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James Bond has saved the day again. But this time he needed help from a boy wizard — and the tax code. After a slump that had the muggles using words like crisis and disaster, Britain's film industry is back and (almost) better than ever. Films like Casino Royale and Harry Potter and the Order of the Phoenix have made 2006 the second-best year on record for the industry. According to figures released Jan. 15 by the UK Film Council, $1.65 billion was spent on making 134 films wholly or partly in Britain last year — 48% more than the $1.12 billion spent in 2005.

Fifty homegrown productions, including films like Kenneth Branagh's The Magic Flute and the upcoming Elizabeth sequel, The Golden Age, contributed $290 million. But the real boost came from outsiders, especially U.S. studios, which poured $1.12 billion into filming Bond and Potter as well as non-English creations using the country's locations, talent or technical know-how. That's the level of activity the industry might have expected after a bumper year like 2003 when Bridget Jones joined forces with Troy and Alexander to help generate $2.2 billion.

But in 2004, the British government closed a loophole that had given foreign investors generous tax breaks, but which could also be used fraudulently. Then it tightened restrictions on coproductions. Suddenly, around 40 films saw chunks of their budgets disappear. Some productions were delayed; others collapsed.

The government responded by introducing subsidies in 2005 and then drafting a new set of tax credits to kick in this year. With relief in sight, the movie money started rolling back in. "What's surprising is the speed at which the industry's bounced back," says John Woodward, the Film Council's CEO. "But if you can build confidence and persuade the financing community that, going forward, things are going to be stable, you're in a good position." Hollywood already adores Brits: Helen Mirren and Sacha Baron Cohen picked up top awards at Monday's Golden Globes, while a bunch of their compatriots are tipped for Oscar nominations on Jan. 23. Now Britain's film industry is a main attraction again, too.

• JUMANA FAROUKY
• Britain's film industry bounces back