Charlie and the Chocolate Factory was one movie filmed in the UK

The report, by Oxford Economic Forecasting, also says the Treasury would lose about �328m a year in revenue if the industry was to vanish.

It comes as figures for 2004 showed the number of jobs in the UK's movie industry fell by 20% to 24,816 people.

The decline is blamed on uncertainty over changes in tax breaks in the UK.

In 2004, the government closed a tax loophole which allowed some producers to claim tax relief more than once for the same production.

Certain tax relief for the film industry remained in place, but it is currently under review and may change.

The suggestion has deterred some US film investors, and with the new tax laws not expected until next year, there are fears of a further decline.

According to the report, inward investment has fallen from about �549m in 2004 "to probably around �324m in 2005".

'Significant contributor'

Introducing the report at a presentation hosted by Bafta, Pinewood Shepperton chairman Michael Grade said it "puts to rest any view that the British film industry is a luxury item".

"In fact it is a significant contributor to the UK economy."

The report, which was supported by Pinewood Shepperton and the UK Film Council, warned that the UK had much to lose if it was no longer seen as an attractive place to invest films.

British film-makers were part of an intensely competitive international industry with some of the UK's most highly qualified and internationally mobile people.

It estimated 25% of an industry "the size of the BBC" would move overseas.

There would be a clear deterioration in the nation's cultural life with a cinema box office reduced by about �38m a year and fewer films that reflected British life, the report continued.

It said the tax regime, established in 1992 to encourage investment in films, had led to a substantial industry which made a large net contribution both to the "economy and to the cultural life of the country".

A Treasury spokeswoman said the government welcomed the report.