Britain’s video games industry is at risk of haemorrhaging talent and intellectual property to more nimble overseas rivals unless Whitehall moves swiftly to sharpen its tax and investment incentives, a leading advisory firm has warned.
With France, Ireland and Australia aggressively courting studios through increasingly generous reliefs, the UK’s reputation as a global gaming powerhouse, home to franchises from Grand Theft Auto to Tomb Raider, could begin to slip, according to audit, tax and business advisory firm Blick Rothenberg.
Speaking during London Games Festival week, Mandy Girder, a partner at the firm, said the sector urgently needed the Government to “level up” its support if Britain was to keep its seat at the top table of global games development.
“Without decisive action from the Government, the UK risks losing both talent and intellectual property to other countries,” she said. “France, Australia and Ireland are offering increasingly generous and accessible incentive regimes designed to attract investment.”
The London Games Festival, now a fixture in the industry calendar, has put a spotlight on British creativity, but Girder cautioned that creativity alone would not keep the UK ahead of the pack.
“The festival highlights the UK’s undeniable creative strength, but creativity alone will not secure long-term global leadership,” she said. “The Government must step up tax relief and investment in the industry.”
While the UK’s Video Games Expenditure Credit and broader creative industry reliefs have underpinned growth in recent years, Girder warned that the regime was increasingly seen by studios as cumbersome when set beside rivals abroad.
“Headline rates are competitive, but the system is often viewed as more complex and, in some cases, less flexible or accessible than the incentive regimes in countries such as Ireland and Australia,” she said.
Recent tightening of eligibility rules is already beginning to bite. Under the revised framework, at least 10 per cent of development costs must now be incurred in the UK rather than across the wider European Economic Area, a change intended to bolster domestic employment but which has tripped up projects structured around continental teams.
“Whilst intended to encourage the use of UK-based talent, this has been restrictive on the number of successful claims for projects already under way and structured around European teams,” Girder said. “It has led to a decline in the availability of these tax credits.”
She is calling for a simpler, more generous regime, backed by targeted incentives explicitly designed to draw inward investment.
“Simplifying and enhancing the UK’s tax framework, alongside introducing targeted incentives to attract inward investment, would significantly strengthen the UK’s global positioning,” she said.
Access to finance is another persistent headache, particularly for studios trying to move beyond the start-up phase. While seed capital is relatively easy to come by, scale-up funding, the kind that allows mid-sized studios to expand internationally and retain their IP, remains elusive.
“Early-stage funding is relatively accessible, but mid-sized studios often face barriers when seeking the scale-up capital needed to expand internationally and retain valuable intellectual property,” Girder said. “This funding gap risks limiting the UK’s ability to fully capitalise on its creative strengths.”
The Government’s newly launched Creative Industries Sector Plan, which opens £28.5 million in funding for the next generation of games developers, is a step in the right direction, Girder conceded.
“The UK has long been recognised as a creative powerhouse, home to world-class studios and exceptional talent behind globally successful titles such as Grand Theft Auto and Tomb Raider,” she said. “The sector plan is a positive step forward.”
But she questioned whether the intervention goes far enough to tackle the structural weaknesses in the industry’s funding pipeline.
“The question remains whether this level of support is sufficient to address the structural funding challenges facing the sector,” she said. “A more comprehensive approach, combining competitive tax relief, grants and alternative financing options, will be essential to unlock sustained growth.”
Her message to ministers was blunt. “Now is the time for industry and Government to work together to simplify incentives, unlock scale-up funding, and ensure the UK remains a destination of choice for global games investment.
“The London Games Festival turns the spotlight on the UK’s role as a leading force in the global video games market, and on the steps the Government needs to take to secure its future competitiveness.”