Codemasters, Creative Assembly, Lionhead, Traveller's Tales, Rockstar North; the UK is home to some of the gaming world's top talent, but our home grown industry is now becoming increasingly threatened by cheaper competition elsewhere. In particular, Canada, France and various US states are becoming more attractive places for large games publishers to invest, and this is seriously worrying many who work in the UK games industry.
The reason for this is simple; the UK games industry isn't a competitive investment any more. This isn't necessarily because UK-based game studios are more expensive, but because other countries are now offering tax incentives for their games industries, and we don't, which instantly makes our international competitors much more attractive to investors.
The effect of this appears to be having a seriously detrimental effect on the UK games business. Last year, government officials from Nova Scotia travelled over to the UK specifically to persuade publishers to move their business from the UK to Canada. 'The current government in the UK has completely cancelled all of their media tax credits,' explained Nova Scotia Premier Darrell Dexter. 'As a result thereof, there is a considerable interest in many of those companies looking for other jurisdictions.'
Nova Scotia Premier Darrell Dexter has come over to the UK to persuade games publishers to move their business to Canada
Similarly, mock Canadian passports were also given out at a UK trade event by a multinational business group called QuickStart Global last year, prompting one source in the industry to say: 'The Canadians are circling like vultures since the news broke that we aren't getting any tax breaks.' Meanwhile, major players Sony and Activision have also said that the UK's lack of tax relief will result in some of their new business being set up in more competitive countries.
However, the headlines surrounding Chancellor George's Osborne's latest budget speech suggested that the coalition government was stepping in to rescue the UK games industry. 'Games industry wins tax relief' said the BBC, reporting on the government's new plans for R&D tax credits. But what are R&D tax credits, and could they actually solve all the problems currently faces by the UK games industry?
'Good grief no,' says Dr Richard Wilson, CEO of TIGA – the UK games industry's trade association, 'absolutely not.' TIGA has been campaigning for the government to introduce games tax relief for a number of years. In fact, in March last year, it actually succeeded in getting the Labour government to introduce its proposals. Then came the election, and the tax relief plans were shelved shortly afterwards. So what's the difference between TIGA's proposal for games tax relief and the R&D credit scheme proposed by the current government?
'Games tax relief, which is the key priority for TIGA and for the UK games industry, will deliver a sector-specific tax break exclusively for the computer games industry and other forms of interactive entertainment' explains Wilson. 'R&D tax credits are cross-sector in nature, so they could benefit manufacturing companies and IT companies in addition to games studios, for example.
UK games industry trade association Tiga is trying to persuade the government to introduce tax relief for UK games businesses
'The R&D tax credits are also specifically focused on improvements to technological processes, so they're much more narrowly defined in scope. It's interesting – although more different sectors of the economy benefit, the areas on which you can actually claim relief are more specific in scope.'
This is difference number one – an R&D tax credit is exactly that – a reward for research and development, and this is only relevant for certain aspects of the games business. 'It focuses on technological innovations, processes and products, says Wilson, 'such as developing game engines, and of course a number of developers in the UK have their own game engines they'll be able to claim R&D tax credits for, but the R&D tax credits wouldn't specifically fund changes or new developments in new game content, so you wouldn't be able to claim R&D tax credits on the development of a new game.'
The other crucial difference is the amount of money on offer. 'In terms of magnitude, games tax relief would be much more generous,' points out Wilson. 'The proposals we've been campaigning for would allow games companies to basically put in a claim for a reduction in corporation tax of between 20-30 per cent on given projects. The R&D tax credits are much smaller in magnitude – we're talking somewhere around 4-5 per cent.'