All that glitters

With success at the Golden Globes and anticipation building for the Oscars, the British film industr

These are heady days for British cinema. Home-grown talent including Peter Morgan, writer of The Queen, Sacha Baron Cohen, creator of Borat, and Dame Helen Mirren swept the board at January's Golden Globes, and are now poised to do the same at the Oscars later this month. A mood of triumphalism will prevail at the British Academy Film Awards (or Baftas), which take place at the Royal Opera House in London on 11 February. Tony Blair has already paid tribute to "the increasing strength of the British film industry and the incredible talents of all who work in it".

How different the scene was just three years ago, when a distinguished group of film-makers descended on Downing Street to beg the Prime Minister to help save UK cinema. The Treasury had just clamped down on a tax loophole that encouraged investment in the industry, and several projects had collapsed overnight. Among these were flagship films such as Tulip Fever, which was to be produced by Steven Spielberg and to star Jude Law and Keira Knightley. Blair told the complainants in no uncertain terms that there was nothing he could do. The new regulations were, he said, "Gordon's baby".

Shortly afterwards, the eminent producer Michael Kuhn, who had backed Trainspotting and Four Weddings and a Funeral, gave the Brit ish industry what seemed to be its last rites. "This is the bleakest prospect for indigenous UK productions since I started in the film business in the mid-Eighties," he said in a lecture to the independent film trade organisation, Pact. "The hour is dark, darker I think than most years in my lifetime."

So what has changed? And, crucially, just how stable is the basis for the resurgence? The concern is that a raft of institutional weaknesses makes Britain's film industry swing wildly from despair to elation and back again. The trade newspaper Variety has astutely compared the industry's psychological state to that of "a hypochondriac with manic depression".

The main problem is that most of the profits made by British films head straight out of the country. The Queen, for example, had a British director, British actors and very British subject matter. But although it was co-funded by ITV, most of its financial backing came from the French-owned production and distribution company Pathé, with help from the American Miramax. Similarly, the Harry Potter blockbusters have generated £2bn in box-office takings, all of which has gone straight into the coffers of the US studios Warner Bros.

Many in the industry believe that British cinema cannot have a secure future without a major studio in this country that will develop, make and distribute films - much as Rank or British Lion did during the Fifties and Sixties. The lack of such a facility, they argue, has led to the domestic market becoming flooded with American output, stifling demand for British product. The problem is compounded by most UK cinemas being owned by US distributors, which have a vested interest in showing Hollywood films.

"There's no such thing as the British film industry," says Jonathan Gems, a director and screenwriter who has collaborated with Tim Burton on Batman, Mars Attacks! and Corpse Bride. "There hasn't been one since the early Seventies, but people create the illusion that it exists." Gems dismisses a recent claim by the Culture Secretary, Tessa Jowell, that films such as the Harry Potter series, Nanny McPhee and Burton's Charlie and the Chocolate Factory represent a victory for the industry. "Tim Burton loves living in Britain, and his studios would much prefer that he lived in LA so they could keep an eye on him," he says. "But he doesn't think, 'I'm making a British film' when he makes Charlie and the Chocolate Factory. Warner Bros in Hollywood have control over the budget, and Tim is answerable to them."

The UK Film Council, which aims to support British cinema talent with government and Lottery money, is inevitably the focus of criticism from the industry, only some of which is justified. One complaint is that it has fostered a copycat culture, playing it safe with well-worn formulas rather than investing in originality. In the wake of Four Weddings and a Funeral it funded a rash of inept marriage-related comedies; two-bob gangster flicks followed the success of Lock, Stock and Two Smoking Barrels. The latest penchant is for costume dramas about celebrated female authors: big awards have been made to both Miss Potter, the biopic of Beatrix Potter starring Renée Zellweger, and Becoming Jane, in which the Brokeback Mountain star Anne Hathaway plays a young Jane Austen. Richard Attenborough's Closing the Ring, which stars Shirley Mac Laine and Mischa Barton, was recently awarded £1.8m. "Nobody has done more over the years to fly the flag for British film than Dickie," says one insider. "But he is 83! Shouldn't we be supporting younger directors?"

The UK Film Council responds to such charges by pointing to its development fund, from which it hands out smaller grants to fresh talent. Yet Colin Jones, a producer who recently won a grant for a comedy entitled Hopeless Romantics, featuring Thandie Newton, makes no bones about needing to play upon existing preconceptions in order to secure funding. "Obviously, everyone is looking for the next Four Weddings and a Funeral," he says. "Ben [Miller, the new film's director] has been referred to as the next Richard Curtis. I certainly hope so."

Even those who do manage to get a film made soon come up against the next problem: getting it into cinemas. Some surprisingly high-profile film-makers have found themselves unable to get a cinema release in the UK. Scoop, filmed by Woody Allen on location in London, has yet to surface in cinemas here. Man to Man, an adventure film starring Joseph Fiennes and Kristin Scott Thomas, could not even get a DVD release. Lower-budget, critically acclaimed British films such as Paul Andrew Williams's thriller London to Brighton and Andrea Arnold's Red Road have disappeared from cinemas a few weeks after they first appeared, scuppering their chances of commercial success. "To get a decent UK release you need a £1m to £2m spend on marketing," says Colin Jones. "But most independent producers aren't in a position to decide how their film is released - it's up to the distributor by that stage in the film's life."

As a result, too much young talent is still leaving the country to seek greener pastures in the United States. Following a string of successes on television, the 30-year-old Mancunian actor Dominic Monaghan made it big as Merry in the Lord of the Rings trilogy. He is now living in LA, where he has found work on the TV series Lost. "I always wanted to support the British film industry but I just wasn't given the opportunity," he said recently. "A year after doing Lord of the Rings and shopping myself around London, I just thought: I have to go where the work is."

Stephen Poliakoff, the acclaimed screenwriter and director, has retreated back to television after flirting with film in the Nineties. He explains that young British actors have turned to the stage, as film doesn't offer them viable opportunities. "They get instant gratification [on stage] because they're not waiting two years for their movie to come out - and then only having it in the cinemas for a week or two."

Kuhn, the former scourge of the government's film policy, sounds a slightly more optimistic note. "It's definitely got better in terms of what's been done to put things right," he says. "The government has done 80 per cent of what is needed, but there is still 20 per cent to do. The reason we don't have a self-sustaining UK film industry is that the profits of successful British films are going to foreign production companies and distributors and not back into the business." Perhaps Helen Mirren should consider mentioning that in her Oscar acceptance speech.

Where are they now? British films you might never see

Scoop

Woody Allen's second London-based film, starring Scarlett Johansson and Hugh Jackman (pictured with Allen) and Romola Garai. It was released last year in Europe and America, but no UK distributor has picked it up.

Modigliani

It took ten years for the Scottish director Mick Davis to get his pet project, a biopic of Amedeo Modigliani, to the big screen. Andy Garcia plays the Italian painter, leading an eclectic cast that includes Miriam Margolyes and Eva Herzigova. It was a success at the Cannes Film Festival and secured release worldwide - but not in Britain.

Colour Me Kubrick

John Malkovich came to the UK to deliver a powerful performance as the real-life conman Alan Conway (above) who duped people into believing he was the reclusive director Stanley Kubrick. With no cinematic release, he might as well have stayed in Hollywood.

Red Mercury

This action drama about Muslim terrorists making a bomb in a London flat stars Pete Postlethwaite, Ron Silver and Nigel Terry. It has been shown widely at festivals, but remains on the shelf with no distributor.