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INDUSTRY UK

Tax changes could drastically cut Exchequer revenues

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In a report from Oxford Economic Forecast called ‘Economic contribution of the UK Film Industry’ commissioned by the UK Film Council and Pinewood Shepperton Studios, analysts warn the government that changes to the current film tax incentives could reduce the Exchequer revenues by around £329m (€ 487m) a year, which is significantly more than the £124m (€ 184m) support the local film industry received in public money in 2004/05 via Lottery cash (around £54m - € 80m) and tax reliefs (£70m - € 104m).

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The report was introduced to an all industry gathering in London’s BAFTA conference hall on September 20 by Pinewood Shepperton chairman Michael Grade, who insisted on the fact that the UK film industry is a significant contributor to the UK economy. The need for the largest film studios in the UK to prove this point to the UK Exchequer with detailed facts and figures through this report is understandable as Pinewood Shepperton’s own revenues fell from £20.4m (€ 30.2m) to £13.3m (€19.7m) during the first six months of 2005 mainly due –according to the studios-to the uncertainly over the future UK film fiscal policy. And as the report is being published, the UK Treasury is going through its final round of consultations on its new tax incentive proposals.

The key findings of the report are that:
-The UK film industry is of similar size to the book publishing industry with 31,000 people employed full-time. The film professionals are highly qualified (46% university educated) and their skills are reflected in their average earnings. For instance the average gross income for workers in the UK production sector was £37,300 (€ 55,210) per annum in 2003, almost 50% more than the UK average income.
-on a turnover of £2.3 billion (€ 3.4 billion), the UK film industry directly contributed almost £960m (€1.4 billion) to UK GDP which is more than the machine tools manufacturing industry.
-But the uncertainly over the future film tax regime has already contributed to a sharp fall in inward investment in film, from £549m (€ 813m) in 2004 to around £324m (€ 480) in 2005.
-If tax incentives were to be drastically reduced and the UK were no longer to be seen an attractive place to invest, one quarter of the UK film workforce would move overseas, UK film production would be seriously hurt and cinema box office reduced by around £38m (€ 56m) a year. The total demise of the local film industry could thus reduce UK GDP by over £1.4 billion (€ 2.1 billion) a year…

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