In spite of all the economic gloom that’s descended on the United Kingdom over the past year, there is one British industry that is in the best of health: movie-making. 

The production of feature films and high-end television is booming there, largely as a result of massive and increasing inward investment from the U.S. 

 “The scale is huge. I mean, outside of North America, the United States and Canada, we’re probably the biggest country in the world for inward investment of content production,” said Adrian Wootton, head of the British Film Commission, whose job it is to attract foreign moviemakers to shoot their films here. The effort seems to be paying off.

“We got near 6 billion pounds ($7.3 billion) worth of inward investment last year, the overwhelming bulk of it from the US,” said Wootton. “This is the biggest figure on record.”

Although the relationship between Hollywood and the U.K. goes back more than a hundred years, to the early days of cinema, the most recent phase of exponential growth was triggered 20 years ago by author J.K. Rowling. She insisted that the Hollywood movies about her boy wizard, Harry Potter, be shot in the U.K. — Warner Brothers duly complied by buying an old aircraft factory just north of London and turning it into a major studio complex.  

Many other film franchises and high-end TV productions have since joined this inward invasion: “Lord of the Rings,” the Marvel and DC Movies, “Star Wars,” “Mission Impossible,” “The Crown” and many more are now largely shot in the U.K.

To accommodate them all, it’s been reported, there may soon be more studio space in the U.K. than in Los Angeles.

“There’s at least 50 new sound stages currently being built around the periphery of London,” said Matt Gallagher, who runs a film crew recruitment and training website, thecallsheet.co.uk.

“40 new stages have been set up since COVID. The combination of this brilliant infrastructure and world-class crew has made the U.K. irresistible for foreign moviemakers,” he said.

Another key attraction, Gallagher said, has been the U.K.’s film tax relief system set up in 2007 and extended to high-end television in 2012.

Under this system, moviemakers can claw back more than 20% of the cost of the production, either as tax relief or as a cash credit — a powerful incentive when budgets run into many tens of millions of dollars.

Disney is reported to have received more than a third of a billion dollars in U.K. tax credits over the past decade. 

But tax breaks on this scale are controversial, especially at a time when tax bills are rising in the U.K. and the cost of living crisis is biting hard. Alex Dunnagan of Tax Watch — which monitors the U.K. tax system for discrepancies — is not entirely happy with this arrangement.

“There are positives in that more films are being made in the U.K. as a result of the relief,” Dunnagan told Marketplace.  “But it comes with a cost.”

For example, he said, consider the cost to the British taxpayer of the last four episodes of Britain’s oldest and best-known film franchise — the Bond movies.

“We’ve had ‘Quantum of Solace’ receiving 21 million pounds in tax relief. ‘Skyfall,’ 24 million pounds in tax relief. ‘Spectre,’ 30 million pounds in tax relief. And most recently, ‘No Time To Die,’ 47 million pounds in tax relief,” he said.

And while the four movies grossed around $3 billion at the box office, Dunnagan claimed that most of the profit was declared and taxed in the U.S. where the film rights reside.

“Considering the U.K. is where the movies are made, it’s U.K. talent going into them and the U.K. taxpayer that’s subsidizing them, basically I’d like to see some corporation tax on those profits here in the U.K.,” he said.

The U.K. production company that makes the Bond films, EON Productions, did not respond to a Marketplace request for verification of these numbers, nor for comment on Tax Watch’s conclusions.

But Adrian Wootton of the British Film Commission brushed aside the criticism of film tax relief. This measure has helped to support a British workforce of 120,000 and to bring lots of extra spending into the U.K., he said.

“The tax credit is amazingly good value for the revenue it generates. For every pound we give out from the Exchequer we get eight pounds back,” Wootton said.  

The British government could be tempted to insist that any company receiving the film tax relief or credit locates more of its profits in the U.K. and pays more tax there, but it seems unlikely to do so. In fact, the government is now planning to increase the relief, anxious not to drive foreign moviemakers away from the U.K. and hobble one of its most buoyant industries.