Where Did British Cinema Go? How a tax system built for Hollywood left domestic filmmakers behind.
An AI-generated image of an English bulldog wearing a superhero mask, seated in a Union Jack director's chair on a rain-soaked London set, with Big Ben visible behind it. In the background, actors in superhero costumes pose in front of a green screen showing an explosion. A clapperboard reading "The Masquerade" sits in the foreground.
In this series: A Cinema of Our Own
Gravity is a British film.
Not in any cultural sense you would recognise from watching it. Not in the sense that it was written by British writers, directed by a British director, or concerns itself with anything recognisably British in character, setting, or sensibility. It was directed by Alfonso Cuarón, a Mexican filmmaker. It stars Sandra Bullock and George Clooney, two American actors. It is set almost entirely in the void of space.
On the BFI Cultural Test, Gravity scores zero points in Section A — no British characters, no British setting, no British subject matter of any kind. Its certification rests almost entirely on Sections C and D: UK-based crew, British VFX and post-production work, and filming at Leavesden Studios in Hertfordshire. The physical production was British. The film is not.
But officially, legally, for the purposes of the tax system that governs how much public money it receives: British.
The same is true of Ghostbusters: Frozen Empire, Supergirl, and Avengers: Age of Ultron. Between them, these productions have claimed tens of millions in UK tax relief, certified as British under the same rules that certify Ken Loach and Andrea Arnold. In 2025, UK film production spend hit a record £2.8 billion. Domestic UK productions — films made by British filmmakers, about British subjects, for British audiences — accounted for 7% of it.
This is the situation British cinema is in. The purpose of this series is to work out how it got here, what other countries have done instead, and whether any of it is fixable.
How a Hollywood film becomes British
The mechanism that makes this possible is the BFI Cultural Test: a points-based system requiring 18 out of a possible 35 to certify a production as British and therefore eligible for the Audio-Visual Expenditure Credit, which offers a cash rebate of 34% on eligible UK production costs with no cap on budget size.
The 35 points are spread across four sections. Cultural content — where the film is set, who the characters are, what the story is about — is worth up to 18 points. Cultural contribution is worth up to 4. Filming location in the UK is worth up to 5. Crew nationality is worth up to 8.
The numbers look balanced. The practice is not. A production can reach the 18-point threshold almost entirely through the location and crew sections, with minimal or no points for content or story. More critically, the test is a simple pass/fail: a production that scrapes 18 points receives exactly the same rate of relief as one that scores 35. There is no incentive, financial or otherwise, to make a film that scores highly on the cultural content sections. A production company optimising for the rebate will naturally concentrate on what it can control — where to film, who to hire — and take whatever cultural content points come incidentally.
The result is that the UK's most substantial film subsidy is, in principle, indifferent to whether a film has anything to do with Britain. The Mission: Impossible franchise makes that indifference visible in financial terms. Paramount's UK subsidiary Jupiter Spring Productions claimed £137.3 million in tax credits between 2016 and 2025 across Fallout, Dead Reckoning Part One, and The Final Reckoning — three films set in South Africa, Malta, Norway, Rome, and the Arabian Peninsula, following an American character played by an American actor, directed by an American director. The British connection, in each case, was Longcross Studios in Surrey. Ghostbusters: Frozen Empire, Supergirl, Avengers: Age of Ultron: all technically British films, all inward investment productions claiming UK tax relief.
A Marvel production filming at Pinewood qualifies for 4 Section D location points immediately. Hiring a British-based VFX house — as every major production shooting in the UK will — ticks further crew points under Section C. Casting British secondary actors or a British supporting crew brings additional points. A production can reach 18 points, and full certification, without a single Section A cultural content point — without a British character, a British setting, or any story connection to Britain whatsoever. The pass/fail structure then ensures that this production receives identical treatment to a Ken Loach film that scores 35. There is no financial incentive to be more British than necessary.
What "culturally British" actually means
A culturally British film is not simply one made by British people, or one filmed in Britain, or one employing British crew. It is a film in which Britain is the subject: its characters are shaped by British class, geography, history, or social reality; its settings are recognisably British places rather than generic backdrops; its concerns — work, family, community, institutions — reflect the texture of life as it is actually lived here. A film about a former steel worker in Sheffield navigating the benefits system is British in this sense. A film about an American spy pursued across Malta and Norway is not, however many British technicians operated the cameras.
