Skyrocketing Costs Hit U.K. TV Industry: ‘We Are Facing a Horrific Winter,’ Pact Chief Says

With inflation hitting record levels, a looming energy crisis and rising interest rates, the whole of the U.K. has been left reeling. But for the domestic television industry, which was already dealing with a post-COVID skills shortage and industry-wide inflation prompted by the streaming wars, the situation has now become critical.

“We are facing a horrific winter,” said John McVay, CEO of Pact, a trade body representing producers. “Borrowing costs have gone up massively, operational costs as a consequence of that have all gone up, gas has gone up, heat has gone up. If you’re having to film on location in multiple locations around the U.K., and you have to transport a lot of people, they have to be fed, watered, accommodated.”

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Steve Wynne, CEO of production company Strawberry Blonde, agrees, citing higher energy bills in the office, the skills shortage and freelancers upping their rates as the biggest hits to the budget. (According to latest figures from the British Film Institute, U.K. production will require over 20,000 additional full-time employees by 2025). “We’ve got editors who are charging over £2,000 [$2,240] a week, which we’ve never heard of before,” said Wynne. “People charging rates that we’re having to pay, because we haven’t got a choice.”

The behind-the-scenes skills shortage is reflected on-screen too. Paul Fleming, general secretary of U.K. performers’ union Equity, says there is a “workforce crisis” among performers driven by the near-collapse of theater and live events during COVID, with many leaving the industry altogether. While top talent are often the biggest above-the-line expense, Fleming points out that those who can command such sums are still a rarity in the industry, with 95% of Equity’s membership earning less than £20,000 [$22,400] per year.

“We are looking at basically every agreement that we hold in TV and film, and the push is going to come to make sure that those rates are increasing with a level that’s commensurate with the cost of living and workforce crisis,” Fleming told Variety.

Juggling talent, crew and commissioner requirements, it is increasingly producers who are finding themselves having to make up the shortfall. Wynne said he has heard “horror stories” about production companies going into shoots knowing they’re going to lost money on the project. “As an indie, we feel squeezed in the middle,” he explained. “Broadcasters are telling us they haven’t got any more money and freelancers are telling us they can’t work for the rates that they were working for [previously]. So it’s us in the middle, that I feel that are going to be mostly hit because there isn’t additional budget… And so we are left having to foot that bill.”

Meanwhile McVay said that last year’s Pact census – taken before the cost of living crisis had started to bite – was already showing that company deficits on projects had quadrupled year on year. “Which is really worrying, because that the buyer is basically saying, ‘Well, we can’t give you any more money, go out to the market and try and raise more money to fill the gap.’ Most of which will be eaten up by inflation,” McVay said. “And then you’re effectively carrying a debt, because that deficit, until it’s recouped by the distributor or whoever’s advanced the money, is a debt on your books.”

McVay believes the current crisis is similar to that experienced during the COVID-19 pandemic, when costly health and safety requirements such as COVID testing and social distancing saw the industry pull together to foot the bill. “It does feel to me a bit like a COVID moment, where we’re facing nothing that anyone could have really predicted, it’s not anyone’s fault,” he explained. “And as an industry, like we did during COVID, we’ve got to find a way through that so we come out at the other end with a strong domestic sector able to produce the quality of programming that our audiences both domestically and internationally expect.”

Variety reached out to three of the U.K.’s main public service broadcasters to ask what they were doing to support indies during the squeeze. The BBC told Variety: “We understand the pressures across the market and will continue to take a flexible approach to programme pricing to support producers and the commissioning of ambitious, distinctive programmes for BBC audiences.” The BBC also has a range of funds and partnerships producers can potentially access to make-up budget shortfall.

A spokesperson for ITV declined to comment but a source for the broadcaster said ITV is “very conscious of rising production costs,” which are being addressed on a “show-by-show basis.”

Channel 4 said: “With indies across the U.K. facing an increasing pressures on their businesses due to rising production costs and talent shortages we are fully committed to working closely with our partners during these challenging times. We’re currently undertaking a review of our commissioning tariffs and for some years now we have been assessing each production budget on the basis of realistic costs rather than sticking rigidly to published targets and we will continue to do so to ensure indies are not left out of pocket. This year (2022) our overall content budget increased by more than £50 million [$56 million] and we will continue to support the industry in the best way we can – by commissioning brilliant content from indies right across the U.K.”

McVay said Pact is also planning to raise the issue of budgets with broadcasters. “We will be going back to domestic buyers and saying ‘Right, well, this is like COVID. It wasn’t our fault. How are we going to deal with this?’” he said. “Because this isn’t producers being less efficient or being wasteful. This is fundamental to the overall economy and how are we going to continue to make the quality of the programmes that we know audiences and markets need.”

“I do think it’s important that U.K. broadcasters recognise what’s going on, and don’t just put their head in the sand and actually talk to us and talk to their suppliers about how do we navigate this,” he added.

Wynne, for his part, said he hasn’t had any conversations with commissioners about increasing budgets due to the crisis, but nor would he expect to. “I don’t think anyone can help,” Wynne said. “Because it’s affecting everyone across the board. It’s not specific. It’s nationwide and arguably, internationally, there are issues as well.”

The problem, of course, is that the public service broadcasters are themselves under increasing financial pressure. The market for content has reached saturation point with the proliferation of streamers, a potentially declining advertising market and limited help, if any, from the government. Channel 4 has spent the last year fighting the government over privatization while the BBC has seen its license fee, which makes up 70% of its income, frozen, creating a £2 billion funding deficit. Broadcasting regulator Ofcom warned in its latest report that although TV advertising grew in 2021 for the first time in six years, “anticipated economic slowdown could restrict future growth.”

In the meantime, Wynne is trying to cut costs wherever he can, from encouraging the use of public transport over cabs, home-brewed coffee over cafes and even housing an out-of-town edit assistant in his office. “I didn’t want him to have to pay rent in London because his salary would be wiped out,” said Wynne.

As much as producers and industry insiders are feeling the pain, Wynne acknowledges that it’s hard to drum up public support for the plight of producers.

“I think probably the last industry in the world anyone’s going to feel sorry for is the TV industry,” said Wynne.

(Pictured: Marvel’s upcoming Disney+ series “Secret Agent” shoots on location in the U.K. in January 2022)

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