Building sustainable film businesses: the challenges for industry

The SFI operates no schemes specifically targeted 

at building companies, although its development 

fund can award up to €110,000 for corporate 

development. Bengt Toll, acting CEO of the SFI  

has said that there are too many production 

companies in Sweden making too few films and  

that is not sustainable.

Regional Support    

Regional funding is a vital part of the Sweden 

production system. Sweden has four regional 

funds, - Film i Väst, Filmpool Nord, Film i Skane, and 

Filmpool Stockholm-Malardalen; together, these 

provide around €12 million a year in equity funding 

for production. The biggest regional player is Film 

i Väst, with a budget of over €7 million, followed 

by Filmpool Nord (around €3 million). Film i Väst 

is involved in 30-40 feature co-productions a year, 

including many majority foreign projects, while 

Filmpool Nord backs four to six films a year. Film i 

Väst also provides a business audit for companies  

it supports, which meets four times a year to  

review strategies.

The regional funds regard their investment as 

equity, but the SFI does not recognize it as such in 

its calculation of the amount of Swedish equity in a 

movie for the purposes of the PRS.

Role of Broadcasters 

Under the Film Agreement, Sweden’s public and 

private broadcasters commit to provide funding 

for the SFI, but also to invest directly into Swedish 

films. State broadcaster SVT guarantees to spend 

SEK36 million (€4 million) a year on co-producing, 

co-financing or acquiring Swedish films, including 

SEK15 million (€1.65 million) on films with advance 

SFI funding. TV4 guarantees SEK20 million (€2.2 

million), including SEK8 million (€0.9 million) on 

SFI films. MTG guarantees SEK1 million (€110,000), 

including SEK0.5 million (€55,000) for SFI films. More 

guarantees SEK0.5 million (€55,000).

Other Current Issues 

The current Film Agreement, which started in 

2006, was due to expire at the end of 2010, but 

has been extended until December 2012 while the 

government and industry negotiates a new version. 

One issue is whether internet service providers and 

online distributors should be expected to contribute 

to SFI funding.

During this negotiation round, the view has been 

aired that the current system should be scrapped 

and replaced with a new model for public funding. 

The government commissioned an independent 

report on future film policy by journalist Mats 

Svegfors, which was published in 2009, and 

recommended that the film agreement should 

be replaced by a State-run film policy, funded by 

raising VAT on cinema tickets from six per cent to 

25 per cent, and ending the box office levy. This 

mirrored proposals by the Swedish Film Producers 

Association and Film i Väst.

Whatever the new sources of funding, it is expected 

that the SFI will continue to operate a mixture of 

automatic PRS funding and selective funding.

Key Conclusions  

The Swedish system is based on a stable and 

established consensus that all those involved in  

the commercial exploitation of Swedish films should 

contribute to supporting production by funding the 

Swedish Film Institute. However commentators have 

warned that the Film Agreement system does not 

always deliver against this aim. They also feel that 

more state resources are needed if the position of 

Swedish cinema is to be improved both locally  

and internationally. 

Section 12.0  

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Section 12.0  

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12.7 

United Kingdom

Summary

Country indicators:

OUTPUT 

Production volume 2011 (€m) 

1540

Number of films 2011 

237

Average budget 2011 (€m) 

6.52

UK independent film share, 2011 (%) 

12.8

Note: figures are for all films receiving UK certification in 2011. This 

includes inward investment features, which spent €1.2 million shooting 

in the UK, €72 million worth of co-production. Domestic UK features 

spent €238 million shooting in the UK last year. 

Country Approach

The UK system combines an automatic tax credit to 

reward expenditure, and selective lottery funding 

for projects deemed to have significant artistic or 

commercial potential. At the moment the largest 

proportion of public subsidy goes to Hollywood 

studio films using the UK as a production base. 

While this is vital in sustaining infrastructure and 

employment in the UK film industry, with associated 

benefits for local producers, it does little directly 

to create sustainable UK independent production 

companies.

National Level Support 

Following the abolition in 2011 of the UK Film 

Council (UKFC), the British Film Institute (BFI) 

has taken over as the lead strategic agency 

for supporting the UK industry, including the 

certification of UK films to qualify for the tax credit, 

and the selective investment of National Lottery 

money into film production. Although the BFI’s 

cultural responsibilities include TV, its industrial 

remit is confined to film. 

British films receive automatic support in the form of 

a rebate on UK qualifying production expenditure, 

which has remained unchanged as responsibility 

for its administration has passed from the UKFC to 

the BFI. Films budgeted under £20 million (€22.7 

million) receive a 25 per cent rebate on qualifying 

expenditure, while films above that level receive a 

20 per cent rebate. Qualifying expenditure is capped 

at 80 per cent of the budget, which means the net 

maximum benefit for a film shooting entirely in the 

UK is 20 per cent for films under £20 million, and 

16 per cent for bigger films. There is no cap on the 

rebate itself, and qualifying expenditure includes 

the salaries of non-EU nationals working in the UK, 

making it particularly beneficial for big-budget 

Hollywood studio films with American talent. To 

qualify, films must pass a British cultural test, based 

on points awarded for material, story content, talent 

and use of UK crews, locations and facilities.

The BFI has also taken over the running of the 

UKFC’s Film Fund, which offers selective support 

for development and production in the form of 

recoupable equity investment, with awards made 

according to a mixture of creative and commercial 

factors. The fund previously had a budget of £15 

million (€17 million) a year, but this has been 

increased to £18 million (€20.3 million) for 2010/11 

and to £28 million (€33 million) moving forward. 

