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UK's Creature Shop faces closure over taxes

Henson is considering options for the London Creature Shop not the LA and New York branches

Courtesy of The London Times
June 3, 2005

Tax uncertainties and the falling dollar are threatening the closure of Jim Henson’s Creature Shop, the fabled special effects company that created characters for films including The Flintstones, Babe the recent Hitchiker’s Guide to the Galaxy and episodes of The Muppets.

The Jim Henson Company, which owns Creature Shop, told The Times yesterday that it was considering shutting the iconic studio because the falling dollar and uncertainty over tax breaks for films shot in the UK allowed rivals to undercut the company.

All staff at the Creature Shop were told this week that they faced being made redundant. The company has 23 permanent staff and dozens more freelance workers.

“It is much more about the tax incentives and lack thereof for doing work in London, as well as the miserable dollar right now,” said Peter Schuber, president of the Jim Henson Co. “Because of those two external elements, which are out of our control, we are going to look at a whole range of alternatives including possibly shutting the Creature Shop.”

Mr Schuber said that it was “premature to say everything is closing” but admitted that “everything is under review”.

The Creature Shop, housed in unremarkable offices along London’s Regent’s Canal, opened in London 26 years ago when Jim Henson arrived in London to make The Dark Crystal, set in an all-puppet fantasy world.

Soon afterwards characters for the film Labyrinth, starring David Bowie and Jennifer Connelly, were made there. The shop has also made characters such as the animatronic pig in Babe and Marvin the Paranoid Android in Hitchiker’s Guide.

Mr Schuber said that regardless of the future of the Creature Shop the Henson Company, which is based in Los Angeles, would continue to carry out work in the UK. “But it is cheaper for others to do it elsewhere, therefore they don’t come to the UK to get the kind of work which the Creature Shop provides,” he said.

The uncertain future of Britain’s entire film industry was triggered by a revision of Section 48 tax benefits for films with budgets of more than £15 million, which the Government found was being abused by some producers.

The situation has been worsened by the weakness of the dollar against the pound, which has meant that American film producers are finding it as much as 30 per cent more expensive to make movies at studios such as Pinewood than it was 18 months ago.

Industry executives expect a huge drop in film production because of the uncertainty. Pinewood suffered a hit this year when Paramount indefinitely postponed shooting its $120 million (£66 million) feature The Watchmen.

Concerns remain over whether the forthcoming Bond film, Casino Royale, and Harry Potter and The Order of the Phoenix will be shot in the studios. The producers of both are considering going to cheaper Eastern European cities, such as Prague and Budapest.

The Film Council, which represents the industry, is in talks with the Treasury to work out a framework for tax relief. It is expected within weeks to set down a timetable for rolling out a new tax regime that will allow for a fresh round of investment from Hollywood studios.

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