Quotes of the Day

The British film industry is already calling it Black Tuesday. On Feb. 10 producer Alison Owen (whose recent credits include Sylvia, starring Gwyneth Paltrow) arrived at Pinewood Studios, north of London, to sign final agreements on her new $45 million movie, Tulip Fever, set to start filming in April with Jude Law, Kiera Knightley and Jim Broadbent. That afternoon she took a call from Paul Lister, an executive at DreamWorks, her U.S. production partner. A large portion of the money behind the movie had fallen away, she was told, because the British government had announced the immediate closure of the tax break for British films on which Tulip Fever's funding — and that of around 40 other British films each year — was based. The $6 million which Owen's Ruby Films had already spent on the project was, apparently, her problem.

"I was devastated," says Owen. "I had to give 80 crew members their notice and we were all in tears." She has until mid-March to find new funding, before the stars become unavailable. If she fails, she says, her company will probably collapse.

Suddenly the $2 billion British film industry is in crisis. Since 2002, big funds like investment company Grosvenor Park's First Choice scheme have been using an accounting principle which allowed investments in British films to be declared as a tax loss until the film turned a profit. High-profile movies including Girl with a Pearl Earring and the forthcoming Wimbledon funded themselves this way. One firm, First Choice, had $267 million invested in around 24 films, accounting for some 10,000 jobs, and was all ready to start principal photography within the next two months. Many of these were big productions, including the John Malkovich–Johnny Depp headliner The Libertine, and Lord of War starring Nicolas Cage and Monica Bellucci.

The Treasury insists that it is merely acting prudently. "These were highly abusive tax-avoidance schemes. Once the [Inland] Revenue realized what was going on it was necessary to shut them down," says a spokeswoman. Some in the film world agree. "It was abused," one well-placed source told TIME. "Certain people went into it because it was seen as cheap money."

But the industry says it's devastated. Broadbent, who won an Oscar for a made-in-Britain film, 2001's Iris, told TIME: "You do your bit for the British film industry, and then something like this is inflicted. It's enormously dispiriting." And Grosvenor Park's managing director Dan Taylor, insisting that funds like his were the nonabusive face of the system, is furious at the Treasury's failure to consult with filmmakers before announcing the move: "They've come in like a bolt of lightning and completely destabilized the previously successful British film industry. It sends a message, 'Don't count on the U.K. as a place to produce films.'"

Russell Smith, American producer of The Libertine, agrees. "The damage done by this to the British industry is frightening. We've saved our film by moving to the Isle of Man," he says. "But we could be the only one under threat to survive."

• JAMES INVERNE
• As Britain's Inland Revenue moves to close a loophole, filmakers feel the pinch