanted to quibble, you could say the industry has excelled at becoming a kind of quasi-service supplier to Hollywood, but if you’re looking at the industry purely in commercial terms, that is completely irrelevant."

The biggest problem facing the industry at the moment is lack of production space. At present, only three British studios – Warner Bros Leavesden, Pinewood and Shepperton – have the space to make big-budget Hollywood movies. And they are all working flat out. Alex Ritman, who covers British film and TV for The Hollywood Reporter, says: "The race is on to build capacity, and not just in terms of space. The pressure on skills, facilities and suppliers is phenomenal. The other problem – which is on almost everyone’s lips – is finding the right talent, especially in specialist craft roles."

Shepperton is embarking on a £500m expansion that could quadruple the size of the studio. Managers say they have missed out on international productions recently because Shepperton doesn’t have enough sound stages; it only has 14. Pinewood will boost its capacity this autumn, and has already been busy making films for Disney – from instalments of Star Wars to Tim Burton’s Dumbo remake – and looks likely to emerge as the British production hub for Netflix. The mad scramble for space has already forced producers in film and TV to turn carpet houses, distilleries and RAF aircraft hangars into studios.

The industry’s infrastructure looks, from the outside, to be in excellent health. Though there are concerns about the pipeline of new talent, Hollywood knows it can rely on British craft. British designers have won the Oscar for best visual effects four times in the past decade and this specialist branch of the movie industry alone contributes an estimated £1bn to the British economy, according to the BFI.

Yet these figures don’t tell the whole story, says Follows: "There is a fragility about the infrastructure, even for some of the larger J companies." The visual effects industry may just be too sexy for its own good. Competition is fierce. Fixed costs are high. The upfront investment in new technology and techniques, which can quickly become outdated, is significant. Halo VFX, which worked on Bohemian Rhapsody, went bankrupt last month, with managers blaming the fact that, after being assured of a major contract, they moved to larger, new premises last year – but the contract never materialised.

Yet does the UK’s commercial success extend to persuading the rest of the world they need to watch British films? Follows is unconvinced. It’s easy to assume that, if only because of a common language, America is interested in British movies, but he sums up their attitude in one word: "Indifference." He concedes this isn’t always true: "We have been very successful with movies like Four Weddings and a Funeral and Gosford Park that fetishise a certain kind of Britishness. Biopics of British historical figures – such as The King’s Speech and Darkest Hour – do quite well globally. Apart from that, with the odd glaring exception such as Trainspotting, the rest of the world isn’t really that interested."

Ritman disagrees. "Look at The Favourite. It may have a Greek director, Yorgos Lanthimos, but culturally it’s a British story with a British cast that won Olivia Colman a best actress Oscar and is doing reasonably well at the box office. Although Bohemian Rhapsody was backed by Fox, it was a British story, with a largely British cast, won four Oscars, including best actor for Rami Malek, and has grossed around $800m outside the UK. British actors, writers and directors are much in demand."

What makes a British film?

One of the difficulties, Follows says, is defining exactly what constitutes a British film. "A points system is used to decide whether you get tax relief as a British movie. You need to get 16 points out of 34 on the British cultural test to qualify, but you get quite a few points if it’s shot in Britain, is in the English language and uses British actors." Among the recent movies to be officially ‘British’ are Chuck Norris vs Communism, Avengers: Age Of Ultron and Gravity, which won the BAFTA for best British film in 2014. "That proved quite controversial," says Follows. "People were saying: it’s an American story, written and directed by a Mexican, starring two American actors, so how can this be a British movie?"

In part, Alfonso CuarÓn’s space odyssey is British because it was filmed at Shepperton, where part of Stanley Kubrick’s 2001: A Space Odyssey was shot between 1965 and 1967. The groundbreaking technological innovations that convinced cinema-goers that Sandra Bullock and George Clooney really were floating in space were developed in collaboration with Framestore, which also provided technical wizardry to Harry Potter and the Philosopher’s Stone (2001).

While tax relief has been the biggest single factor in the British film industry’s revival, it remains politically controversial. The rule of thumb is that every pound spent on British movie production is worth four or five times as much to the UK economy as a whole, but you don’t have to be an ardent Marxist to wonder whether the Star Wars franchise, which has generated $9.3bn at the global box office, really deserves funds from the British government.

Although Star Wars is largely made in the UK – and has featured such notable British actors as Peter Cushing, Sir Alec Guinness, Sir Christopher Lee, Ian McDiarmid and Ewan McGregor – it does not reflect or represent our national culture in the same way as the Carry On films, the Bond franchise or Harry Potter. Here, the evidence of the British film industry’s success is more equivocal.

In part, it’s a matter of sheer economics. Between 2007 and 2016, Follows’ figures suggest that 74 per cent of the money collected at the UK box office went to the top 50 films. Given there are now around 900 films released a year in the UK, this presents obvious difficulties for independent filmmakers. "Even if you go to the cinema once a week, there are 850 films you are going to miss out on," says Follows. "You could argue that, in this instance, more is less."

