British Films like Skyfall, Slumdog Millionaire, The Woman In Black and The King’s Speech were internationalÂ hits – putting them in the minority.
Just 7% of films made in the UK turn a profit, according to recent figures revealed by the BFI.Â The statistics relate to more than 600 British films released in cinemas between 2003-2010.Â They showed that only 4% of lower budget films – such as those made for less than Â£2m – were likely toÂ make a profit.Â
The figure improves as budgets rise – with 17% of films that cost more than Â£10m making theirÂ money back.Â But British film director Paul Greengrass says the figures do not tell the whole story.
Speaking at the British Independent Film Awards (Bifa), he described the British film industry asÂ a “success story” and predicted it would continue to see international growth – especially inÂ China.
A BFI spokesperson said the 7% figure included “tiny budget films that, while commercialÂ success is always hoped for, are successful and beneficial to the industry for other reasons likeÂ skills and training development and for artistic and cultural importance”.
Greengrass told the BBC on Sunday night the 17% figure for higher budget films wasÂ approximately the same rate of profitability as Hollywood.
“I’m not saying it can’t be improved, but it’s always been the case,” he said. “In the heart ofÂ Hollywood, it’s the big movies – the big franchise movies – that pay for all the rest of theÂ productions.
“No film industry in the world works on the basis that 100% of the movies are going to makeÂ money.”Â He went on: “This is a success story. With success comes choices and a need to continue toÂ build growth and sustainability.Â “We’re nowhere near where we were in the ’80s when we were trapped in low budget BritishÂ film-making, with films that no-one wanted to go and see.”
Greengrass, whose most recent film is the US-backed Somali piracy thriller Captain Phillips,Â said he hoped more could be done to get British films in cinemas, with more promotion on TVÂ and internationally.
He was also positive about a China-UK co-production treaty, which he predicted would open upÂ a huge new audience for British films.Â “This is a big industry,” he said. “It’s right up as one of the leading industries in this country inÂ terms of revenue creation, and job creation and growth and opportunity.”
Thatâ€™s all well and good for the industry but where does it leave EIS Investors that are tempted by studio visits, participation opportunities and other hype surrounding the current round of offers from the ‘Media’ funds?
The BFI says the UK’s export film industry is the second strongest in the world after Hollywood.Â Profitability figures, it adds, do not necessarily reflect the whole value chain of a film’s life andÂ don’t take into account the long tail profit and life of a film which can “continue for decades”.
However, with movies like ‘Diana’Â which had a reported production budget of around Â£9m, having only taken about half that sum at the box office, theÂ ‘tail profits’ have a lot of work to do before investors will see a return.
One particularly worrying feature of this seasons film SEIS & EIS offers is the introduction of Â â€˜insurance-type wrappers’ covering the non EIS element of the investment. This amount is being ‘guaranteed’ by pre-sales contracts and film tax credit before any project proceeds, therefore protecting the downside risk. If this is the case then this potentially puts the project at risk of breaching current SEIS/EIS regulations regarding inherent project risk and indeed â€œthe spirit of the regulationsâ€ cited by HMRC as part of their most recent PR regarding the development and promotion of tax efficient investments.
To put this into context, investors in previous Future Capital Partners film schemes, (though not EIS) find themselves being pursued by HMRC for unpaid tax and penalties amounting to Â£117m, (according to figures from HMRC in December 2013) following the latest Supreme Court ruling that saw the dismissal ofÂ an appeal from Â brought by Future Capital Partners and the 287 investors. The facility for HMRC to retrospectively review, and indeed revoke investor tax benefits for film investment schemes that in the future may be deemed to be too â€˜aggressiveâ€™, is all too clear.Â Furthermore, with fewer than 1 in 25 small film projects, (sub-Â£10m) in the UK making any money, the question is, if I may quote film legend Clint Eastwood – Â â€œDo you feel lucky, Punk?”