Spending on film production in Britain increased by nearly half to £840.1 million last year from £568.8 million in 2005, making it the second-best year on record, according to new figures from the UK Film Council released today.

The UK Film Council has linked the boom in spending to an increased confidence in the British market, thanks to a new film tax system announced in late 2005 and introduced at the start of this year.

John Woodward, the chief executive of the UK Film Council, is confident that 2007 will prove to be another strong year for production spending in Britain.

He said: “The new tax credit which came into force this year will ensure that the UK stays one of the best places in the world to produce a film.”

The coming year will see the release of British films including This is England, Notes on a Scandal, Atonement, The Other Boleyn Girl and 28 Weeks Later — as the hand-to-mouth home film industry hopes to find a more secure footing.

However, the new tax rules are controversial because they apply to films shot or made in Britain, and can exclude those backed by British capital but produced abroad — creating anomalies.

Prince Caspian, the $250 million (£130 million) sequel to The Lion, The Witch and The Wardrobe, is one of the first films to be made under the new rules — qualifying because the post-production work, including special effects, will be carried out in Britain, plus some of the live action filming.

The film industry body looked at films with production budgets of at least £500,000, of which there were 134, up from 124 in 2005. This included 50 British feature films, up from 37 in 2005, 27 inward investment productions — films with finance from overseas but made mainly or significantly in the UK — and 57 British co-productions filmed both in Britain and abroad.

Inward investment rose by 83 per cent to £569.6 million from £312 million in 2005.

The new tax relief is available on the UK production spending on a film. For films that cost up to £20 million, the relief is worth up to 20 per cent of the budget. For those films budgeted at £20 million and over, it is worth 16 per cent — provided that the films meet the conditions set out by the Treasury to attain the relief.

The Film Council said that the most beneficial aspect of the relief is that it is paid directly to the production company from the Treasury rather than financial organisations, which is designed to end abuses seen in the previous system. That involved films being made but never distributed, since their sole purpose was to qualify for the break.

Inward investment films included Chris Weitz’s His Dark Materials: The Golden Compass, based on the first book from Philip Pullman’s trilogy; Matthew Vaughn’s Stardust, featuring Robert De Niro; David Yates’s Harry Potter and the Order of the Phoenix; David Dobkin’s Fred Claus, starring Kevin Spacey and Kathy Bates; and Paul Greengrass’s The Bourne Ultimatum.

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