Government must intervene to prevent 'potential UK market failure'

Government must intervene to prevent 'potential UK market failure'
Michael French

By Michael French

October 13th 2008 at 9:56AM

Games Up files formal report with the government, concluding that a 20 per cent tax credit is needed to support developers

The Games Up campaign has today delivered the results of a games market study in response to the Treasury's request for data proving that the group's lobbying for a industry tax break has foundation.

According to the research, entitled Games Impact, UK games developers are "competing on uneven international playing fields" thanks to the tax breaks available in Canada, France, Australia and the US, forcing publishers and those investing in games development to not spend money on British developers: "As a result, global companies are beginning to look at subsidised territories for their next partners or studios despite Britain’s reputation as an industry-leading talent pool."

Games Up, a lobbying group supported by a number of major UK studios and publishers (which Develop was the first to detail - link), has for the past six months ben promoting the power of the UK games industry while simultaneously calling on the Government to address the tax climate for games developers and introduce a 20% production tax credit. The group argues that such a subsidy should be introduced on the same EU-approved basis as that has allowed for such grants available to the film industry in the UK and games developers in France.

The Treasury responded to the campaign (as also revealed by Develop) by requesting the group supply evidence that UK games developers would be under fire without Government assistance - and today's Oxford Economics-authored research is Games Up's formal answer.

The new data says that the games industry in the UK "supports a total of 28,100 jobs, allowing for those directly employed (10,000 in games development) and for the multiplier effects; contributes over a billion pounds per annum to the UK’s Gross Domestic Product, taking into account direct, indirect and induced impacts; and provides £420 million for the Exchequer in tax revenues, when direct and multiplier impacts are taken into consideration".

UK games development also contributes to the economy in other ways, the report adds. The industry "invests 14% of its turnover in R&D, some of which spills over into other sectors; games developers are clustered around 8 hubs in the UK, the effect of which is to enhance productivity within the industry; and the video games sector generates cultural spillovers, including strengthening the UK’s brand image, its record for technological achievement and the promotion of tourism".

“The new report by Oxford Economics confirms that the UK games development sector makes a significant contribution to the economy supporting almost 30,000 jobs and contributing over a billion pounds per annum to the UK’s Gross Domestic Product and more than £400 million to HM Treasury," said Richard Wilson, CEO of Tiga and one of the chairmen of the Games Up campaign.

"The games development sector’s overall economic impact is even greater than these facts demonstrate: UK games developers’ research and development activities spill over into other industries and video games contribute to the culture of the UK, strengthening our cultural image, our technological reputation and in some cases promoting tourism.

"The UK games development sector is world class but we’re competing on an uneven international playing field as other territories, recognising the economic impact of the games industry, provide a more favourable taxation regime. This research confirms the need for a comparable tax credit in order to maintain a successful games development sector in the UK."