02 · The VFX business
A fixed-price, labour-heavy business where the client's tax credit decides where the work goes.
How a show is bid, earned and paid; why margins sit at low single digits even at the biggest vendors; how the 2025 UK VFX relief changed the onshore/offshore sum; and what the closures of 2024–25 say about where the risk is.
How a show makes money
Fixed bid is the norm for film and episodic work. The vendor carries the overrun unless the client signs a change order.
Shots × complexity × days
The client's breakdown tags shots easy/medium/hard. The vendor estimates artist-days per task (matchmove, roto, paint, animation, FX, lighting, comp) and bids shared assets separately. Supervision and production are loaded on top.
Fewer shots, caveated
The awarded scope is usually below the first bid, and it comes with assumptions: revision rounds, turnover dates, plates. Outpost's CEO has described "a continual bidding department constantly adjusting".
Revenue by % complete
Revenue is recognised on cost incurred against estimated total cost. Cost-to-complete is the judgement auditors flag. A change in EAC re-phases both revenue and margin.
Milestones, not timesheets
A reservation or deposit, then milestone or delivery invoices, often with a holdback to final. Framestore's UK company carried £17.4m of deferred income at the end of 2025, billing ahead of work.
Peer filings
UK Companies House accounts, read the same way as Outpost's. Even the largest vendor runs at around 1% operating margin.
| Company | Year | Revenue | Avg heads | Staff cost ÷ revenue | Revenue / head | Operating margin | EBITDA margin |
|---|---|---|---|---|---|---|---|
| Outpost VFX (group) | FY26 (Mar) | £29.9m | 414 | 64.6% | £72.2k | 2.9% | 3.6% |
| Outpost VFX (group) | FY25 (Mar) | £23.8m | 413 | 74.9% | £57.6k | −16.1% | −14.0% |
| The Framestore Ltd (UK company) | 2025 (Dec) | £129.0m | 1,259 | 77.7% | £102.5k | 0.4% | 2.8% |
| Infinity Topco (Framestore + Company 3 group) | 2025 (Dec) | $607.1m | 5,185 | 74.1% | $117.1k | −2.3% | 8.0% |
| Cinesite Media Holdings (group) | FY25 (Apr) | £84.8m | 1,537 | 96.3% | £55.1k | −37.8% | −22.1% |
| BlueBolt Ltd | 2024 (Dec) | £5.2m | 80 | 81.3% | £65.2k | −18.3% | about −13.5% |
Staff cost as a share of revenue
Above about 80% has meant distress in every case reviewed
Operating leverage is brutal in both directions. Framestore's UK company barely moved its revenue and stayed at 0–1% operating margin. Cinesite, BlueBolt and Outpost lost 33–60% of revenue in the trough, and margins went deeply negative.
Revenue per head reflects mix, not quality. London-centric shops make about £100k a head; multi-site groups with India capacity make £55–72k. Outpost's lower staff cost share (64.6%) is the other side of the same coin.
What management reports. Framestore: turnover, gross margin, EBITDA. Cinesite: current ratio, operating margin, debt ratio. Outpost: "sustainable EBITDA and positive cash flow".
Ratios calculated from each company's filed accounts. Infinity reports in US dollars.Calculated
Incentives and site mix
The vendor doesn't claim these credits; the client's production company does. They still decide where the work goes, so they belong in the bid model.
AVEC with the VFX uplift: 39% gross on UK VFX costs incurred from 1 January 2025 (claims from 1 April 2025), with VFX exempt from the 80% cap. Work must be done in the UK; anything offshored is deducted from the client's claim. Generative-AI costs qualify.
25% base plus a 16% VFX/animation labour bonus, but service contracts are capped at 65% of eligible cost from 31 May 2024: (25% + 16%) × 65%. Outpost says this cut the effective rate on new Montréal work by about 25%.
A foreign-production incentive of up to 40% (capped at ₹30 crore) is claimed through an Indian line producer, with uneven take-up for VFX-only work. Maharashtra's AVGC-XR policy funds capital, not shows. India's lever is cost.
The 70.75% rule
For a UK production, a UK artist-day priced at £100 costs the client £70.75 after the relief. The same work done in Mumbai earns no UK relief. So Mumbai only saves the client money if it is priced below 70.75% of the UK rate.
