U.K. film industry given a minor role

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LONDON - As Keira Knightley gazes out from hundreds of posters across the country advertising the local-grown hit "Pride and Prejudice," the casual observer could be forgiven for thinking the British film industry is booming.

However, the star-studded remake of the Jane Austen classic is fast becoming an anomaly.

Miss Knightley and her co-stars spent months filming on location in England, but other major film productions, including the Roman Polanski-directed "Oliver Twist" -- have decamped overseas amid wrangling over the country's tax system and spiraling costs. Future installments of both the Harry Potter and James Bond series may do the same.

A report commissioned by the U.K. Film Council this month found that industry jobs dropped 20 percent last year and predicted that investment would fall to $570 million in 2005, down 70 percent from last year.

More movies shot elsewhere would have a devastating effect on a sector that contributes about $5.5 billion annually to British gross domestic product, the report added.

Tourism officials also are worried. They estimate that around one-fifth of the 28 million people who come to Britain each year do so after seeing the country depicted on-screen. The report suggests that up to $2.8 billion of tourism spending is linked to films shot here.

"A good film in a great location not only brings in money during actual filming here, but people are inspired to visit when they see it in cinemas and for years afterward as it is distributed on DVD and video," says Elliott Frisby, spokesman for the VisitBritain group.

The film industry's troubles began in 2004 when the government cracked down on programs that allowed tax losses claimed by film backers to exceed the initial capital invested. Closing a loophole that allowed some producers to claim tax relief twice for the same film -- for production costs and then for its sale and lease-back -- caused chaos for several films already being shot.

The government is consulting with the industry about a new tax credit system due to start in April, but many are concerned about a likely decline in the tax relief available. Analysts predict that Hollywood films shot in Britain would qualify for a tax break of as little as 2 percent of their budgets, compared with about 9 percent now.

Pinewood Shepperton, owner of Britain's premier soundstages and home of superspy James Bond, says the ambiguous outlook has prompted major studios to defer bookings or shift production elsewhere.