Games sector ‘betrayed’ by tax reversal

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UK computer games sector representatives on Tuesday said they felt “betrayed” by the government’s decision to scrap planned tax breaks for the industry.

The previous government’s budget in March had promised tax relief for computer games companies, similar to those given to the film industry. It was aimed at stopping a brain-drain from Britain to countries such as Canada, which offers lucrative tax incentives to games developers.

In Tuesday’s emergency Budget, however, George Osborne, chancellor, said the ‘poorly-targeted’ proposals would not be implemented.

“This is a complete betrayal of pre-election pledges given by both parties in the coalition,” said Richard Wilson, chief executive of Tiga, the industry association for games developers. “Ed Vaizey is on record saying he would support tax relief for the sector.”

“George Osborne said he wanted a sign saying the UK was open for business, but for the games industry he has just torn that sign down.”

Mr Wilson said he was worried that several large international computer games publishers, who had been considering investments in the UK over the next few years, would now take projects elsewhere.

“I have had a number of conversations with US games publishers who will be making investment decisions in the next 18 months, who have told me it is essential we have the tax relief in place,” he said.

“You have to look at companies like Ubisoft, which have been investing heavily in Canada and not at all in the UK. They were possibly looking at investment in the UK but that won’t happen now,” said Jason Kingsley, chief executive of Rebellion Studios, an Oxford-based games developer.

UK games developers have lobbied the government for more than five years for tax breaks, which they believe would create or safeguard 3,550 graduate-level jobs and increase spending on development by £457m during the next five years.

France launched a 20 per cent tax relief scheme for games companies two years ago and as a result, Ubisoft, the French games publisher, has increased its staff levels in France by 20 per cent.

Tiga estimates that the games industry contributes about £1bn a year to the UK economy, and employs about 27,000 people, including 9,550 highly skilled creative jobs. About 91 per cent of UK games companies export their products.

About a quarter of the world’s 100 most successful games studios – including Rockstar, which developed the Grand Theft Auto franchise and Playfish, makers of highly popular games for Facebook – are located in the UK.

However, the UK has in recent years fallen to fifth place in global games development rankings, down from third in 2007. Employment in the UK games sector fell 4 per cent in the year to July 2009 and 15 per cent of games development companies went out of business in that time, according to Tiga.

Mr Wilson said he would continue lobbying the government for tax breaks.

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