The reason it was banned in the UK . . . .

A number of serious psychological effects were reported in Ghostwatch's wake despite the programme being advertised as non-fiction:-
Eighteen-year-old factory worker Martin Denham, who suffered from learning difficulties and had a mental age of 13, committed suicide five days after the programme aired. The family home had suffered with a faulty central heating system which had caused the pipes to knock; Denham linked this to the activity in the show causing great worry. He left a suicide note reading "if there are ghosts I will be ... with you always as a ghost". His mother and stepfather, April and Percy Denham, blamed the BBC. They claimed that Martin was "hypnotised and obsessed" by the programme. The Broadcasting Standards Commission refused their complaint, along with 34 others, as being outside their remit, but the High Court granted the Denhams permission for a judicial review requiring the BSC to hear their complaint.
In its ruling, the BSC stated that "The BBC had a duty to do more than simply hint at the deception it was practising on the audience. In Ghostwatch there was a deliberate attempt to cultivate a sense of menace." They ruled that the programme was excessively distressing and graphic - referring to the scratches on the children and the mutilated animals - and that it had aired too soon after the 9pm watershed. They further stated that "the presence in the programme of presenters familiar from children's programmes ... took some parents off-guard in deciding whether their children could continue to view.”
The film's producers argued that Ghostwatch had aired during a drama slot, that it was recognisable as fiction to a vast majority, and that running disclaimers or other announcements during the programme would have ruined its effectiveness. They also stated that, had they anticipated the audience reaction, they would have made its fictional nature clearer. However, after the BSC ruling they issued an apology.
Simons and Silveira published a report in the British Medical Journal in February 1994, describing two cases of Ghostwatch-induced post-traumatic stress disorder in children, both ten-year-old boys. They stated that these were the first reported cases of PTSD caused by a television programme. Responses to the article described a further four cases in children aged between 11 and 14, as well as one case in an 8-year-old that stemmed from watching the pre-watershed hospital soap Casualty. The respondents also noted the potential for similar reactions in elderly people. However, the conclusion of the article states "The rapid resolution of the children's symptoms suggests that the children suffered a brief anxiety reaction to the television programme; although they may have exhibited some of the features of post-traumatic stress disorder, this diagnosis in their cases is inappropriate."