The producers of the Lord of the Rings prequel The Hobbit say preparations are being made to move the production off-shore.

In a statement issued to the media this morning, Peter Jackson and Fran Walsh said industrial action by NZ Actors' Equity and Australian union Media Entertainment and Arts Alliance had "undermined Warner Bro's confidence in New Zealand as a stable employment environment, and they are now, quite rightly, very concerned about the security of their $500m investment".

The pair said the lifting of the actors' blacklist of the production has done nothing to help the films stay in New Zealand.

"The damage inflicted on our film industry by NZ [Actors'] Equity/MEAA is long since done," they said.

"Next week Warner's are coming down to NZ to make arrangements to move the production off-shore. It appears we now cannot make films in our own country - even when substantial financing is available."

Last night up to 1500 workers marched from Weta's Miramar studios into central Wellington to picket an Actors' Equity meeting being held at St John's Hall. The Equity meeting - which was to discuss unrelated matters - was cancelled after union bosses learned the march was on its way.

"The spectacle of NZ Actors' Equity suddenly cancelling their Wellington meeting, because film workers wanted to express to them their concern at losing The Hobbit, exemplifies the pure gutlessness of this small, self-centred group."

"They don't appear to care about the repercussions of their actions on others, nor are they prepared to take responsibility for decisions made in their name. NZ Equity constantly refer to 'good faith' discussions but they have never acted in good faith towards our film."

The statement said four weeks ago NZ Equity, represented MEAA, urged "several international actor's unions to gang up on our production in an attempt to bully us into illegal collective bargaining".

"MEAA's representative, Simon Whipp, admitted in a recent interview with the Hollywood Reporter, that it was his intention to use The Hobbit as a way to 'unionise other productions' in the New Zealand film industry - presumably whether we want it or not.

"This unilateral decision, made by an off shore union, we assume with Equity's blessing, is the reason why our film industry is now in dire jeopardy."

The statement said while they do not deny the unions the right to represent their group of actors, the industrial action was taken without consultation with their members.

"These clumsy, heavy-handed tactics have put at risk the livelihoods of thousands of workers and jeopardised a potential investment of a billion plus dollars into the NZ economy."

Walsh and Sir Peter said they will "continue the fight" to keep the film in New Zealand, but ultimately this decision belongs to Warner Brothers.

"We are however, hugely heartened by the incredible show of support from Wellington actors, technicians and crew. It is a reflection of the terrific pride NZ film workers have in their industry and their very real fear of losing their jobs."

"Seemingly overnight, NZ Actors' Equity shredded the reputation of a burgeoning industry, which has been over forty years in the making."