Brain-drain threatens UK games industry

(Eidos)

Development of intellectual property in games in the UK has slowed down over the past five years, a survey published today reveals.

Games industry executives say an increasing number of developers are moving abroad, encouraged by generous subsidies handed out by governments in countries such as Canada and France.

This, they add, is causing British companies to lose key talent and creativity and it adds weight to a campaign by gaming industry bodies to persuade the UK government to develop a system of tax reliefs.

The findings were the result of independent research commissioned by National Endowment for Science, Technology and the Arts and it follows an event held at the House of Commons in June in which John Whittingdale, chairman of the House of Commons Select Committee on Culture, Media and Sport, urged fellow MPs from all parties to act fast in offering greater incentives to British developers,

The survey questioned 30 leading representatives from the industry, as well as potential investors ahead of the Government’s consultation on the cultural tax credit due to end this Friday.

Of those surveyed, 20 believed tax credits would help original IP development and 75 per cent of independent video games developers said it would help them retain IP they create.

A tax relief scheme would cost the UK Treasury “a fraction of the £104 million cost of the tax relief scheme in place for the UK film sector”, says NESTA, which also claims the videogames sector in the UK contributes £1 billion to GDP.

Without it, NESTA adds, Britain will continue to slip down the league table of international games developers with the country – currently third in the world after the US and Japan – expected to fall to fifth place this year and sixth within 12 months.

Jonathan Kestenbaum, NESTA’s Chief Executive, said: “The video games sector is one of the UK’s great success stories of recent years and we shouldn’t walk away now.

“The Government should consider any action that it takes as an investment, not a handout.”

Investment in privately held games companies has dropped by 60 per cent since 2008 and those surveyed believe a tax credit would help independent developers to create lucrative online and mobile business models.

Ian Livingstone, life president of Tomb Raider creators Eidos, said: “It is becoming increasingly difficult to compete with countries offering production tax credits of up to 37.5% to development studios, and offering income tax holidays and other financial incentives to the UK talent that we have nurtured.”

The report has been supported by TIGA, the trade association representing the UK’s games industry.

CEO Richard Wilson said: “NESTA’s research confirms that while the UK video game sector remains a world leader it has been under enormous pressure for the last five years.

“This is because our key overseas competitors have benefited from generous tax breaks for games production.

“The unfavourable tax environment has also led to a decline in the development of original intellectual property on the part of the UK games industry.”