Hollywood movie studios have abandoned the UK as a production base in droves, with their investment falling by almost half in the last two years, according to new figures.

But while fewer films were made in the UK, cinema-going was increasingly popular, with British audiences bucking a global downturn in box office revenues.

Since the chancellor, Gordon Brown, put film industry tax breaks under review, Hollywood giants have deserted UK studios such as Pinewood, often for eastern Europe. The amount spent on production in the UK last year declined by 31% from 2004 to £559.5m, according to statistics published yesterday by the UK Film Council.

Even that figure was buoyed by increased investment by British film-makers. Big budget projects such as Stormbreaker, featuring teenage spy Alex Rider, and Sir Richard Eyre's adaptation of the Zoë Heller novel Notes on a Scandal, boosted spending by more than a third.

The high water mark for inward investment was 2003, when more than £1bn was spent on movies, including Troy, Batman Begins and the Harry Potter series.

However, the British film industry is hopeful that a new tax regime unveiled by the Treasury last month will result in foreign investment swiftly returning to the UK. In his pre-budget report, welcomed by the industry, the chancellor offered producers of films costing more than £20m a rebate of 16% provided they fulfil certain criteria, including a "cultural test".

British-made films costing under £20m will be entitled to claim up to a fifth of their budget in tax credits.

Steve Norris, of the British Film Commission, which promotes the UK as a production centre, said that 2005 "was always going to be a tough year for production in the UK, due to the overhaul of tax incentives and a strong British pound against the US dollar". In contrast, with the new arrangements in place, 2006 offered "a great deal of promise".

Yesterday's figures also showed that home-grown films are proving more popular with British audiences than at any point in the past decade.

British films accounted for 34% of UK box office revenues, with Wallace and Gromit: The Curse of the Were Rabbit and The Hitchhiker's Guide to the Galaxy among them. Harry Potter and the Goblet of Fire, the most recent cinema instalment of the fantasy saga, topped the chart with box office receipts of £47.6m in 2005.

Cinema chains and the film industry were also cheered by figures showing that UK audiences had bucked the worldwide downward trend in cinema attendances. UK and Ireland box office receipts totalled £840.35m during 2005, a marginal rise on the previous year.

Audiences across Europe and the US declined during 2005. In Germany, total box office revenues fell by 18%, while in Spain the total value of cinema receipts fell by a tenth.

Biggest box office

Top 10 films in the UK in 2005, ranked by box office receipts

1 Harry Potter and the Goblet of Fire, £47.6m

2 Star Wars Episode III, £39.3m

3 The Lion, the Witch and the Wardrobe, £38.3m

4 Charlie and the Chocolate Factory, £37.4m

5 Wallace and Gromit: The Curse of the Were Rabbit, £32m

6 War of the Worlds, £30.6m

7 Meet the Fockers, £28.9m

8 King Kong, £26.1m

9 Madagascar, £22.7m

10 Hitch, £17.4m