When capital contracts: Navigating the new economics of film finance

UK film production is booming. Spend reached a record £2.8 billion last year. However, only £0.2 billion of that was spent on domestic UK films. For the UK's independent producers, the picture looks less of a boom.

Pre-sales deals have fallen away. Broadcasters are commissioning less. In their place, producers must assemble a patchwork of regional grants and other soft money, senior debt, tax credits, equity and gap finance, each with its own parties, fees and conditions.

At Centtrip, we support the film and television production industry. Our clients include independent producers, financiers, accountants, insurers and some of the world's largest studios. Many of them live with this complexity every day.

That's why we wrote When capital contracts. The report identifies six causes of finance complexity and nine practical ways to ease the pressure.

Here are just some of the insights included in the report.

1.  Pre-sales no longer anchor the finance plan

“Years ago, you could have pre-sales, domestic distributor, tax credit, single piece of equity – done. The film is made.” – Christelle Conan, Founder, Crystal Lake Media and adviser to Elevation Films

Since 2015, the number of local UK films made with a sales company attached has fallen by 81%.

The consequence?

Producers must replace that missing money with more, smaller sources of finance. And more parties mean more legal fees, more paperwork and more complexity.

2.  Investors want an investment, not magic beans

“You've got to treat an equity investor now as a sophisticated investor who is comparing [your film project] to putting their money into the stock market or a tech business.” – Jasper Warry, award-winning filmmaker, Founder & CEO of Hello Deer Studios

The consequence?

New investors bring institutional expectations. Producers who build financial literacy, a credible waterfall and a clear route to recoupment are more likely to raise the money, and to keep those investors for the next project.

3.  The tax credit is generous, but cash flow can be painful

The Independent Film Tax Credit is worth around 32% of a production budget. However, certification, HMRC processing and VAT reclaims can mean a gap of “sometimes five to six months” before producers see the money. – John Gillett, production finance specialist and founder of Scripted Finance Ltd

The consequence?

Careful expenditure planning, early registrations and a robust finance plan help to shorten that gap, and to reduce the cost of financing it.

When capital contracts – get your copy now

When capital contracts: Navigating the new economics of film finance explores the causes of complexity in independent film finance and what producers can do about it. Across 48 pages and 8,500 words, the report combines desk research with the experience of seven industry professionals:

• Christelle Conan, Founder, Crystal Lake Media

• John Gillett, Founder, Scripted Finance

• Nikki Parrott, Producer and Co-founder, Tigerlily Productions

• Huw Penallt Jones, Founder/Director, South West Financial Management

• Kate Phibbs, Head of Studio, Film Soho

• Oliver Roskill, BAFTA-winning producer

• Jasper Warry, Founder and CEO, Hello Deer Studios

Our thanks to each of them.