After years of vocal protest and lobbying, it seemed, before the recent general election, that the UK gaming industry would finally get the tax breaks that it so desperately needed in order to level the playing field with countries such as Canada and France.  Now however, the new coalition government have tossed out the proposals in a surprise move, leaving the industry reeling and feeling betrayed.

With much of the UK’s talent being siphoned off to other, more hospitable countries, many of whom offer rebate incentives to studios, with the Quebec government even going as far as to offer income tax holidays for UK staff who choose to relocate, the UK industry is suffering from a significant drain.  The government have turned a blind eye and deaf ear to studios quietly closing and talent fleeing abroad, while UK games studios and TIGA, the gaming industry trade body, have endlessly pointed out the threat to one of the UK economy’s highly lucrative industries.

The apparent light at the end of the tunnel came when Labour promised tax relief in its March budget, with former Chancellor Alistair Darling going on to say that “we need to keep British talent in this country” and that “we have world-class industries, but our competitors are not standing still”.  The gaming industry finally breathed a sigh of relief at the disadvantage and lack of investment potential being finally washed away.  However, with the new coalition government in place, the proposed relief has been retracted in the emergency budget in order to save the UK an alleged £190 million over the next five years.  While formerly, both the Liberal Democrats and Conservatives were on board with the idea, the U turn, while not entirely unexpected, is a blow for UK studios.

After joining forces with TIGA, George Rose, Executive VP of Activision Blizzard had this to say in a recent press release:

“The introduction of Games Tax Relief in the UK will be a game changer. It will make the UK a significantly more attractive place to invest in games development. Games Tax Relief will lead to increased investment, more job creation and power economic growth. However, if Games Tax Relief is not introduced then the UK will remain at a real disadvantage in comparison to other territories as  a location for inward investment. Without Games Tax Relief the UK games industry will not fulfil its potential.”

In an opinion piece on C&VG, TIGA CEO, Richard Wilson also expressed his disappointment:

“Strictly speaking, it’s a betrayal. It’s a betrayal of a pre-election promise made by both the Conservatives and The Liberal Democrats. They both said publicly that they’d support games tax breaks and in the Conservatives’ case they said that they would introduce them in the first Budget. That isn’t opinion – I’m stating fact.”

Opponents to the tax break have cited the breaks for businesses that have been introduced such as the reduction in corporation tax and freeze of Employer NI rises as being good enough.  After all, gaming is just one sector, so why the preferential expectation – in short, is the games industry being selfish at a time of economic recovery?  Not so, says Richard Wilson:

“It’s all very well saying: ‘We’re going to reduce the corporation tax from 28p to 24p,’ but that cannot compensate for the fact that our Canadian friends have enormous tax breaks for games production and Quebec provides 37.5 per cent of salary costs for studios. The corporation tax the Treasury have announced so far is not competitive and can’t make up for that.”

Wilson also suggests that the move will jeopardise millions of pounds of jobs and investment which will be ultimately damaging for the UK industry.  In the meantime, accusations are currently circulating after an article on Develop-Online.net which suggest that a ‘major global publisher’ lobbied UK parliament against the proposed relief, effectively using its weight and influence to sabotage the proposal.  How true this is and who it was is still wide open to speculation, though with the internet being a hive of conspiracy theories, we don’t see this one dying down for some time.  Before pitchforks are readied though, Bobby Kotick probably has an alibi

Only time will tell how the industry will fare, but while some studios have packed up, others such as Lionhead, Codemasters, and Rockstar have hung on, suggesting that while times may be tough, we’ll endure.  Indeed, with the new culture minister, Ed Vaizey being ‘industry friendly’ and apparently showing an understanding of the economic and cultural importance of the gaming biz, perhaps all is not lost.  TIGA intend to keep fighting and with the support of one of the largest publishers on side, (presumably not the same one who allegedly threw a spanner in the works) the sun hasn’t quite yet set on our games.  A very British chin up.

Sources: C&VG, TIGA, Gamesutra, Develop Online

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