Seen any good British films recently? How about the lottery funded Rancid Aluminium with Rhys Ifans, Tara Fitzgerald and Joseph Fiennes? You've not even heard of it?

To tell you the truth we're not surprised. One reviewer wrote: "Anyone who pays money to see a film as poor as this needs their head looking at."

Earlier this year the film critic Alexander Walker identified over a dozen British films made with the assistance of National Lottery funding that underperformed at the box office.

On Friday the UK's poor record of commercially successful film production will be forgotten as the first Harry Potter casts its spell over every multiplex in the country. Advanced ticket sales at Odeon, UCI and Warner Village cinemas stand at £3m and rising and US sales could reach £300m. The reviews have been good and it looks like a movie with both a good story and mass appeal.

The British Film Commission and the book's author, J K Rowling, deserve credit for ensuring that the movie was made at the Leavesden Studios in Hertfordshire and on location in Gloucestershire. The BFC is the body responsible for encouraging international film makers to locate their productions in the UK. It can claim some success: in 2000 inward investment into the UK rose to more than £500m, a 33% increase over 1999.

Harry Potter and this year's other film-of-the-book, the Lord of the Rings, made in New Zealand, will dominate our screens like no other. Media analysts predict that Harry Potter will become the most popular children's movie of all time, grossing a minimum of £500m at the box office for Warner brothers. The studio has signed an endorsement deal with Coca-Cola worth about $100m (£69m) and merchandise tie-ins are ex pected to bring in hundreds of millions more. So will Potter break the recent British film mould?

The cast is British to the core. The 300 technicians and craft crew were mainly British. But the other creative talent is more global in make-up - an American director and a production team consisting mainly of Americans and Australians. The funding is American and the US is where the profits will disappear to faster than you can say "Hogwarts".

And that's the rub. Harry Potter looks, sounds and smells like a British film. But scratch the surface and the US movie machine is revealed. It will realise the global rewards, with Warner Brothers standing to make up to $2bn from franchise deals.

The British Film Council, set up by this government to create a coherent structure for the UK film industry and to develop film culture in the UK, is the latest attempt to professionalise the government's grant-giving in aid of the British film industry. In 2000 the council announced a package of film production initiatives backed by a total fund of £22m. But to put this into perspective, the marketing budget for Harry Potter in Britain alone is likely to run to £5m.

So as Emma Thompson suggested at the Edinburgh Film Festival in August, it is not going to be an easy task. "The very phrase 'the British film industry' depresses me," she said. "I don't think we've got a film industry, and never have had in the way we'd like to have... we've been making bloody awful films... lots of people go on about the British film industry and as soon as they're offered anything in Hollywood they're off. You can't see them for the dust."

The American backed Harry Potter will make money across the globe, but as Martin Spence of BECTU the UK film union commented: "The majority of the crew was British, and the signs are that the same will be true of the sequel - which is just as well because apart from this and the new Bond movie, feature film production in the UK is at a very low level. It's a dreadful end to a dreadful year."

It is difficult to argue with either Thompson or Spence. In 1997 the government awarded a six-year franchise to three companies: DNA, Pathe and the Film Consortium in an effort to kick start the British industry. A total of £95.62m was awarded and in return the companies agreed to make 90 films over six years. As a mid-term review ended only 18 films had been made. The reality is that we are simply not making films in the quantity or quality required.

Perhaps Robert Altman's Gosford Park, one of the first films to be made with lottery support from the Film Council's Premiere Fund and which opened the 45th Regus London Film Festival will be a step in the right direction. But then Keep the Aspidistra Flying opened the 41st festival with a lottery grant of £1m and went on to take less than £150,000 at the box office.

·Nigel Culkin and Keith Randle are members of the Film Industry Research Group (FIRG@Herts.ac.uk) at the University of Hertfordshire