The British film industry will die slowly like a "frog in a saucepan" unless the big players, including the Hollywood studios, get tax breaks to distribute British movies, Alan Parker warned yesterday.

The Hollywood director turned chairman of the Film Council, set up by the government two years ago to bring stability to the notoriously fickle business that almost died under the Tories, insisted the industry would have to go through a "radical reinvention" to survive.

In a blistering speech at the British Academy of Film and Television Arts in London, he said small British films were unsustainably expensive and accused the industry of so neglecting training - once its greatest selling point - that the National Film and Television School "looks like an abandoned set from The Day of the Triffids".

There was no point, he said, in even quadrupling subsidies so film-makers could make more films if no one was seeing them. Britain had a "production addiction" it had to be cured of, he claimed. The real money was in international distribution - an area totally dominated by the Americans - and British films would not be seen even in our own cinemas unless a new system of write-offs made it worthwhile for US and independent distributors.

The government must pressure commercial and satellite TV to honour their investment commitments under the new communications bill. "The BBC invests less than 1% of its budget on feature film production, and believe me, we're grateful," he said.

Parker compared film-makers to frogs being lulled to sleep as the saucepan of cold water they sit in is brought slowly to the boil. "Slowly but inexorably our competitive advantages are evaporating. Our creative and technical skills ... are in shorter supply than they were, our great technicians are ageing ... and, unless we jump out of the pot, we too will be goners."

But the solution was as much in film-makers' and broadcasters' hands as the government's.

The first thing that had to go was "Little England" mentality, he said, because in the future many Hollywood films traditionally shot in Britain would go to cheaper countries. The trick was to make sure that British talent and technicians retained a prominent place in what he called was the "the last travelling circus in the world".

Last night the culture minister, Kim Howells, welcomed the proposals, though he stopped short of hinting that any further tax breaks might be in the offing.