Marvel movie Thor: The Dark World

There is a balance to be struck. Too many films spending too little time at cinemas and losing too much money isn’t good for anyone. Yet we don’t want to revert to the bad old days of the 1980s, when a director as gifted as Ken Loach found it so hard to raise finance he only made three feature films in the entire decade. This century he has made 12, most notably I, Daniel Blake, bringing an authentically British sensibility to our screens. Loach’s compatriots Christopher Nolan (unlucky not to win an Oscar for Dunkirk) and Boyle (who deservedly won for Slumdog Millionaire) have also flown the flag for British creativity.

Yet despite the volume of film production in the UK, will the next generation of Loaches, Nolans and Boyles be able to make their mark? "If you look at movies made over the past 70 years, 36.5 per cent of directors got to make a second film. That has declined since – it could be lower than 10 per cent. That could be because directors are finding it harder than ever, but it may also reflect the fact there are fewer barriers to entry than before," says Follows. "History suggests there are three ways directors get to make a second movie: their debut is commercially successful, critically acclaimed or generates industry buzz that makes people want to work with you."

The vagaries of film finance don’t make a director’s lot any easier. To call them Byzantine would insult the regulatory complexity of the ancient eponymous empire. Gosford Park, the 2001 movie that won screenwriter Julian Fellowes an Oscar, was almost never made.

With veteran American director Robert Altman hired – even though he was uninsurable after a secret heart transplant – the producers had raised £10m in finance, but then, as Fellowes recalled later: "There was one really terrible moment when, literally two or three weeks before we were about to start shooting, all the money vanished overnight." There was £2m still left in the kitty, pledged by the British Film Council and distributors Capitol Films agreed to replace the recalcitrant investors. Gosford Park succeeded critically and commercially, allowing Fellowes to write Downton Abbey.

Why is finance so volatile, complex and uncertain? The process at the major studios is much more straightforward – they decide what to make and budget accordingly. Yet other production companies must face the daily reality that movies are far too risky for many investors. "If I invest £500,000 in a film and it flops, I’ve probably lost almost all of that money, once and for all," says Follows. "If I invest that sum in a house, even if I buy at the top of the market before it slumps, the investment will probably retain at least half its value and increase when the market picks up again."

Global blockbuster Harry Potter and the Deathly Hallows - Part One filming in Wales

Putting financial packages together has become one of the producer’s primary tasks. They have to factor in some or all of the following: tax relief, loans, crowdfunding, equity investors, state production incentives, other studios, distributors, broadcasters (TV fees now account for almost 40 per cent of UK film industry revenue) and revenue or profit-sharing deals (often demanded by actors and directors).

The negotiations can be more arduous than actually making the film. The big decisions – Who should star or direct? What’s the budget? How should we invest? – are all haggled over at great length. Some investors limit their exposure to a finite sum, as Warner Bros did with Hugh Hudson’s Revolution (1985). Executives didn’t believe he would bring it in on budget, so they capped their investment. They were right – the overruns weren’t all Hudson’s fault, but a film budgeted for £6m cost £19m and recouped less than £1m at the US box office, leaving Goldcrest £10m out of pocket.

Nobody knows anything

The one fact that nobody ever acknowledges as contracts are drafted and redrafted is that, ultimately, as the late, great Oscar-winning screenwriter William Goldman said: "Nobody knows anything. Not one person in the entire motion picture industry knows what’s going to work." Historical examples abound. In the 1920s, MGM boss Louis B Mayer turned down Mickey Mouse because he thought it would scare pregnant women. Even Steven Spielberg lost the chance to film Harry Potter because he didn’t understand why an American child actor couldn’t play the boy wizard.

Sometimes, a producer’s hunch pays off spectacularly. Before rebooting 007 in Casino Royale (2006), producers Barbara Broccoli and Michael G Wilson commissioned market research to identify what audiences wanted from Bond. The public declared they had no interest in poker, liked his wisecracking and womanising ways and loathed the idea of him falling in love. But the script for Casino Royale had already been written – featuring a long, crucial poker game, few wisecracks and a serious love interest. With a chutzpah worthy of Bond himself, Broccoli and Wilson ignored the market research and carried on regardless, producing a picture that became, at the time, the franchise’s highest-ever grosser.

Yet Goldman’s adage also applies to the future of the British film industry. Commercially, the sector is booming. Culturally and artistically, it is competitive. Yet all this could change. The infinite permutations surrounding Brexit are, for many in the industry, too migraine-inducing to contemplate. It is also hard to read how substantially Netflix will invest in UK film and TV production. As The Hollywood Reporter’s Ritman says, the expansion of Shepperton and Leavesden, managed by people privy to Hollywood plans, suggests they are reasonably confident of demand over the next five years.

"Everything looks very healthy at the moment, but things can change very quickly," says Follows. "The government could one day decide to end tax relief – or the pound could suddenly strengthen, putting up costs for inward investors."

There are other imponderables at play, too: for all we know, as you read this article, an unknown author, scribbling frantically on their daily commute, could be writing the next Harry Potter.


Image credits: Getty images

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