Although major American productions, such as The Empire Strikes Back and Superman II, continued to be filmed at British studios in the 1980s, the decade began with the worst recession the British film industry had ever seen. In 1980 only 31 British films were made, down 50% on the previous year, and the lowest output since 1914. Production was down again the following year, to 24 films. However, the 1980s soon saw a renewed optimism, led by companies such as Goldcrest (and producer David Puttnam), Channel 4, Handmade Films and Merchant Ivory Productions. Under producer Puttnam a generation of British directors emerged making popular films with international distribution, including: Bill Forsyth (Local Hero, 1983), Hugh Hudson (Chariots of Fire, 1981) and Roland Joffe (The Killing Fields, 1984)
When the Puttnam-produced Chariots of Fire (1981) won 4 Academy Awards in 1982, including best picture, its writer Colin Welland declared "the British are coming!" (quoting Paul Revere). When in 1983 Gandhi (also produced by Goldcrest) picked up best picture it looked as if he was right. It prompted a cycle of bigger budget period films, including David Lean's final film A Passage to India (1984) and the Merchant Ivory adaptations of the works of E. M. Forster, such as A Room with a View (1986). However, further attempts to make 'big' productions for the US market ended in failure, with Goldcrest losing independence after a trio of commercial flops, including the 1986 Palme d'Or winner The Mission. By this stage the rest of the new talent had moved on to Hollywood.
Handmade Films, part owned by George Harrison, produced a series of comedies and gritty dramas such as The Long Good Friday (1980) and Withnail and I (1987) that had proven popular internationally and have since achieved cult success. The company was originally formed to take over the production of Monty Python's Life of Brian, and subsequently became involved in other projects by the group's members. The Pythons' influence was still apparent in British comedy films of the 1980s, the most notable examples being Terry Gilliam's fantasy films Time Bandits (1981) and Brazil (1985), and John Cleese's hit A Fish Called Wanda (1988).
With the involvement of Channel 4 in film production a number of new talents were developed in Stephen Frears (My Beautiful Laundrette) and Mike Newell (Dance with a Stranger), while John Boorman, who had been working in the US, was encouraged back to the UK to make Hope and Glory (1987). Stephen Woolley's company Palace Pictures also enjoyed some notable successes, including Neil Jordan's The Company of Wolves (1984) and Mona Lisa (1986), before collapsing amid a series of unsuccessful films. Amongst the other notable British films of the decade were Lewis Gilbert's Educating Rita (1983), Bill Forsyth's Gregory's Girl (1981) and Peter Yate's The Dresser (1983).
Following the final winding up of the Rank Organisation, a series of company consolidations in British cinema distribution meant that it became ever harder for British productions. Another blow was the elimination of the Eady tax concession by the Conservative Government in 1984. The concession had made it possible for a foreign film company to write off a large amount of its production costs by filming in the UK — this was what attracted a succession of blockbuster productions to British studios in the 1970s.