EXCLUSIVE: Some of the UK’s top film and TV studios have raised concerns with Culture Secretary Lucy Frazer over a property tax bombshell that has this week put the breaks on Sunset Studios’ major expansion into the British market.
Deadline understands that Frazer has held talks with industry representatives about potentially eyewatering increases in business rates. Sources said she is keen to avoid damaging Britain’s world-leading production facilities.
The Treasury leads on tax matters, so it would ultimately be for Chancellor Jeremy Hunt to intervene, but Frazer could be an important advocate for a rethink. Hunt is a former Culture Secretary himself and has championed the UK’s creative industries.
Political interest in the issue comes as Sunset Studios Waltham Cross, a £700M ($900M) studio development in Hertfordshire, has been paused amid uncertainty over the property taxes. The development is an expansion of Sunset’s facility in California, which has housed shoots including Oscar-winner La La Land.
Deadline understands that Blackstone and Hudson Pacific, which own Sunset Studios, still plan to build at Waltham Cross but are holding back until there is greater clarity over the property tax concerns. Stubborn inflation in the UK has also been a factor in the decision to halt diggers.
Construction was due to begin imminently and it is not clear how long the project will be delayed. Construction Enquirer cited sources saying it could be 2024 before work begins. Blackstone and Hudson Pacific declined to comment.
In April, the UK’s Valuation Office Agency (VOA) updated UK studios’ “rateable values,” an assessment of the annual amount a property would rent for if it were available on the open market.
Rateable values are used to calculate business rates, a tax on non-domestic properties. The higher the rateable value, the higher the business rate tax.
Pinewood Studios, where James Bond is filmed, has had its rateable value raised fourfold to £16.2M on April 1. Warner Bros. Studios Leavesden, home to HBO’s House of the Dragon, has seen its rateable value rocket fivefold to £25.3M.
Pinewood is among the studios lobbying against the changes, while Deadline understands that Netflix has also been making representations. The British Film Commission is helping coordinate the efforts.
Industry insiders have warned that higher property taxes will threaten investment in new facilities at a time when studio space is at a premium. One observer said it was “sad times” that the issue had impacted the Sunset Studios build.
Other developers have raised concerns. Giles Dobson, a partner at property consultancy Bidwells, which is developing Hertswood Studios in Hertfordshire, said earlier this year: “Rises in UK property taxes are threatening to dethrone Britain’s position as a global hub for the entertainment industry.”
The VOA is continuing to assess the issue and has been carrying out inspections at UK studios. It is not clear if a resolution will be reached. The VOA has been contacted for comment.
The Treasury is providing £13.6B of business rate relief to companies in need of support, but declined to comment on whether this includes any UK studios.
A Treasury spokesperson said: “The UK is Europe’s largest TV and film industry and we continue to champion that growth with the new audio and visual expenditure tax credit and reliefs to allow production companies to claim a corporation tax deduction.”
Elsewhere, Elstree Studios’ owner Hertsmere Borough Council has warned that the facility requires redevelopment funding of up to £200M after asbestos was discovered in sound stages. Elstree is home to The Crown and Star Wars.