START-UP VIDEO GAMES DEVELOPER-PUBLISHERS HELD BACK BY LACK OF FINANCE

Former Financial Secretary to the Treasury is calling for the Government to look again at Games Tax Relief

TIGA, the trade association representing the UK games industry, revealed today that while 216 new games companies entered the UK games industry between 2008 and 2011, there were also 197 closures. Limited access to private and public finance is contributing to the high studio mortality figures. The findings are based on a survey conducted by Games Investor Consulting in 2011 of 75 per cent of the UK’s games businesses and published by TIGA in a forthcoming report, Making Games in the UK Today: A Census of the UK Developer and Digital Publishing Sector.

Stephen Timms MP, former Financial Secretary to Treasury, commented: “This timely report is a further indication that in Government we were right to recognise the growth potential of the video games industry and propose a targeted tax relief to help the sector to grow and create hundreds of highly skilled jobs in the UK. I urge the Coalition Government to review Games Tax Relief for the forthcoming Budget.”

Key findings from TIGA’s Report include:
• 216 new games companies entered the UK games industry between 2008 and 2011, but there were also 197 closures.
• The UK’s share of global investment (venture capital and private equity) in the games industry declined from 10 per cent in the mid-2000s to 3.5 per cent.
• 93 per cent of TIGA members said that a new Games Tax Relief would result in more private investment in the UK games industry.
• 63 per cent of TIGA members said that they would seek private investment in new games following the introduction of a new Games Tax Relief.

Dr Richard Wilson, TIGA CEO, said: “Despite an almost record number of start-up studios, the industry’s potential is being held back by limited access to both private and public finance. UK developers are missing out on investment from global publishers and from global venture capital. This is partly because the UK, unlike many of our key competitors, lacks a tax break for games production, which effectively reduces the cost of games development. Access to debt, bonds and equity finance is difficult because of the high levels of uncertainty about consumer demand and the intangible nature of IP in the games sector. In contrast to the film industry which benefits both from a tax credit and from lottery funding, there is negligible public financial support available for video games development.

“Poor access to finance has contributed to a high incidence of business closures in the games sector. The Coalition Government should consider the introduction of a carefully targeted tax break for games production. This would improve the availability of finance for the sector and enable the sector to compete on a level playing field with our overseas competitors. TIGA will bring forward a revised, well-targeted tax break for games production in time for the March 2012 Budget.”

Oli Christie, CEO at Neon Play, said: “UK game developers and digital publishers have the skills, the creativity and the ability to generate new IP. However, our industry is being held back by difficulty accessing finance. A well-targeted tax break for games production would help our industry overcome this challenge and enable us to contribute to the UK’s economic recovery.”

Jason Kingsley, TIGA Chairman and CEO and Creative Director at Rebellion, said: “The fact that many studios struggle to raise finance beyond the prototype phase is particularly worrying and is contributing to the high studio mortality rate. A carefully targeted Games Tax Relief would enhance the availability of finance for studios, improve the UK’s attractiveness to global investors and allow studios to grow and retain experienced development staff.”