Brexit will ‘blow up’ co-production foundations

Michael Ryan

The foundations underpinning European co-productions have been “blown up” by the UK’s decision to leave the European Union, an industry body is warning.

The TV industry has been plunged into uncertainty after the British public voted to leave the EU, with Prime Minister David Cameron subsequently resigning.

Various companies and individuals are already on the record as suggesting a ‘Brexit’ will lead to disaster for the UK creative industries, with many expecting European subsidy programmes such as the MEDIA programme, which has ploughed millions of pounds in the UK, would be made unavailable to British producers.

Following the result of the vote, Michael Ryan, chairman of the D and partner at GFM Films said the repercussions would be felt industry-wide.

“The decision to exit the European Union is a major blow to the UK film and TV industry,” he said. “Producing films and television programmes is a very expensive and very risky business, and certainty about the rules affecting the business is a must.

“This decision has just blown up our foundation – as of today, we no longer know how our relationships with coproducers, financiers and distributors will work, whether new taxes will be dropped on our activities in the rest of Europe, or how production financing is going to be raised without any input from European funding agencies. The UK creative sector has been a strong and vibrant contributor to the economy – this is likely to be devastating for us.”

German broadcaster ProSiebenSat.1, which owns British prodcos through its Red Arrow Entertainment group, issued TBI a statement saying Brexit “makes Europe smaller and that is a disadvantage for European companies”.

“We have invested in British production companies because of their creative talent and the outstanding content they create,” the statement read. “That won’t change because of Brexit. So, operationally, we foresee no immediate consequences, but of course, general conditions for investments have not improved.”

Rival European broadcaster Modern Times Group was upbeat, telling DTVE sister title TBI: “The UK remains a major European and global content and technology hub. MTG has been present in the UK since the 1980s and we have no plans to change that. We have recently launched a brand new play-out facility, invested in new digital companies, and we buy and sell thousands of hours of TV programming from London – all of which indicate our commitment to our operations in the UK.”

James Burstall, CEO of Argonon Group, which came out strongly for the remain camp earlier this week, said his company was “still processing the news”, but said TV producers were robust enough to weather coming changes.

“We need to listen to the plan of the Leave team and see if they can deliver on their promises,” he said. “We are a resilient industry and a resilient nation and we will find a positive outcome.”

John Enser, partner at law firm Olswang, which works on industry M&A deals, also offered hope, saying: “While Brexit will be disruptive and the results uncertain, at least there is another treaty [the 1989 Council of Europe European Convention on Transfrontier Television] already in place which should guarantee that UK content still qualifies as ‘European Works’ for quota purposes.”

Broadcasters reliant on advertising revenue could be particularly hard hit by a new recession, which many commentators and economists are forecasting will follow the Brexit vote.

“Advertising is especially vulnerable to loss of confidence in growth as it represents not only a discretionary business spend and an easy cost to cut, but also suffers from the fact that consumer cut-backs on spending impact conversion rates – consumers are less likely to purchase products after seeing a commercial, affecting advertising’s effectiveness,” said Richard Broughton, research director at UK-based Ampere Analysis.

“Subscription businesses such as pay TV are typically more resilient than their ad-funded counterparts, with long contract terms keeping spend stable despite losses of confidence,” he added. “Even so, the UK pay TV market hit a period of slow growth following the recession.”

The impact of Brexit on the UK media sector would go “beyond the immediate financial effects”, said Broughton.

“Many international media businesses base their European operations in the UK to take advantage of the EU’s freedom of trade rules, as well as some of the UK’s more relaxed broadcasting regulations – broadcasting out of the UK to other EU markets. The future for these companies’ ability to base themselves in the UK is now likely to depend on the trade agreements the UK is able to put in place with the European Union upon exit.”

According to the Creative Industries Federation, which supports UK production, the creative sector was worth £84.1 billion (€109 billion) to the UK in 2013-14 and was growing at double the rate of the wider economy.

Europe is the UK’s largest export market for the creative industries, the CIF noted, taking 57% of all overseas trade, and 96% of the CIF’s members had backed the remain campaign.

“As the UK creates a new identity and a new position on the world stage, our arts and creative industries – the fastest growing sector in the economy – will play an important role,” said CIF chief executive John Kampfner.

“It will be vital for all sides to work together to ensure that the interests of our sector on issues including access to funding and talent are safeguarded as the UK forges its new relationship with Europe. The importance of British culture in representing our country to the world will be greater than ever.”