There are currently no specific schemes targeted 

at building production companies. The UKFC 

previously ran various different multi-year deals 

to finance slate development, most recently in 

December 2008, when 15 companies received two-

year Vision Awards to fund creative development, 

totalling over £2 million (€2.3 million). In January 

2012, the UK Film Policy Review noted the success  

of the Vision Awards, and recommended that the  

BFI should follow with a similar scheme and this has 

now been confirmed by the BFI.

Although not specific to the film business, the UK’s 

Enterprise Investment Scheme is sometimes used 

by film companies to raise production finance. 

Investors in an EIS company receive a tax break of  

30 per cent, recently raised from 20 per cent, though 

the maximum amount which can be raised is £5 

million (€6 million). A separate Special Enterprise 

Investment Scheme (SEIS) has also been launched, 

enabling producers to raise up to £150,000 

(€183,186) in seed development funding. British 

filmmakers attempted to raise €92 million through 

the EIS in the 2011/12 tax year. 

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Regional Support    

Creative England was launched on October 3 

2011 to provide support for independent creative 

businesses and individuals across English regions 

- this nationwide body absorbed the old Regional 

Screen Agencies, but has broadened their remit, 

aiming to offer specialist support to the games, 

digital and creative services, as well as to film and 

television. The agency controls its own Film Culture 

Lottery Fund making £500,000 (€611,000) of BFI 

Lottery funds available to regional organisations 

and festivals. The first batch of lottery funding was 

handed out in January, with 39 recipients sharing 

£465,972.

More importantly, Creative England will address  

the issue of creating sustainable businesses through 

its new business development programme, aimed 

at supporting creative and digital SMEs across the 

English regions. It will include £5 million  

(€6.1 million) of European funding, which will form 

the basis of a private sector-led scheme providing 

development funding and market expertise to small 

creative and digital businesses working in cross-

platform content and services. Creative England has 

also secured investment from the Government’s 

Regional Growth Fund for Digital Champions, a  

new scheme to support digital and creative 

companies. The audit process for this is presently 

coming to a close, and the scheme details are still  

to be confirmed. 

The national agencies in Scotland, Wales and 

Northern Ireland have considerable experience in 

supporting their film businesses. They each receive 

their share of national lottery revenues to invest in 

film production. Northern Ireland also has an annual 

fund of around €4 million to provide a 25 per cent 

production rebate for film and TV projects shooting 

in the province, capped at €1 million per project. 

Films shooting in Wales can apply for gap finance up  

to €800,000 from the €13 million Welsh Creative  

IP Fund.

Role of Broadcasters     

Public broadcasters in the shape of the BBC and 

Channel 4 play an important role in the UK film 

financing ecology, despite relatively modest 

budgets for film production. BBC Films has an 

annual budget of £12 million (€13.6 million), while 

Film4 has had its budget raised by 50 per cent to 

£15 million (€17 million). Investing in independent 

British film was always a formal part of Channel 4’s 

remit. Both are key investors in development, as well 

as co-financing production, and exercise a strong 

editorial influence over the projects they back.  

Both have also regularly invested alongside the 

UKFC, and will continue to do so with the BFI.

Commercial broadcasters play no significant role 

in UK film financing, although ITV and BSkyB have 

both been involved in film production in the past. 

In January the UK Film Policy Review recommended 

that the Government initiates immediate 

discussions with each of the major broadcasters, 

including BSkyB and ITV, with the aim of creating 

a memorandum of understanding with each 

broadcaster to set out commitments in support of 

British film. If this approach proves unproductive, 

the report suggested the UK government legislate 

for more broadcaster involvement. 

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Other Current Issues     

The UK Film Policy Review published in January 

2012 has made a number of recommendations 

towards creating sustainable film businesses.  

These include: 

l

  The introduction of a funding mechanism to 

enable recycling successfully-returned BFI 

development funding back to companies that 

achieved that success, to be reinvested in further 

development funding

l

  Encouraging producers and distributors to work 

together from the initial stages of financing a film 

by creating Joint Venture Lottery funding, to be 

accessed by partnerships between producers and 

distributors

l

  Enabling producer equity recouped through Film 

Tax Relief to be recouped pro-rate and pari-passu 

with BFI Lottery investment

l

  That the current level of BFI producer equity 

recoupment corridor (PEC) should be maintained, 

but that it should be treated as a supplement to 

the tax relief as producer equity position

l

  All recouped funding (tax relief as producer 

equity, the additional BFI producer corridor (PEC) 

and Joint Venture funding from BFI supported 

projects should be held in trust by the BFI to 

be made available for reinvestment in future 

filmmaking activity by the producer

l

  That the BFI should relax its recoupment targets 

to encourage the rewarding of success and 

helping to create a less dependent production 

sector. 

The BFI’s response to the FPR indicates that some 

of these recommendations will be considered for 

future action.

The BFI estimates it will have around £57 million 

(€70 million) a year in Lottery funding to invest 

in the UK industry a year over the next five years, 

above and beyond its government grant in aid. Last 

year close on £350 million (€428 million) worth of 

public money was invested in UK film through a 

mixture of the Film Tax Relief, government grant 

in aid to the BFI, Lottery money and broadcaster 

investment.

Key Conclusions     

UK producers still struggle to build their businesses, 

with initiatives targeted at supporting bigger 

companies such as the Lottery franchises and 

the UKFC’s super-slate deals having had, at best, 

mixed results. To date, UK film policy seems to 

have done relatively little to stimulate producers 

to be media entrepreneurs although the FPR (and 

subsequent BFI response) have some promising 

recommendations.

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Building sustainable film businesses:

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SPI would like to thank Libbie McQuillan, Kate Milne 

and Tim Adler for their contributions to the report 

and also Bengt Toll for his support for the project 

while at the Swedish Film Institute.

Thanks

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© Olsberg•SPI