Roto, paint and matchmove clear that bar easily: Indian salaries run at roughly 10–25% of London's. Compositing and CG may not, once supervision, rework and time-zone overhead are added. That is consistent with Outpost's FY26 shift to 78% UK revenue.
Two consequences for finance. First, every bid should show the client's net cost by site. Second, the bench risk moves to whichever site the incentives disfavour, so utilisation by site becomes a pricing input, not just an HR metric.
Try it
The bid builder does this sum
Set shots by complexity and the site mix for comp, prep and CG. It prices from the rate card, costs from the studio's actual hours and cost per hour, and shows the client's net cost after the UK relief, with a per-department table of where offshore still saves the client money.
Open the bid builder →The shake-out, 2023–2026
Two years from the strikes to a broad recovery, and the UK lost some of its biggest names on the way.
- 2023WGA and SAG-AFTRA strikes (May–November). About 4,000 of about 10,000 UK VFX jobs went, mostly freelancers. US scripted series fell 14%.
- Oct 24Milk VFX and Lola Post go into administration and are sold in a pre-pack for £225k, with 200+ staff transferred. Phantom FX agrees to buy them in July 2025.
- Feb 25Technicolor collapses: MPC, The Mill, Mikros. About 440 UK and 3,200 India jobs; India's February salaries went unpaid. A competitor's diagnosis: "too much work at too little money".
- Mar 25Jellyfish Pictures (London and Mumbai) suspends operations. Cinesite refinances (£154m).
- H1 25The top six streamers order 24% fewer scripted originals than a year earlier. Global VFX headcount falls 7.6% after a brief recovery.
- Aug 25Glassworks closes after 30 years.
- 2025UK production spend hits a record £6.8bn (+22%): film £2.77bn, high-end TV £4.03bn, 85% inward investment. Framestore says it is "at full capacity" by December.
Lessons for finance
- Underbidding to fill capacity is the failure mode that killed the biggest name. Bid margins need a floor set from actual overrun history.
- Bench carried through a gap is a choice with a price: Cinesite chose to "preserve our talent" and its EBITDA went from −£7.5m to −£18.7m.
- Cash timing: vendors that bill ahead of work (deferred income) survive gaps better than those carrying accrued income.
- Lower-cost sites are the most exposed when a group fails. Payroll continuity in Mumbai is part of the brand.
AI
Productivity gains arrive in the bid before they arrive in the headcount.
What it saves
FICCI-EY reports time savings of up to 40% across workflows, and 20–40% on roto depending on genre. Outpost's own face-swap model now produces a first client version in 2 days instead of 1–2 weeks.
Who it hits
Roto, paint and matchmove first: the work most concentrated in India. Headcount hasn't fallen yet; the 2026 World Atlas shows roto/paint up 8.7%. Clients increasingly expect cheaper VFX all the same.
What finance should do
Track hours per task by tool, before and after adoption. Decide how much of each gain stays as margin and how much goes into price. Treat compute and model licences as a growing semi-fixed cost. In the UK, generative-AI costs still earn the client's 29.25%.
KPIs and the benchmarks that exist
Few public VFX benchmarks exist; most of these numbers have to be built from a studio's own data.
| KPI | Why it matters here | Public reference point |
|---|---|---|
| Utilisation | Labour is 65–80% of revenue; every idle point hits margin | Professional services average 68.9% vs about 75% needed for healthy profit (SPI 2025). UK VFX/post capacity use was 30% in 2025 (ScreenSkills). |
| Realised day rate | Captures overrun and price concessions together | Revenue per head per working day: Framestore about £466, Outpost about £328 (FY26) |
| Bid vs actual | The core fixed-bid risk | No public benchmark. Anecdote: Life of Pi bid at about £10m, cost about £14m |
| Staff cost ÷ revenue | The best single health check | 65–78% when healthy; over 80% in every distressed case above |
| Contribution per show | Ranks shows and clients | Gross margin: Infinity 29.8%, Outpost FY26 25.6%, Framestore Ltd 20.3%, Cinesite FY25 17.6% |
| Debtor days, deferred vs accrued | Cash through gaps | Outpost FY26 about 33 days; Framestore carries deferred income well above accrued income |
| Site mix | Sets the client's net price | Outpost UK revenue share 55% → 78% (FY25 → FY26) |
The full set of definitions behind Finance Dailies, with formulas, grain, sources and owners, is on its data page.