The Hobbit may be filmed in Ireland

After a row so protracted that it has made the Lord of the Rings trilogy look endearingly brief, the Prime Minister of New Zealand, John Key has announced that the movie of The Hobbit will, after all, be made in NZ.

Emerging from two days of crisis talks with Warner Bros executives at his official residence in Wellington, the capital, Mr Key said legislation would be brought in to resolve concerns about the country’s industrial laws which had threatened the $500 million project.

In return, Warner Bros. would use its marketing clout to promote New Zealand as a tourist destination, the Prime Minister said.

“It’s good to have the uncertainty over, and to have everyone now full steam ahead on this project,” he said.

A bitter dispute with the actors’ union NZ Equity over pay had left the project, already cracking under the strain of soaring costs, legal battles and the loss of the original director Guillermo del Toro hanging by a celluloid thread .

Peter Jackson, the director, had threatened to remove the film of J.R.R Tolkien’s prequel to the Lord of the Rings from his native NZ where he made the trilogy and which has since developed a thriving tourist industry based on the films.

Those films, which grossed almost $3 billion and swept the boards at the 2003 Oscars, created a modern film industry for New Zealand centred at Sir Peter’s ‘Weta’ film studios in Wellington, or ‘Wellywood’ as it is now known.

New Zealanders regard the movies as their own and over the weekend, thousands took to the streets to protest against The Hobbit moving offshore. Mr Key described the loss of the film as a potential “tragedy” for the country as other locations, including Watford were suggested for the shoot, which begins in February.

Today, Mr Key said Sir Peter, who is also the film’s executive producer would “be a very happy camper,” and added that it was “unacceptable” to the New Zealand public to have the film go offshore.

“I am delighted we have achieved this result,” Mr Key said.

As well as a change in industrial laws, Mr Key said the film would get a NZ$15 million tax rebate - $7.5 million per film for the two-film project, a sum which he had indicated had been achieved by a “fair bit of hardball being played on both sides.”

Meanwhile a furious Sir Peter claimed that the actors’ unions had already decided to blacklist the movie before it requested a meeting to discuss pay.

Releasing a letter from the International Federation of Actors dated before discussions began and warning that it had instructed its members not to act in the film Sir Peter said: “From the outset they had a gun to our head.”