WALLACE and Gromit creator Aardman has posted a £2.5m loss this year after soaring costs and shrinking income from its commercials division ate into the bottom line. Despite recording £1m profits last year and increasing revenues by a third to £31.5m since then, the Bristol-based animation house has been hit by costs from moving headquarters, hiring more freelancers and pitching for new business.

The studio said its commercials business, which specialises in making TV adverts, experienced its lowest income in five years. Aardman is now banking on its current ventures, the short film A Matter of Loaf and Death and a new Shaun the Sheep children’s television series. It says these are performing well, and the studio is also working on two new films, Pirates and Arthur Christmas.