Game tax breaks: Major firms eye UK investment

Ed Vaizey, the culture minister, has indicated that a number of leading games firms will consider investing in Britain if its tax break policy is enacted.

“Some big businesses made it quite clear they would seriously consider investing heavily in the UK if there was a tax break,” Vaizey said in an interview with MCV.

In an industry where excessive production costs are squeezing profit margins on blockbuster games, many publishers already rely on tax breaks to heighten their competitiveness.

Ubisoft has made significant inroads in France and Canada; two nations that have offered as much as a 40 per cent discount on production costs.

EA, Warner Bros Interactive, Square Enix, Capcom and THQ also operate a network of studios across Canada. Activision CEO Bobby Kotick, meanwhile, claimed that the UK Government’s initial tax break snub was a “terrible mistake”.

Last week he told Develop that the Treasury’s decision to revive UK tax relief policy UK was “a great first step”.

Vaizey, who in 2010 personally took the brunt of industry criticisms when the Treasury axed plans for games tax relief, said that the Culture Department “didn’t give up on tax breaks and the case grew in strength”.

He said that pledges from big businesses to reconsider UK investment were key to the cause.

In recent years game publisher support in the UK has weakened. Major studios such as Bizarre Creations (owned by Activision) and EA Bright Light have closed down at their owners’ request.

But Vaizey believes that the Government’s renewed support will compel companies to reconsider.

“What it does, over and above for all of the games industry, is prove that we have policy that shows the UK government takes the games industry seriously and wants to see investment there and is prepared to invest itself.

“That’s almost as important as the pounds, shillings and pence of it,” he said.

The department for Culture is now preparing to consult with games industry executives to shape a tax relief policy that it will submit to the EU.

The process is expected to take at least twelve months, though the Government has set a April 2013 target.

Vaizey said those involved in the consultation must “put a realistic case to Government and have to show how the tax credit can work in practical ways”.

“The Treasury will be concerned about tax avoidance, so that must be addressed,” he added.