Councillor Graham Chapman
Deputy Leader
Nottingham City Council
Loxley House
Station Street
Nottingham
NG2 3NG
Tel: 0115 9163787
Rt.
Hon George Osbourne MP
Chancellor
of the Exchequer
HM
Treasury,
1
Horse Guards Road
London
SW1A
2HQ
24 February 2012
Dear Chancellor,
Tax Relief for
the Video Games Industry
I would like to bring to your attention the concerns of both myself and
the games development industry in Nottingham over the continuing issue of the
tax relief system that benefits companies in the industry in other countries, such as Canada and South Korea. A recent report from TIGA, which has been
sent to the Treasury, has highlighted the growth potential of the games
industry and the benefits it could have to the economy coupled with the issue
of significant tax benefits in other countries for the sector.
As you will be aware the decision in the March 2010 budget to
announce the proposed tax relief system followed a campaign by the Video Gaming
Industry, and recommendations by the All Party Parliamentary Group for
the Computer and Video Games Industry to
introduce tax benefits similar to those enjoyed in other economies and help
support and stimulate growth in the British gaming industry. However, in the emergency budget of the 22nd
June 2010 you announced that the proposed tax relief for the games industry
would not be introduced.
Nottingham is home to a number of games developers,
most notably Crytek, and Outso who between them employ nearly 200 people in the
city. There are also a growing number of
smaller developers in the city proving that Nottingham is fast becoming the
epicentre of the UK
videogames development industry. It
hosts the internationally renowned “GameCity” festival in October each year
that attracts games developers and key figures from as far afield as the United States
and the far East.
The national 5 year
Research and Development growth rate compiled by the UK’s Universities in 2011
recently suggested that the creative sector is expected to grow by 120% and the
digital sector by 47% over that period. Independent reports highlight that the
projected annual growth rate for he online video games market is 21.3% between
2010 and 2014. At over £2billion in
global sales, the UK’s
video games sector is bigger than either its film or music industries.
Harnessing this would have a significant and very posititve effect on the
growth of companies and the numbers of people employed if that growth could be
achieved in this country.
Games developers in
Nottingham are already being aggressively targeted by publishers and companies
from countries such as the USA,
Canada and South Korea who benefit from
government subsidies and tax breaks.
This not only threatens the competiveness of the UK games industry and individual
businesses, but in the long term could threaten its very existence.
Recent discussions
with key companies in the sector have highlighted that whilst the Canadian
games sector is growing the opposite is
the case in the UK even though all the evidence points to the sector enjoying
significant growth overall. Major new
games can take up to 2 years to develop and require substantial up front
investment of around £30 – £40 million.
Very little of this funding for development is sourced from the UK
therefore any games that are developed here attract large amounts of investment
funding from overseas and then, once the product is launched, earn a
significant amount in export sales.
Not implementing
this tax relief is a very short sighted policy.
As a report from TIGA argued, the
introduction of this tax relief would generate both more high quality jobs and
increased revenue for the exchequer. To quote the report directly it is
estimated the introduction of tax relief would:
“create or save 3,550 graduate level jobs
(or the vocational equivalent); increase or safeguard £457 million in
development expenditure; and secure £415 million in new and saved tax receipts
over five years. This measure will drive sustained growth in the UK
studio sector and halt the current decline in investment in and jobs. The
outlay for the Government is anticipated to be £192 million over the same
period.”
Your colleague Ed Vaizey MP, minister for Culture,
Communications and Crative Industries said that he would “look again at what credible submissions we can
make to the Treasury on the way the video games industry can be helped” and I would urge you to review this policy, as a
matter of urgency and introduce a tax relief system that will help
“level the playing field” for the games development industry in Nottingham and
the UK.
I look forward to hearing your
plans to support this important and growing industry.
Yours sincerely,
Cllr Graham Chapman
Deputy Leader and Portfolio Holder for Economic Development,
Resources and Customer Care.
cc. Rt. Hon Dr Vince Cable MP,
Secretary of State for Business Innovation and Skills
Ed Vaizey MP,
Minister for Culture, Communications and Creative Industries, Dept for
Culture, Media
and Sport.