Tax breaks are required to secure the future of the British film industry, Watford’s MP has argued.

Richard Harrington, who convened a Parliamentary debate on the UK film industry yesterday, welcomed Warner Bros.’ £100million investment in Leavesden Studios but warned the British film industry would continue to shrink if home-grown investors were not incentivised by the tax system.

Despite the existence of such world class facilities, he argued, most of the profits created by the industry still flowed into the pockets of foreign investors.

Potential British investors, he said, were put off by and by the scant rewards currently offered by the Treasury – a trend that has seen the average investment in British films fall by nearly a half to £1.5miilion since 1993.

He said: “The fact is that, while we have amazing facilities in this country and all the infrastructure, we are providing a vehicle mainly for foreign investors to do their production here while the profit, quite understandably, returns to the investors, who are abroad.

“Today, I am speaking to the Government about how we need to achieve a situation in which British investors can invest in British films tax efficiently.”

Mr Harrington, who called for the establishment of a Parliamentary working group to address the problem, conceded that a “lax film taxation” regime was introduced when the last government came to power in 1997, allowing wealthy investors to abuse the system.

But subsequent restrictions, he argued, had gone too far, meaning the UK side of the business was in danger of becoming “cottage industry.”

He added: “The value of the film industry to this country is significant. People might not be aware, but it directly employs about 36,000 people. If we include the multiplier effect, which studies do, 100,000 people derive their income from the film industry.

“The taxation commensurate with that is significant. The industry provides about £1.6 billion in direct revenues to the country and £440 million in taxation.

“…but we should look carefully at creating an industry that is British financed and British made, and whose profits remain in Britain.”