The £10m question

Predictions are already being made of another mini gold rush in the UK film financing sector when the cap on Enterprise Investment Scheme (EIS)Funds is raised, as expected, from $3.1m (£2m) to $15.7m (£10m) in April 2012.

“It is very clear this government is minded to allow EIS investment in film on a fairly large scale,” says Paul Brett, a director of the Prescience film fund, a financier of The King’s Speech, which provides both debt and equity financing.

The challenge is to track down investors at a time when the UK economy is contracting. Opinion is sharply divided about how easy this will prove.

“A lot of people think [the EIS changes] are going to make a huge difference,” says Christine Corner, a partner in the media and entertainment group at accountants Grant Thornton. “I don’t think it is going to be the big saviour people think. Film has never been that attractive [for UK investors]. The issue is de-risking it so it can be more attractive and compete. People don’t want to take a risk on film. The equity comes quite low down in the recoupment.”

“It’s one thing to say you can raise [$15.7m] under EIS; not many people have the operational facility to do that,” says producer and former stockbroker Stephen Evans of Renaissance Films, who is hoping to set up an EIS Fund. “The big players like [film fund] Ingenious will be able to utilise it.”

Certainly, the private film funds are confident they can secure equity funding for UK features, thanks in part to the awards success of UK films such as The King’s Speech and Slumdog Millionaire, and the UK box office performance of local comedy The Inbetweeners Movie.

Unlocking investment

“There are enough [high net-worth individuals] to raise very significant amounts of finance,” says Ivan Mactaggart, a partner at producer and financier Trademark Films. “What it doesn’t mean is that every Tom, Dick and Harry with every film they dreamed up can wander out and get [$15.7m]. Investors are looking for people who are reliable and they can trust.”

‘It’s one thing to say you can raise $16m under EIS; not many people have the operational facility to do that’

Stephen Evans, Renaissance Films

While familiar names such as Prescience, Ingenious, Goldcrest, Future Films, Scion, Premiere Pictures and Silver Reel are actively financing UK and international films and many are hoping to increase their EIS activity, various newcomers are also providing equity financing. Post-production house Molinare was one of the equity financiers on The King’s Speech, while this summer has seen the first two features backed by the Pinewood Studios Group’s new fund for low-budget UK films — A Fantastic Fear Of Everything and The Last Passenger — go into production. At the lower budget end, Matador Pictures continues to close new EIS schemes and work on co-productions.

During 2011, says Brett, Prescience is expecting to raise “well in excess of $235.8m (£150m)” for UK films through its debt and equity funds, pre-sales and discounting the UK tax credit. It has most recently backed a slate of films that includes Fernando Meirelles’ 360, Marc Evans’ Hunky Dory and Iain Softley’s Trap For Cinderella.

The UK remains hugely reliant on equity investment from government and the broadcasters through the three pillars which underpin the industry, the British Film Institute, Film4 and BBC Films. Stephen Evans insists there is a compelling argument that can now be made about film and the state of the UK economy to potential private investors.

“The advantage of EIS and the high tax rate at the moment is that the worst you can lose is 35% on a British-qualifying movie,” he says. “If you’re investing in the stock market, nobody has a clue as to what that is going to do.”

He argues that if producers present film as “an alternative source of investment” and give investors a “further level of comfort”, films will seem an attractive proposition.

For others, the underlying problem is not the lack of equity investment but of decent projects to invest in. “I am convinced that if you can find good material and attach good talent to it,” says Mactaggart, “you will be able to find the money to finance your project.”