Culture boss slams door on games tax breaks

Culture boss slams door on games tax breaks

By Rob Crossley

March 28th 2011 at 12:25PM

Yet Jeremy Hunt admits UK needs to stand up to Canada

The man put in charge of the UK’s culture department has broken silence on games industry challenges and has admitted Britain needs help to compete with Canada.

But Jeremy Hunt, the culture secretary, appears to have ruled out any near-term possibility for games development tax breaks.

"I don't know if that was the right way to go,” said Hunt in reference to the Treasury’s decision to cancel plans for games tax relief.

Hunt told the Guardian that Britain “needs to offer the video game industry a package as financially competitive as Canada".

"We need to diversify our economy, replicate some of the success of the city," he said.

Hunt appeared to suggest that these changes should come via "the right regulatory framework".

Chancellor George Osborne announced enhancements to R&D tax credit rates in his “Budget for growth” last week.

Industry associations applauded the move but, based on Tiga’s own data, Develop discovered that the switch from tax breaks to R&D credits means the Coalition Government is investing £159 million less into the UK games industry.

Former chancellor Alistair Darling introduced games tax breaks during his last Budget in office. Yet before the bill was enacted, the Coalition Government axed the plan.

Both the Conservatives and the Liberal Democrats pledged to support games tax breaks in the run-up to the election.

After the tax relief 'snub', industry heavyweights, including Ray Maguire (Sony) and Bobby Kotick (Activision), warned of investment slow-downs shortly afterwards.

Kotick went further and branded the tax break snub a ‘terrible mistake’. 

In the following months Activision made sweeping redundancies across its UK dev workforce – including the closure of Project Gotham studio Bizarre Creations.

Sony has made small reductions to its UK workforce.

The UK games industry is thought employs 9,000 development staff – a nine per cent reduction since October 2008.

The sector contributes £1 billion to the UK economy, yet investment is flooding overseas, particularly to Canada which offers world-leading rates on tax breaks.