Independent Report confirms that UK games industry at competitive disadvantage
TIGA, the trade association representing the UK games industry, said today that there was new evidence that tax incentives were influencing game studios’ location and expansion plans, enabling studios to recruit and retain higher quality staff, enhance the quality and attractiveness of their games and powering job creation. 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.
TIGA made the comments following the publication of a Report by e-skills, the Sector Skills Council for Business and Information Technology. The Report, Technology Insights 2011: The Games Development Sector, examines the importance of business support mechanisms in operation, and is based on survey responses of over 80 studios based in the UK and 220 based overseas in France, Canada and the USA. The Report is significant because it provides strong empirical evidence from overseas studios – particularly Canadian and French – that tax relief policies are having a positive impact on their businesses.
Key findings in the Report:
- Survey results show the incidence of support amongst overseas studios ranging from around two thirds of studios based in Canada and France (i.e. 68 per cent and 65 per cent respectively) to 19 per cent of those sited in the USA.
- The most common form of support received by studios overseas was found to be tax relief/credits for R&D activity, followed by relief/credits on labour expenditure, with 65 per cent and 50 per cent respectively of studios receiving support citing these as mechanisms for its delivery.
- 81 per cent of Canadian studios receiving support received tax relief/credits on labour expenditure, 61 per cent received R&D tax relief and 50 per cent received relief on capital investment.
- In France R&D tax relief or credits were more commonly reported (82 per cent), followed by grants (69 per cent), subsidised premises (27 per cent) and tax relief/credits on labour expenditure (20 per cent).
- Considering the value of support received, it appears that for studios based in both Canada and France, the majority of the support provided is to assist with labour related expenditure.
- On average, respondents to the e-skills UK survey stated that the support they received was equal to around 20 per cent of their annual turnover – 23 per cent in the case of firms based in Canada and 19 per cent of those in France.
- Public support appears to have a significant impact upon the strategic decisions of studios within the three study nations, with over three quarters of survey respondents stating that support had had an impact both on their establishing operations within their home country (77 per cent), and on their decision to retain a domestic presence (76 per cent).
- Just over two thirds of studios (68 per cent) thought that support had impacted on the company’s decision to expand operations within the study nation and over half (54 per cent) thought it had affected the establishment or expansion of an overseas presence.
- At an operational level, more than half (53 per cent) of studios questioned thought that public support had enabled them to increase their output of games, over two thirds (69 per cent) thought it had enabled them to increase the quality/attractiveness of their games and 61 per cent considered that support had actually enabled them to increase market share. Moreover, in virtually all cases a still greater percentage of studios held these views in Canada and France where fiscal incentives were more common place.
- 61 per cent of studios receiving support were of the opinion that this assistance had enabled them to attract/retain better quality staff and 58 per cent thought that support allowed them to increase domestic employment.
- Seven out of ten studios receiving support stated that this had enabled them to increase profitability – rising to 90 per cent of those based in Canada. The potential for increases in productivity and/or competitiveness were slightly less common but still identified by almost two thirds (65 per cent) of studios receiving support.
Dr Richard Wilson, TIGA CEO, said:
“This Report provides empirical evidence that government financial support for game development in countries such as France and Canada is significant, widespread and impactful. At the strategic level, public financial support – including tax credits/tax relief – often influences overseas studios’ location and expansion plans. At an operational level, public support enables studios to increase profitability, increase their productivity/competitiveness, increase their output of games, increase the quality and attractiveness of their games and/or increase their market share
“Additionally the provision of tax relief has a direct bearing on recruitment and employment. The majority of overseas studios receiving public support were of the view that it had enabled them to attract/retain better quality staff, and/or increase domestic employment.
“This Report states that studios in receipt of public support in Canada are receiving support equivalent to 23 per cent of their turnover. The UK games development sector is creative, innovative, and talented. The potential for rapid growth exists. It’s time for UK policy makers to support the UK games development sector through a tax break for games production, enhanced R&D Tax Credits and a Creative Content Fund.”
Jason Kingsley, TIGA Chairman and CEO and Creative Director at Rebellion, said:
“This independent research confirms the thrust of TIGA’s argument. Namely, that tax breaks and other forms of public financial support influence the studio location and expansion plans and have a positive bearing on studio profitability and competitiveness.
“With the UK economy barely growing, now is the time for the Coalition Government to look again at a carefully targeted tax incentive to enable the UK’s highly skilled, high technology, video games sector to give a powerful contribution to economic growth.”