TIGA, the network for game developers and digital publishers and the trade association representing the UK video games industry said today that the UK’s liberal approach to Foreign Direct Investment (FDI) has generally served the economy well and has been good for the video games industry. However, many other OECD countries operate a more restrictive approach to foreign acquisitions than the UK and that the Government needs to be able to intervene when FDI impacts on UK national security. TIGA made the comments in its response to the Government consultation paper National Security and Investment White Paper.
The Government is aiming to introduce changes to FDI to ‘protect national security from hostile actors using ownership of, or influence over, businesses and assets to harm the country’.
The video games industry has undoubtedly benefited from Foreign Direct Investment (FDI). Foreign controlled UK games companies employ 40 per cent of the total development workforce and investment from abroad encourages growth in the sector. The UK video games industry is currently growing at 7 per cent per annum in terms of headcount. Large foreign companies can acquire dynamic UK games companies with the ambition of taking them much further.
In its response to the consultation exercise, TIGA noted the following:
- many other OECD countries operate a more restrictive approach to foreign acquisitions than the UK such as Japan, Australia and Israel.
- a new, more selective approach to FDI on the part of the UK, would be part of a wider global trend.
- FDI has been beneficial to the UK video games industry. However, FDI is not always beneficial to all UK companies in other sectors. Approximately 80 per cent of acquisitions fail to increase shareholder value or improve performance, according to international studies.
- the Government could consider issuing a further, separate consultation exercise over whether takeovers and mergers in a few key strategic sectors of the economy should be subject to a ‘public interest’ or ‘national interest’ test.
- measures relating to FDI that protect and enhance national security should be welcomed.