Brexit: Together… for how long?

On June 23, the UK will vote in a referendum on whether it should stay in the European Union. At the time of writing, the odds suggest the answer will be “yes”. Most betting companies have the “stay” option at a narrow 1-3 on and the “leave” option at 9-4 against. The Government’s position is clear, namely that “the UK should remain in a reformed EU”.

Nonetheless, with heavyweight politicians from all sides of the political spectrum campaigning for a UK exit (known colloquially as ‘Brexit’), the possibility the UK might withdraw from the EU is very real.

Underlining the divisions in UK politics over the issue, the secretary of state for culture, media and sport John Whittingdale is campaigning in favour of the UK leaving the EU while, in the same department, Ed Vaizey, minister of state for culture, communications and creative industries, is a strong advocate of staying in Europe.

If a Brexit does happen, there will undoubtedly be consequences for the UK film industry. The challenge is working out just what they will be.

In normal circumstances, organisations such as the British Film Institute and Creative England, and broadcasters Channel 4 and the BBC would be expected to lead the debate over an event that could have such a far-reaching impact on the film and TV sector. But as publicly funded organisations they are required to remain neutral. The result is a vacuum at the heart of the debate.

And a spokesperson for the European Commission (the executive body of the EU) told Screen: “We do not speculate on what may or may not happen after the referendum.”

It isn’t hard to turn up details of the extent of Creative Europe MEDIA programme support to the UK audiovisual industry, however, both in the past and on a continuing basis. Among the notable UK films backed by Creative Europe MEDIA at distribution level are the Oscar-winning documentary Amy and such recent critics’ favourites as Carol, Brooklyn and High-Rise.

MEDIA also invested more than $732,800 (€660,000) in the European theatrical distribution of Paul King’s Paddington.

Funding from MEDIA for the UK audiovisual industry amounted to $111m (€100m) for the period 2007-2013. Together with the former Culture Programme, MEDIA is now part of Creative Europe, which has a $1.62bn (€1.46bn) budget for the period 2014-2020 — a 9% increase compared with the previous funding programmes combined. The UK continues to benefit.

“Creative Europe has supported 227 UK cultural and creative organisations and audiovisual companies, including 52 UK cinemas in the Europa Cinemas network, and the cinema distribution of 84 UK films in other European countries, with grants totalling €40m [$44m],” says the EC spokesperson of the first two years — 2014 and 2015 — of the new programme.

Of this $44m, $31.6m (€28.5m) was invested in the audiovisual sector through the MEDIA sub-programme. Some 85 UK companies benefited directly from grants totalling $17.7m (€16m), while 84 UK films had their distribution supported in other European countries to the tune of $13.9m (€12.5m) of investment from Creative Europe MEDIA.

Deep pockets

It is not just MEDIA money the UK film industry risks losing. There are other pockets of EU financing from which the UK film and TV industries regularly draw. They include the European Regional Development Fund (which has invested in Screen Yorkshire, among others), the European Investment Fund and the various highly regarded EU training schemes such as EAVE and ACE. (UK film executives and film-makers could potentially still attend these if the UK moves out of the EU, as up to 20% of spaces are reserved for non-EU participants. But they would be on the margins of the schemes, rather than at the heart of them.)

“If we leave, we lose a lot of the glue that makes our business successful,” suggests producer Rebecca O’Brien, whose films with director Ken Loach are often made with the support of multiple European partners.
Sixteen Films, for which O’Brien works, has received MEDIA slate funding on several occasions. “It is wonderful money because if you get it, you can recycle it,” O’Brien says. “It is invaluable, because development money is so hard to come by. To lose that would be a real shame. That has really helped us stay afloat in the leaner times.”

It is not as if the UK film industry would grind to a halt if the UK does vote to leave the EU. UK producers should still be able to use the Council Of Europe Convention on Cinematographic Co-Production (to which non-European countries can now sign up). The UK has its own bilateral co-production treaties as well but hasn’t been part of Eurimages (the Council of Europe’s Cinema Support Fund) since the mid-1990s.