The difference is more obvious when you score the two extremes of the test against each other. I, Daniel Blake — set in Newcastle, following a British man through the British welfare system, written by Paul Laverty, directed by Ken Loach — scores near the maximum in Section A. Its characters are British, its setting is British, its subject matter is explicitly about British social policy. It scores in Section B through its contribution to British culture. It scores in Sections C and D through its crew and locations. The test is, for a film like that, doing something close to what it claims to do.
Avengers: Age of Ultron scores nothing in Section A. There are no British characters, the film is not set in Britain, and nothing in the story connects to any British subject. Its Section B contribution is negligible. It reaches certification almost entirely through Sections C and D — Shepperton Studios and a British-based crew and VFX operation. Both films receive the same certification. Both receive the same rate of relief. The test cannot distinguish between them because it was not designed to.
The calculator below lets you score any film against the test directly — and includes presets for Gravity, Barbie, and Age of Ultron to show precisely how each reaches 18 points.
Qualifies with zero UK story points — Barbieland is not the EEA. A British crew, British HODs (Jacqueline Durran, Sarah Greenwood), and eight stages at Leavesden Studios get it over the line. Section B for the diverse ensemble cast.
View on Letterboxd
No A1/A2/A3 story points. The BFI awarded Section B for British creative contribution — a discretionary judgement with no published criteria.
The pattern is visible in a single franchise. The Avengers (2012) filmed entirely in the United States and almost certainly fails the Cultural Test. By Age of Ultron (2015), Marvel had opened a deal with Shepperton — and UK tax authority payments offset at least $50.7 million of Disney's production costs on that film alone, with later Companies House filings from the relevant Disney subsidiary suggesting the final settled credit was closer to $79 million once post-production and VFX qualifying expenditure was included. By Endgame (2019), primary photography had shifted to Pinewood Atlanta in Georgia, with qualification depending almost entirely on UK VFX and post-production. The score stayed around 18. The geography had changed completely.
Who benefits and who doesn't
The consequences within the British film industry are genuinely split. For experienced crew, the inward investment boom has been broadly positive. Sustained employment, higher day rates, a technical skills base that has grown considerably. Studio owners at Pinewood and Shepperton have benefited from long-term leases with well-capitalised American tenants. The argument that the UK is a world-class production hub is not wrong — it is simply that being a world-class production hub and having a world-class domestic film culture are different things, and the current system produces the former whilst making the latter harder.
For independent British producers working with budgets in the £3m to £6m range — the territory where films like Aftersun, Saint Maud, and God's Own Country get made — the same conditions are punishing. Producer Andrea Cornwell, whose credits include Saint Maud, told Screen Daily that filmmakers "are not confident they can mount a cast and crew at this time", with day rates tracking the inward investment boom rather than the independent sector's means. Studio space locked up on long-term leases by Netflix and Amazon is simply unavailable at any price. Independent British productions are competing for resources in a market shaped by budgets ten to fifty times larger than their own.
The data reflects that divide. Domestic UK film spend stood at £206 million in 2016; by 2025 it had fallen to £193 million — which looks almost flat until you account for inflation over the same period, which ran at approximately 45%. In real terms, domestic spend has fallen by roughly a third across the decade. Inward investment grew by 86% over the same period, from £1.35 billion to £2.51 billion.
That divergence is not a rounding error. The chart below tracks it year by year.
† 2018 domestic spend (£319m) is an outlier. The BFI noted this partly reflected methodology changes in data collection. The 2020 dip reflects Covid-19 production shutdowns (March–July). The 2023 dip in inward investment reflects the Hollywood writers' and actors' strikes. All figures are film-only; high-end TV production is excluded.
The two brief dips — in 2020 during Covid production shutdowns and in 2023 during the Hollywood strikes — were external disruptions rather than structural shifts. Each time, inward investment rebounded to record highs. Domestic spend simply oscillated without any underlying growth.
