For Hollywood studios shooting productions in the UK, the outcome of a hard Brexit is an historic opportunity not to be missed.

With a no-deal Brexit, the UK would face an immediate drop in the valuation of its currency against the dollar and the euro. The IMF estimate a drop of 15-20% as a realistic possibility, where the pound could head towards $1.10 or even $1.05. Sterling could even drop below parity with the euro.

Following a crash out of the European Union, Britain would face some disruption and uncertainty in a number of industries such as manufacturing. However, continuity agreements already signed by the United Kingdom and the United States ensure that trade will continue as normal in the no-deal scenario.

Hard Brexit for Hollywood

If Britain departs the EU without a deal, there will be disruption and a severe hit to the pound, providing studios with the option to make considerable investments in UK production with an effective 20% ‘tax break’ due to the currency drop vs the dollar. This means that for future productions, in the near-term, American producers would be able to get more for the same amount of money they spend on a production. That is to say for every dollar they spend following a hard Brexit, they would receive up to 20% back due to the fall in the pound.

Netflix, Disney, Sony and Paramount for example would benefit from buying sterling immediately after a no-deal exit. With the UK film and creative industries providing some of the world's best facilities, and a stronger euro, a hard Brexit scenario would make European productions more expensive and some could even move back to the UK to benefit from the currency drop.

The EU has already agreed a 90-day visa-free movement in a no-deal scenario so film production crews shooting partly on the continent could still travel without issues.

However, it should be noted that despite this gain, films that are shown at the UK box office would yield much less if the profits were converted back to dollars, therefore studios would have to keep their profits inside the UK until the currency recovered some of its losses vs the dollar in the months following a hard Brexit.

In the scenario where Britain would remain closely aligned to the European Union, there would also be a notable change as well.

Soft Brexit (customs union option)

Should Britain decide to strike a deal with the EU that keeps the country locked into a customs union, then sterling would most likely strengthen against the dollar and the euro. Since the vote in 2016 the pound has remained weak due to uncertainty, but this would change with a deal and close alignment. The pound would likely strengthen considerably against the dollar and the euro in the mid-term as certainty returns.

For studios, hard Brexit makes productions in the UK instantly less expensive but whether this scenario will ever play out depends on the discussions that will take place in the coming days ahead.

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