UK VIDEO GAMES SECTOR AFFLICTED BY BRAIN DRAIN OF SKILLED STAFF

Derby has a strong heritage of creativity and innovation and was the birthplace of Lara Croft. But Derby’s games industry is not what it once was and the industry is under pressure right across the country. TIGA, the trade association representing the UK games industry, released fresh evidence this week about a brain drain of skilled development staff to overseas jurisdictions. With 41 per cent of the jobs lost by the games development sector between 2009 and 2011 relocating overseas, urgent Government action is needed to arrest this decline in the British games industry.

TIGA has revealed that:

• The UK games industry workforce shrunk by over 10 per cent between 2008 and 2011.
• 41 per cent of the jobs lost between 2009 and 2011 relocated overseas. The majority of these jobs went to Canada, with the next largest territory being the USA.
• Many games businesses reported that the losses were particularly damaging due to the seniority of the positions and the difficulty in replacing like-for-like when competing with packages of salary, seniority and other incentives offered by Canadian companies.
• Former staff of a single major studio (Bizarre Creations) closed by its global publisher owner (Activision) in 2011 indicate that up to 35 per cent of them left the UK, mostly to Canada, and that disproportionately senior staff went overseas versus those that stayed in the UK.The loss of jobs in British games studios has seen the Exchequer receive nearly £100m less direct and indirect tax revenues, while the sector’s contribution to UK GDP has fallen by nearly a quarter of a billion since 2008.
• The findings are based on a survey conducted by Games Investor Consulting 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 (January 2012).

Game developers in countries including Canada, France, Singapore and the USA receive tax breaks for games production. Studios in receipt of public support in Canada are receiving support equivalent to 23 per cent of their turnover, giving them a significant competitive advantage. No tax break for games production exists in the UK. Consequently, the UK is missing out on investment and employment in the video games sector.

TIGA advocates the introduction of a well-targeted tax relief for games development, similar to the existing film tax relief. This would effectively reduce the cost of games development in the UK, attract inward investment, stimulate growth in the sector and halt the brain drain.

Dr Richard Wilson, TIGA CEO, said: “The UK video games development and digital publishing sector provides high levels of graduate employment, has a high propensity to export, is at the cutting edge of R&D, and has a world class reputation for IP generation. The video games industry is exactly the kind of sector that the Government should be supporting to help rebalance the UK economy.

“Yet our industry is suffering from a serious brain drain. Our competitors in Canada and elsewhere are able to recruit highly skilled developers from the UK largely because they benefit from tax breaks, which effectively reduce the cost of games development. Tax breaks both stimulate job creation in the games sector and provide games businesses with significant financial resources with which they can deploy to recruit staff.”

TIGA recommends that the Government introduce a carefully targeted tax break for games production to enable the UK games sector to compete on a level playing field and to prevent the brain drain. TIGA conducted a snap survey of 27 of its members about the potential impact of a new Games Tax relief.Of those surveyed, 93 per cent said a tax relief in the UK would slow or halt the brain drain abroad while none felt it would cause the situation to worsen.
Dr Richard Wilson added:

“Without a tax relief, the UK runs the risk of losing its leadership position in video games development and becoming a finishing school for the Canadian games industry: with UK universities educating developers and UK studios then honing their skills before they leave for employment in the Canadian games sector. This is bad for the UK video games sector, bad for the Government and bad for the UK taxpayer. We need a targeted tax relief to halt the brain drain.”

Jason Kingsley, TIGA Chairman and CEO and Creative Director at Rebellion, said: “The UK has a highly skilled development workforce but the brain drain of talented staff overseas is jeopardising this competitive advantage. The evidence from overseas is that the provision of tax relief enables studios to attract and retain high quality staff and to increase employment.

“A carefully targeted Games Tax Relief would enable UK studios to grow and retain experienced development staff, halt the brain drain and stimulate growth in the games development sector. TIGA will bring forward a revised, well-targeted tax break for games production in time for the March 2012 Budget.”