Pinewood Shepperton, the studios group chaired by BBC chairman Michael Grade, has reported a near 60% fall in operating profits, reflecting the decision by many Hollywood studios to desert the UK because of uncertainties over tax breaks. Profits fell from £11.4m in 2004 to just £3.7m for the year to December 2005 as US movie studios abandoned the UK as a production base.

Pinewood Shepperton said the results reflected the 31% fall in the amount spent on production in the UK since 2004 as changes to the way films can claim tax breaks went through parliament.

But overall revenues fell by just over 13% from £38.7m to £33.4m as productions such as Green Green Grass and The Weakest Link eased TV revenues up from £6m to £8.9m.

"Trading conditions, particularly for the first half of 2005, were challenging, resulting principally from our film customers' uncertainty, now resolved, over the outcome of the government's review of UK film fiscal policy," Mr Grade said.

Grade said prospects for this year were encouraging after parliament ratified new tax rules for overseas productions and films such as Kenneth Branagh's Magic Flute and the latest Bond film, Casino Royale, are planning to use the studios.

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