The Financial Reality Behind UK Films: How US Tariffs Could Impact an Already Vulnerable Industry

Written By Stacey Grigolava

The UK film industry faces a serious challenge. The US has proposed a 100% tariff on foreign-made films. This would effectively double the cost of UK films entering the American market, a potential crisis for an industry already showing signs of financial strain.

While headlines often focus on the impressive £2.1 billion spent on UK film production last year (BFI, 2025), DataLedger's detailed analysis of 45,640 UK film companies reveals a more concerning picture of the industry's actual financial health.

Understanding Film Companies vs Film Projects

Most film businesses in the UK (70.4%) are tiny companies called "Special Purpose Vehicles" or SPVs. These are created just to make a single film. According to Silver Levene, a UK accounting firm specialising in film finance, producers should "incorporate a company as a Special Purpose Vehicle (SPV) and channel all production expenditure through it" to "ring-fence production expenditure" (Silver Levene, 2019).

The British Film Commission confirms that for a production to qualify for UK film tax relief, it must have "a Film Production Company (FPC) responsible for the film that is within the UK corporation tax net" (British Film Commission, 2025). This tax structure incentivises the creation of separate legal entities for each production.

SPVs are standard practice in filmmaking, but they don't tell us much about the long-term health of the industry. For that, we need to examine the established companies that operate year after year.

The Financial Health of Established UK Film Companies

When we use DataLedger to analyse the permanent film companies (not the temporary SPVs), we see clear signs of financial weakness:

  • Severe financial difficulties: 9% of these companies (4,108) cannot pay their bills as they come due, with current ratios far below what lenders consider acceptable

  • Critically low cash reserves: These companies have almost no cash cushion for difficult times (their "current ratio" is just 0.01, meaning they have only 1p in current assets for every £1 of current debt)

  • Excessive debt loads: They have borrowed 7.32 times more than their equity value (a "debt-to-equity ratio" of 7.32, when banks typically prefer ratios below 2.0)

  • Shrinking business value: Their assets are declining by 15.26% annually, showing a business that's becoming less valuable each year

These figures reveal that many established UK film companies operate on extremely thin financial margins, even before facing potential US tariffs.

Cinema Exhibition Under Pressure

Film theatres are in particularly difficult financial positions. DataLedger shows that 11.8% of UK cinema companies are in severe financial distress. Their numbers reveal:

  • Virtually no working capital for day-to-day operations

  • Debt levels 17.28 times higher than their equity

  • Business value shrinking by 14.39% each year

Cinemas have struggled to fully recover from COVID closures, and would face additional pressure if US tariffs reduce the flow of new films.

Special Effects and Post-Production Companies

The companies handling special effects and editing (the "post-production" sector) show equally concerning financial indicators. DataLedger's analysis reveals:

  • Nearly half (49.3%) would be highly vulnerable to economic shocks such as US tariffs

  • These financially vulnerable companies employ 39.6% of the workforce in this sector

  • They operate with debt levels 17.58 times higher than their equity

  • Their business value is shrinking by 12% annually

These technical companies represent a significant competitive advantage for the UK film industry. Their financial vulnerability creates risk for the entire sector.

Critical Importance of the US Market

The American market is vital for UK film companies. The British Film Institute's Statistical Yearbook shows that the US represents 36.3% of UK film market share, worth $24,694 million (BFI Statistical Yearbook, 2024). The proposed tariffs would reduce access to this crucial revenue source for many UK productions.

Employment Impact Across the Industry

While the temporary SPVs constitute up to 70.4% of all film companies, the established permanent companies employ 33.9% of all film workers (50,627 people) in more stable, long-term positions. Financial distress at these companies would threaten thousands of secure jobs.

Television production companies could also face difficulties, despite the tariffs targeting films specifically. DataLedger's analysis shows these companies have:

  • 50.4% high vulnerability to tariff impacts (6,094 companies)

  • 53.8% of television production staff working at financially vulnerable companies

  • Extremely high debt levels (18.94 times more debt than equity)

The Value of Financial Intelligence

Standard reports about the UK film industry typically highlight production spending and export figures. These surface-level metrics can create an impression of a thriving industry while masking underlying financial weaknesses.

DataLedger's advanced financial analysis tools allow us to see beyond these headline figures to understand the true financial condition of the companies comprising the industry. Our data shows the proposed US tariffs would impact a sector already operating with minimal financial buffers and high debt levels.

This doesn't predict industry collapse, but it does suggest significant restructuring would likely follow tariff implementation, with potential job losses and supply chain disruption. Understanding these financial realities helps stakeholders prepare more effectively for possible challenges ahead.

How We Conducted This Analysis

This analysis was performed using DataLedger's proprietary financial data service, which applies sophisticated normalisation algorithms to Companies House data to allow for analysis on an industry level. Here's an explanation of the key financial metrics we analysed:

Current Ratio: This measures a company's ability to pay short-term obligations by dividing current assets by current liabilities. A ratio below 1.0 indicates a company may struggle to pay its bills. The industry average of 0.01 is alarmingly low, suggesting almost no liquidity buffer.

Debt-to-Equity Ratio: This compares a company's total debt to its shareholder equity, revealing how much a business is financed by debt versus owned outright. The industry average of 7.32 is substantially higher than the 1.5-2.0 typically considered healthy, indicating excessive leverage.

Net Assets Growth Rate: This measures the percentage change in a company's net assets (total assets minus total liabilities) over time. The industry average of -15.26% shows significant contraction in business value.

Tariff Vulnerability Score: We developed this proprietary metric by combining multiple financial indicators to assess how severely a company would be affected by tariffs. Factors include US market dependence, current ratio, debt levels, and cash reserves.

Our methodology excluded SPVs (identified as micro-entities with specific SIC codes and financial patterns) to focus on operational businesses with ongoing activities. Companies were classified into financial health categories based on a composite risk scoring model that evaluates multiple financial dimensions simultaneously.

This analysis is powered by DataLedger's proprietary financial data service, which provides enhanced and normalised data from 45,640 UK film and television companies. Unlike raw Companies House data, DataLedger applies sophisticated normalisation algorithms and accountant-verified validation checks to generate actionable financial intelligence. The dataset incorporates SIC classifications and location-based open data, revealing insights impossible to extract from standard financial repositories.

Sources:

Stacey Grigolava
Next

Beyond British Steel: DataLedger Exposes Financial Fragility Across UK Manufacturing SMEs