BFI_logo-782327EXCLUSIVE:: The film agency has suspended work on the British Film Institute’s £166 million ($271 million) flagship project until the autumn. The new Conservative government is cutting the UK Film Council’s budget by 3% (£1.3 million [$1.9 million) for this financial year. This comes on top of the £25 million the UKFC has already saved from its annual budget to help pay for the 2012 Olympics.

Suspending work on the UK Film Centre will come as a blow to the BFI, whose biggest project this has been for years. The centre, which was due to be completed by 2015, is to house five digital screens, with one large auditorium. The BFI is putting brave face on things. It only advertised for an architect last month. “As far as we are concerned, we are simply going ahead on a different timetable this year,” it says.

John Woodward, CEO of the UKFC, tells me that all public organisations must stop spending money on new capital projects until the autumn, when government spending plans for the next three years will become clear. “This one decision will effectively deliver the grant-in-aid cuts that the government has demanded,” Woodward says.

There’s worse to come. The UKFC has been asked to model further 20% cuts in its state-funded expenditure over the next three years. This is on top of the 20% cut it has already made to its overhead. “Like every other part of the public sector, we are braced for further and bigger grant-in-aid expenditure to come,” he says.

However, one BFI insider tells me the UK Film Council board presented the UK Film Centre freeze as a fait accompli. “There was no consultation with the institute,” this insider says. If so, it doesn’t bode well for relations during the impending merger between both organisations. I’m hearing that the wheels are getting wobbly on that, with new culture secretary Ed Vaizey making non-committal noises about the merger. The official line is that the merger is still going ahead as planned, and that the new government is only just getting down to work.