The script was written by T.E.B. Clarke and demonstrated his usual logical development of absurd ideas. Some scenes in which the residents are refused passage out of their district into London by the authorities, and rely on supplies thrown over the dividing wall by well-wishers, were very topical because the film was made during the Berlin Blockade.
The film was inspired by a true incident during World War Two, when the royal family of the Netherlands (including the pregnant Princess Juliana) fled to Canada. Under Dutch law, a royal heir had to be born in the Netherlands in order to be eligible for succession to the throne. To accommodate this, the Canadian government passed a special law making her room in a Canadian maternity ward officially part of the Netherlands.
A bomb left over from the Second World War blows up in Miramont Gardens in the Pimlico district of London after some local children roll a tractor tyre down a hole. The explosion reveals a buried cellar from the manor house that gave Miramont Gardens its name, in which artwork, coins, jewellery and an ancient parchment document are found. Professor Hatton-Jones (Margaret Rutherford) authenticates it as a royal charter of Edward IV that ceded the house its estates to Charles VII ("the Rash"), the last Duke of Burgundy, when he sought refuge there several centuries ago after being presumed dead at the Battle of Nancy. As the charter had never been revoked, Pimlico is legally part of Burgundy. Local policeman P.C. Spiller (Philip Stainton) observes, "Blimey! I'm a foreigner!"
The British government has no legal jurisdiction and requires the Burgundians to form a committee according to the laws of the long-defunct dukedom before negotiating with them. Ancient Burgundian law requires that the Duke himself appoint a council. Without one, all seems lost - until a young man from Dijon (Paul Dupuis) steps forward and proves that he is the heir to the dukedom. He duly forms a governing body; one of its members is the shrewd shopkeeper Arthur Pemberton (Stanley Holloway).
Very quickly, Burgundy (followed soon after by the rest of London) realises that it is not subject to post-war rationing and other bureaucratic restrictions, and the district is quickly flooded with entrepreneurs, crooks and eager shoppers. A noisy free-for-all ensues, which Spiller, the Chief (and only) Constable of Burgundy, finds himself unable to handle. Then the British authorities close the "border" with barbed wire. Having left England without their passports, the bargain hunters have trouble returning home - as one policeman replies to an indignant woman, "Don't blame me Madam, if you choose to go abroad to do your shopping."
The Burgundians decide that two can play this game and stop an underground train dead in its tracks. "The train is now at the Burgundy frontier." explains an agent of the newly formed customs and excise department. They proceed to ask the passengers if they have anything to declare.
The infuriated British government retaliates by breaking off negotiations. Burgundy is isolated, like post-war Berlin, and the residents are invited to "immigrate" to England. But the Burgundians are "a fighting people" and, though the children are evacuated, the adults stand fast. As Mrs. Pemberton (Betty Warren) puts it, "We've always been English and we'll always be English; and it's precisely because we are English that we're sticking up for our right to be Burgundians!"
Pimlico is cut off from electricity, food and water (though there's plenty of gin and crisps). The water problem is solved by a covert raid late one night, refilling the reservoir with hoses attached to the nearest fire hydrant on the British side of the border. Unfortunately, the food supply is spoiled when the cellar where it is being stored becomes flooded, and it appears that the Burgundians are beaten. Just in time, three Burgundian youngsters learn about this crisis and toss food across the border, setting an example for sympathetic Londoners; they begin throwing food parcels across the barrier in an improvised "airlift", echoing the one that ended the Berlin Blockade. Soon, others get into the act. A helicopter drops a hose to deliver milk. Even swine are parachuted in (possibly a reference to the expression "when pigs fly").
Meanwhile, the government comes under public pressure to resolve the problem. It becomes clear to the bumbling British diplomats assigned to find a solution, Gregg (Basil Radford) and Straker (Naunton Wayne), that defeating the Burgundians would be no easy task, so they decide to negotiate. The sticking point turns out to be the disposition of the unearthed treasure. At last, the local banker (Raymond Huntley) hits upon a novel solution: "A Burgundian loan to Britain!"
With negotiations successfully concluded, an outdoor banquet is prepared to welcome Burgundy back into the fold. Just as Big Ben strikes the hour of reunification, the Burgundians realise they truly are back in England, when the clouds part after a loud clap of thunder, and the heat wave is brought to a swift end by a torrential downpour, sending everyone scurrying for cover.
Connie Pemberton: We always were English and we'll always be English, and it's precisely because we are English that we're sticking up for our right to be Burgundians!