The counter-argument deserves acknowledgment: without the inward investment boom, the UK might not have the world-class crew base it does. Cinematographers, sound mixers, and VFX supervisors who have spent a decade working on Marvel productions bring technical expertise that does, eventually, benefit independent films when those films get made. The industrial infrastructure American studios have built is not exclusively their servant. The honest version of the critique is not that inward investment is bad, but that the system has no mechanism to translate its scale into any return for the domestic sector — no levy, no co-investment requirement, no expectation that the infrastructure built with British crew and British public subsidy should generate any obligation toward British cinema.
By 2025, domestic UK productions accounted for just 7% of total UK film spend. The BFI's chief executive Ben Roberts acknowledged the local industry "remains under pressure" and that "access to finance is an acute challenge." A Bectu survey of over 4,000 UK film and TV workers in early 2024 found that 68% were not currently working, with 37% planning to leave the industry within five years. A follow-up survey in autumn 2024 found unemployment had fallen to 52% — an improvement, but concentrated among experienced crew rather than newer entrants — while the proportion planning to leave had risen to 38%. The Big Bectu Survey published in spring 2025 put unemployment across film, TV drama, and unscripted at around 45%, with 68% of respondents reporting financial difficulty.
The funding shortage is only part of the problem. Even a film that clears every financial hurdle — BFI support, broadcaster backing, a cast and crew assembled despite the rate pressure — faces a distribution market that was not built for it. In 2023, the UK independent film box office was just £38 million — a near 50% drop on the year before, representing 3.8% of total UK box office. Of the top 50 films at the UK box office in 2024, 46 were studio releases. The heads of Film4 and BBC Film acknowledged in 2024 that one of the sector's defining problems was "difficulty getting cinema screens for independent film". Multiplex chains programme commercially, which means Hollywood franchise films get the prime screens and slots; independent British films compete for whatever remains — typically limited-run, limited-screen releases that cannot generate the audience momentum needed to sustain a theatrical run. There are approximately 124 fewer independent cinema venues in the UK compared to pre-pandemic levels.
Production funding and distribution are treated as separate problems, but for an independent film they are the same problem at different stages. Getting made is not enough.
Cutting the credit wouldn't fix the problem
The obvious response to all of this is that the UK should reduce or reform the tax credit to deter American studios and free up capacity for British productions. This is a more complicated argument than it looks.
If the credit were cut, there is no mechanism that would redirect the savings toward domestic production. The Treasury would retain them. Independent British film would have more available crew but no more money to pay them. The structural problem is not that the inward investment credit exists; it is that the industrial credit and the cultural funds share no connection whatsoever. There is nothing that translates inward investment spending into any obligation toward the domestic sector — no levy, no co-investment requirement, no expectation that the British infrastructure American studios depend on should benefit the British films that can't get studio space.
The two tiers of UK film policy were built independently and continue to operate independently. The money flows in parallel and never meets.
What would actually help is not cutting one tier but connecting the two: a mechanism by which the scale of inward investment generates some obligation toward domestic production. France has a levy. South Korea has quotas. Denmark has a children's mandate. None of these destroyed the industrial base they drew on.
The cultural layer and why it isn't enough
The UK does have cultural policy for film. The BFI Film Fund reads scripts and assesses artistic merit. Channel 4 and the BBC, through Film4 and BBC Film, have historically funded films like Trainspotting, This Is England, Secrets & Lies, and Billy Elliot — films that are British not as a tax classification but as an artistic identity. These institutions exercise genuine curatorial judgement and have produced some of the most significant British cinema of the past thirty years.
Mr Bates vs The Post Office in 2023 achieved what years of journalism, legal campaigning, and parliamentary debate had not: it forced the injustice of the Post Office Horizon scandal into public consciousness at a scale that made political inaction impossible. It came through ITV — a public service broadcaster operating under a different regulatory framework, with different mission obligations, and a different relationship between cultural purpose and commercial pressure. Adolescence arrived in 2025 and prompted a national conversation about male violence, social media, and parental fear that no government campaign could have produced. It came through Netflix — a platform that is, by any measure, a central part of what British film policy needs to address.
