The big exodus: Is the British film industry in crisis?

Where has Britain's Oscar-winning actress Helen Mirren been working for the past few weeks? The answer isn't Pinewood, Shepperton or Ealing, but far away in Germany, where she has been playing Count Tolstoy's wife in Michael Hoffman's new movie, The Last Station. True, Tolstoy isn't British, but not so long ago, The Last Station would surely have been put together as a British production. After all, it is being made by a British company (Zephyr) with British actors (James McAvoy as well as Mirren) and British technicians.

What about Stephen Frears, who directed Mirren in The Queen? He, too, has been in Germany, finishing off the shooting of Cheri, his Christopher Hampton-scripted adaptation of Colette's novel about the love affair between a spoiled young man and his much older mistress (played by Michelle Pfeiffer).

Stephen Daldry, another renowned British director, has also been working in Germany, shooting The Reader, his David Hare-scripted adaptation of Bernhard Schlink's novel.

Even though the action is set in Germany, one would have expected the film to be shot in a British Studio.

Where has Joe Wright (of Atonement fame) been in recent months? The brightest of young British directors has been in Los Angeles, shooting The Soloist, his new film about a schizophrenic musician on skid row.

Who would want to shoot films in Britain? This may seem a perverse question given the British film industry's continuing reputation for technical excellence, fantastic actors and top-notch studios. If the UK is so grim, one might ask, why do the Studios still make the Harry Potter and James Bond movies here?

Then again, trace the whereabouts of Britain's most celebrated film-makers and it is striking how few of them have been working at home. Of course, producers don't just look for the perfect locations for their movies. They want tax breaks, easy funding, affordable labour and the best studio facilities.

But is Britain providing them with the conditions they need to make their movies? The number of international co-productions being shot in Britain has plummeted. In some respects, this is a healthy trend. The Government has curtailed the flagrant abuses committed by renegade producers during the days of the old Section 42 and Section 48 tax breaks. It is no longer possible for films to qualify as British – and take advantage of UK fiscal incentives – by dint of some clever paperwork. Movies that want to access the new "tax credits" have to pass a "cultural test." They must prove their British credentials.

The downside is that Britain isn't an attractive place for foreign producers. "It's very hard to do something now in the UK," says Hans De Weers, the Oscar-winning Dutch producer of Antonia's Line. "The system is OK if you are fully shooting in the UK, but otherwise it is hardly interesting."

Fewer movies are being made in the UK. That means less work for technicians and a slowdown at the UK's vaunted post-production houses. One area that is comparatively robust is smaller UK films aimed at British audiences. Some argue that the Brits risk becoming insular in outlook.

"Where we might be going wrong is [in] thinking too much of ourselves as an island and not reaching out – collaborating, reciprocating and co-producing that is respectful of other people's national requirements as well," says British producer Mike Downey of F&ME, the London-based outfit behind Guy X and Bathory. Meanwhile, attracting Hollywood productions grows ever tougher. "Jeez – that pound of yours is kind of crazy..." said one American producer referring to the strength of sterling against the dollar.

The British industry remains susceptible to whatever ailments infect the US studios. "When Hollywood sneezes, the global film industry catches cold," is how British Film Commissioner Colin Brown characterises the relationship between the US majors and the rest of the world. In April, Britain's flagship studios Pinewood-Shepperton announced a 26 per cent fall in pre-tax profits in 2007, to $10.58m (£5.3m). The irony is that the British Government has gone to great lengths to cater to the Hollywood studios.

"The UK tax credit is a very generous system ...but it's a pity that it favours principally the US studios," comments one British producer who is now doing his film-making in Germany.

If Tom Hanks or Brad Pitt make a Hollywood movie in Pinewood or Shepperton, they are subsidised by the Treasury. If Ralph Fiennes stars in a British-financed film that shoots in Africa, the producer is unlikely to get anything. According to current rules, such movies as David Lean's Doctor Zhivago wouldn't qualify for the full UK tax credit.

"The failure of the legislation (for the UK film tax credit) is to make it useful for a broader, independent community that would provide a continuous and consistent throughput of work for people in all areas of the industry," suggests Mike Downey of the perceived bias toward Hollywood.

When I visited Shepperton Studios earlier this year, it was a ghostly experience. Only one movie was actually shooting – sci-fi drama Moon, the debut feature from British director Duncan Jones (formerly known as Zowie Bowie, son of rock star David Bowie.) Across the road, another bigger film – Richard Curtis' The Boat That Rocked – was in preproduction, but otherwise Shepperton was unnaturally quiet. At the time, everybody blamed the then writers' strike in Hollywood for the slowdown. A few months on, that strike has been resolved, butproducers aren't hurrying back to Blighty. They are put off by the strong pound, the changes to the tax incentives and the sheer expense of being in Britain.

British Film Commissioner Colin Brown strikes a robust note about prospects for the UK to lure back the Americans. He says that bookings later in the year look set to pick up. On bigger films (those costing over £20m), he points out the producers are offered 16 per cent of the budget as a tax credit. He concedes that the writers' strike and the prospect of an actors' strike later in the summer have slowed down production in the UK but insists that business is picking up.

The British studios are cagey about announcing advanced bookings. However, one tent pole movie, Ridley Scott's long-gestating Nottingham (a reworking of Robin Hood backed by Universal) has now set up production offices at Pinewood.

"The Americans get a warm, fuzzy feeling here," says Colin Brown of what Britain can offer to Hollywood. "There is something about the way that we tell stories and look at life and, believe it or not, even the sense of humour – whether you like it or not, the Americans admire the UK. A lot of the talent loves to work here. This is a great place to make a movie."

Arguably, the British film industry over-reacts to downturns. "We're not in the depths of a depression. There are probably a few less large-scale films shooting over the summer than there would [normally] be," says Adrian Wootton, the chief executive of Film London.

The question is how much responsibility the Brits are willing to take for the long-term health of their own film industry. You can't help thinking that the UK film sector should learn how to build up a little resistance – so that it isn't laid low quite so easily by events in Hollywood over which it has no control.