In the week that UK unemployment hit its highest rate in 16 years, it has become more apparent than ever that the government must make bold moves in the forthcoming budget in order to revitalise the stuttering economy. The government remains stoically committed to serving the needs of traditional industries, when it should instead be focused on high-tech and creative industries which have been continually cited by the CBI, and the government itself, as having massive growth potential.
Video games development is an industry that is experiencing almost unparalleled global growth. Until recently the UK was the third biggest developer in the world behind the huge gaming markets of the US and Japan. It has since slipped to sixth. TIGA, the trade association that represents the UK games industry, is adamant that one of the main reasons for this decline is the huge tax breaks that are currently offered for games development in countries such as France, Canada and Singapore. But, so far, our government has declined to employ similar incentives in the UK.
If the UK does not implement tax relief soon, further studios could close and more jobs could be lost. The opportunity for the UK to seize an increased share of the growing global video games market could disappear. The UK is not competing on a level playing field and, sadly, the figures bear this out.
The simple fact is that the video games tax credit in France has helped games development companies in the country grow by 20% since its introduction in 2008. In the same 2008-2011 period, the workforce in the UK video games development sector declined by 10%. These figures equate to the creation of an extra 2,000 jobs for French industry and a loss of around 1,000 in the UK. This job loss is compounded by the subsequent 'brain drain' of senior and emerging talent to countries that are thriving from investment and growth due to conditions created by a more hospitable tax environment.
To stimulate growth of its national games industry, the French government saw fit to offer its full support and has reaped the rewards through tax revenue. The cost of the tax credit over three years has been €38m with tax receipts totalling €63.4m; a clear indication of how a similarly implemented tax credit could benefit the UK government. TIGA has estimated the initial outlay for a UK tax credit would be around £96million over five years, with a projected return for the government of £172m.
The UK film industry receives a tax credit and additional funding worth £256m per annum and it has revitalised a business that in the 1990s was close to collapse. TIGA supports the incentives granted to the film industry but fails to see why the government has to date been disinclined to back the comparable, creative industry of video games development.
Gaming is now more mainstream and profitable than ever and, with global growth of 23% during recent economic turmoil, has shown itself to be one of the few recession-proof industries that we have. The games industry is no longer, if indeed it ever was, the preserve of teenage boys. Since the rise of smartphone technology and social networking, entire new industries in mobile and social gaming that appeal to a wide and varied demographic have emerged. This huge appetite for casual games means that the demand exists to create new studios and jobs for highly skilled developers.
But in the UK we seem to be defying this global trend and heading backwards. Start-ups and entrepreneur developers are entering the industry at a time when investment is down, the support is non-existent and the reality is that, unfortunately, many will struggle to survive. If the government really wants to rebalance our economy it can take practical steps by introducing TIGA’s Games Tax Relief, a measure that will drive investment and jobs in a high technology, high skills, export focused industry. It’s time to back the UK video games industry.