Both were British stories, made by British writers and directors, about things happening in Britain, for a British audience that responded to them with genuine feeling. Neither was a film. That one came through a PSB and the other through a subscription platform suggests something useful: the problem is not the screen, and it is not the streamer. It is the absence, in cinema, of any institutional framework — public or commercial — that asks the same question those commissions asked. Film4 and BBC Film ask it. The question is whether the resources available to them are anywhere near adequate to act on the answer.
But their combined annual budgets — Film4 at £22.5 million, BBC Film at £11 million, the BFI Film Fund at around £18 million — come to roughly £51 million. In 2025, inward investment productions claimed £2.51 billion in UK tax relief. The cultural layer and the industrial layer are not in competition: they are operating at different scales entirely. One is a rounding error in the other's accounts.
In 2024, the government made a meaningful attempt to address this imbalance at the lower end of the budget scale. The Independent Film Tax Credit, introduced in the Spring Budget and active from April 2024, offers an enhanced 53% credit — effectively around 40% after corporation tax — on qualifying expenditure capped at 80% of core costs. The real cash benefit as a proportion of total budget is therefore closer to 32% for most productions. Crucially, it adds a requirement the standard Cultural Test lacks: a "Modified Creative Connection" condition, meaning the film must have a lead director or lead writer who is a British citizen or UK resident, or be an official co-production. A Marvel production cannot claim the IFTC. For the first time, a significant piece of UK film tax policy is tied to who is creatively in charge rather than merely where the film is shot or who the crew are.
The IFTC is a genuine step in the right direction. Its limitation is that it operates at the budget level where British independent films already exist — the £3m to £10m range — rather than creating new capacity in the mid-budget territory that disappeared.
Then there is what the UK lost when it left the European Union. The Brexit transition period ended on 31 December 2020, and with it the UK's membership of Creative Europe. Between 2014 and 2018, Creative Europe awarded €89.5 million to 376 UK organisations and supported the distribution of 190 UK films across Europe. The UK received €12.2 million from Creative Europe's MEDIA programme in 2018 alone — funding that went disproportionately to the kinds of lower-budget, culturally specific films that the industrial tax credit ignores. Ken Loach's I, Daniel Blake, which won the Palme d'Or at Cannes in 2016, received Creative Europe funding for development and distribution — exactly the kind of lower-budget, culturally specific film the industrial tax credit was never designed to reach. These are not productions that would have claimed meaningful sums from the AVEC.
The government's replacement, the Global Screen Fund, launched at £7 million — against the BFI's requested £17 million and well below what the UK had been receiving. The fund has since been increased to £18 million per year from 2026, but that covers distribution, co-production, and business development across the entire sector, not film production alone. The BFI estimated at the time that without a replacement fund, the independent sector would shrink by 10% and lose up to 1,200 jobs.
Brexit was a political decision with direct cultural consequences: a reduction in funding for the sector the Creative Europe programme was specifically designed to support, happening simultaneously with the inward investment boom the industrial credit was fuelling.
Where this leaves us
This is not a story about individual villains or bad faith. The AVEC does what it was designed to do: attract international production to the UK. The Cultural Test does what it was designed to do: create a workable standard for certification. Film4 and BBC Film do what they were designed to do: fund ambitious British cinema within the budgets available to them. Each part of the system is functioning. The system as a whole is producing a domestic film culture that holds 7% of its own market.
Whether that is acceptable depends on what you think a film industry is for. If the answer is employment, studio occupancy, and GDP contribution, the current situation is a success. If the answer is films that reflect British life back at the people living it — the kind of films that made Mike Leigh, Ken Loach, Andrea Arnold, and Lynne Ramsay possible — it is something closer to a slow failure.
The failure is not creative. The rest of this series tries to work out whether it is structural and permanent, or whether there are things other countries have done, and things Britain has done in the past, that suggest a different approach is possible.
What do you think happens next?
Question 1 of 3
The BFI, Film4, and BBC Film together spend around £51 million a year on British cultural film production. Netflix alone reported £1.7 billion in UK revenues in 2023. What do you think a 5% levy on streaming revenues would generate?
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Christopher Bray
Engineering open algorithms to map the invisible connections of cinema. I build discovery tools that look beyond streaming catalogs to ensure film history isn't lost to the algorithm.