By the mid-1930's, it became abundantly clear that Britain's quota system had failed to create a flourishing industry. The producers that believed the production of quality films were only viable if there was an American market - had found that the vital cinema circuits were controlled by American production interests and so were implacably barred to those people trying to circulate British films in the States. Director and producer Victor Saville when on record to say that the financial terms of distribution in the United Kingdom was less favorable to British producers than to Americans.
In the second half of the decade, the slump hit the British film industry. Gaumont-British would cease all production at Shepherd's Bush come the end of 1936. Around the same time Alexander Korda fell on hard financial times after his expenditure for the studios at Denham. The financiers in the City of London came to the realization that they had been lending short-term capital without adequate security and at lease one producers; Julius Hagen (1884-1940) of Twickenham was declared bankrupt. All the Quota Act had accomplished was a frivolous expansion of low-cost production. The Act was due for renewal in the year 1938 in any event, but a government committee led by Walter Guinness, convened several times in 1937 to reconsider the Quota and other means of coping with the American influence. In this critical time of uncertainty, investment in production tapered off and the major Ameircan companies began to take over studios that had been expanded during the boom period. Britain by this time a fully geared up movie colony ripe for big-budget American productions.