But if the UK were to leave the EU the likelihood is the UK would become even less active as a co-production partner on European films. As media analyst Bertrand Moullier puts it, “Britain is not a great co-producer right now. We are more of a pre-sales-driven independent film sector.”

One agency which has looked in detail at the potential impact of a UK exit on the audiovisual industries is the British Screen Advisory Council (BSAC). Last year, at the time of the referendum on Scottish independence, BSAC published a paper drafted by Moullier (now updated) examining how the regulatory and policy framework might be affected. The report highlights how heavily dependent the UK’s film and audiovisual content sectors are on UK public money in the form of direct aid, investment from the broadcasters and tax credits. 

According to the report, all sources of state aid combined reached £390m in the financial year 2013-14. The BFI’s Lottery funds alone channelled $36.5m (£25.5m) into UK production, development, exports and training.

There would be no reason for this funding to be affected by a UK exit. As BSAC chief executive Fiona Clarke-Hackston explains however, “what you would get [from Brexit] is uncertainty about the pound”. Questions, she suggests, should be raised as to whether “big American businesses would continue to use London as their hub”.

Indeed, it is possible the $1.69bn (£1.18bn) earned by inward investment in 2015 would be at risk, as it is questionable whether the Hollywood studios would want to base their big productions in the UK if they couldn’t freely and easily move their cast and crew around to other European locations.

What about the tax credit?

In recent months, amid the turbulence brought on by the impending referendum, the pound has weakened against the dollar and the euro. This, though, has made the UK yet more attractive for inward investment, at least in this interim period.

“People are in London because we speak English, because of our copyright laws, our legal system, high-quality executives and good connections,” John McVay, the chief executive of PACT recently told Broadcast magazine. “London is a strong base anyway. I don’t think everyone would get on the next flight to Paris or Madrid.”

The consensus is the much-vaunted tax credit, which has helped galvanise the huge boom in film and TV production that is ongoing in the UK, will be preserved in or out of the EU.

“If we left [the EU], we would still be left with British legislation that has all the rules of the tax relief [in it],” one well-placed source comments. “The Government has done tremendously well for us in recent years. Whatever we’ve asked for, [Chancellor of the Exchequer] George Osborne has put his hand in his pocket and paid for, in terms of the tax relief at least.”

The observer suggests the tax credit could even be strengthened if the UK were outside the EU. There would no longer be the need for a cultural test or a cap at 80% of the budget, which are both EU requirements.

Others are not so sanguine. “Whatever happens, you’re subject to the [EU] competition rules,” one analyst notes. “If [the EU] feel any of this affects intra-community trade or your trade with them, they may put pressure or adopt retaliatory measures.

“I wouldn’t say the tax credit is safe because policy may change. The rules of the game may change. No scenario that you look at comes up with the UK [after a Brexit] not having to live with some measure of regulation that it is absolutely not able to influence.  It would cast a huge doubt on the notion of good old-fashioned British exceptionalism.”

Some within the UK media industries might welcome a Brexit on the grounds it would help them escape the immensely frustrating negotiations around the EC’s proposals for a Digital Single Market (DSM). In  particular, the threat of the erosion of ‘territoriality of rights’, the tradition of films being licensed and released on a country-by-country basis, long regarded as a core part of film financing and distribution.

Then again, some experts suggest that the UK’s position regarding the DSM and many other issues would be weakened if the country was outside the EU and therefore unable to influence policy decisions directly. The example of Norway hardly inspires confidence.

“Over the years, people who run [UK] trade associations have had calls from the Norwegians saying: ‘Certain things are about to happen at a European level, and is there any way we can lobby on their behalf?’,” one analyst relates. “Asking others to advance your point of view dictates how far you are outside the club.”

“The European Commission, when we engage, listens to us,” Clarke-Hackston states of the present situation, with the UK still at the EU table. The danger of withdrawal lies in losing the ability to affect key debates and policy formulations. “In that case,” she suggests, “we would just have to take what is dished out to us.”

Have Your Say: Brexit – are you in or out?