How a tax break could affect the UK gaming industry

Gaming industry experts and insiders talk about the effects a Government tax break could have on the British videogames industry.

With the election fast approaching and the controversy over the Digital Economy Billdominating political coverage, it is not surprising that an important lifeline for the UKvideogames industry has fallen off the agenda.  

Alistair Darling's announcement of a tax incentive for UK videogame developers came as a welcome surprise for the scores of British creatives, and was a victory for TIGA -- The Independent Games Developers Association -- which had been campaigning for such a tax break.

"This is an inspired decision," said TIGA CEO Dr Richard Wilson. "In backing TIGA's Games Tax Relief the Government has chosen the future over the past, growth over decline, success over failure. Our research shows that Games Tax Relief over a five year period should create or protect 3,550 graduate level jobs and increase or safeguard £457 million in development expenditure."

It is hoped the benefits of the tax break will be felt across the industry and, in particular, will prevent the so-called "brain drain" of new talent fleeing to growing development hotspots in Canada, France and South Korea.

According to Michael Rawlinson, Director of The Entertainment and Leisure Software Publishers Association (ELSPA), the news has come at a pivotal time for the games industry, drawing in much-needed investment.

"We want to see growth in the industry and develop the video games industry in the future," says Rawlinson. "It [the tax break] will be a building block for establishing the UK as a centre of excellence, and hopefully encourage investment by external investors, venture capitalists and multinationals, and get them to commission UK talent to make new games."

Countries including Canada, which overtook the UK to become the world's third largest games producer, already have incentives in place for video games, and have seen investment from large games development companies such as Eidos, Electronic Arts and Ubisoft. It is hoped that when a UK tax incentive for developers is introduced it will stem the flow of talented creators moving abroad, and prevent the UK from slipping further down the rankings behind the likes of South Korea and China.

Britain versus the world
For many large companies the business case for setting up in the UK hasn't stacked up in recent years. But Guy Cocker, editor of GameSpot UK, believes the British video games industry will bounce back once it is put on a par with its rivals. "There's a lot of opportunity -- video games have entered the mainstream and we've got some great talent that has proven itself by creating many great games such as Grand Theft Auto and the original Batman," he says. "The main concern is that all our creative talent will go overseas. We've got a lot of creative leads -- the producer of Fifa, for example, is a Brit -- but we're losing out to Canada. It may be one of the most expensive [places to develop] but we have a great history and lineage in the UK."

The UK has a long history of games development, achieving global success from the likes of GTA, Tomb Raider and more recently Little Big Planet. With the gaming industry worth countless billions globally each year, it is not surprising that the Government singled out the sector for special tax benefits to curb the exodus of talent.

"The announcement is a very big acknowledgement, as it was the only industry singled out in the Budget," says Michael French, Editor-In-Chief of video games trade website MCV. "It must mean something is going well in the industry and it will make people wake up to it. People will probably want to tweak their ideas to fall into the tax break, but that might result in some really good, unique British products."

The proposed tax benefit might then create a wave of exciting new entirely British games -- a prospect leading UK developers are already excited about, such as Ian Livingstone, Life President of Eidos.

"There might now be an opportunity to develop more games in the UK," Livingstone told Wired. "We're perhaps the most creative nation in the world, with our fashion, music, film and art. A tax break will help stop the decline of development in UK games. We're the unruly step-child of the creative industry, despite being the largest entertainment industry in the world. This now puts games on the agenda."

Gareth Edmondson, head of the Ubisoft Reflections studio based in Newcastle, has previously said Ubisoft would like to increase its UK development staff by 1,000, but could only do so if there was a tax break. In an emailed statement to Wired, Edmondson reflected upon the tax break proposal by saying: "I believe a Games Tax Relief will allow UK developers to become more innovative, to be able to invest in new business models and technology and to create new intellectual property. We expect the criteria [of the tax break] to allow game developers a large degree of latitude."

Investment
But it's not just the immediate impact of the tax break that followers of the industry are excited about. The ripple effect of increased investment and interest in UK gaming might have a dramatic impact on the number of people entering the industry.

The future of the Games Tax Relief is still uncertain, but TIGA is tenaciously pursuing the matter in its own Election manifesto. In a statement, TIGA Chairman and CEO, Jason Kingsley, said: "Our political parties need to ensure that Games Tax Relief is operational in the UK by 2011 if they are serious about wanting to boost the UK video games industry."

For developers it is now just a matter of waiting. But when a tax break finally does arrive it promises to be a very exciting time for our nation's current and future creative talent.