On 18 June 2020, TIGA, the trade association representing the video games industry, published its UK-EU trade deal paper setting out the priorities for the video games industry in a new trade deal, following the UK’s departure from the European Union.
On 24 December 2020, the EU and UK Government announced that a deal on the future EU-UK trading and security relationship had been reached. The Trade and Cooperation Agreement runs to over 1,000 pages. TIGA has now reviewed the Agreement against the 8 key areas for the video games industry, outlined in the 18 June paper. The following provides analysis of what TIGA has called for and what the UK and EU have agreed:
- Tariffs – The UK should negotiate a trade deal with the EU that avoids quotas, tariffs, and other barriers to trade.
The UK and EU have agreed to zero tariffs and zero quotas on trade between the UK and the EU, where those goods being traded meet the relevant rules of origin. The EU does not currently impose tariffs on computer games produced outside of the EU. Accordingly, UK games developers that export content to consumers in the EU will continue to trade tariff free.
- Maintain and enhance Video Games Tax Relief (VGTR) – VGTR is the most important factor in determining the favourability of the UK’s tax environment as far as the video games industry is concerned. VGTR therefore needs to be maintained and potentially enhanced in a new deal.
The UK and EU have agreed that each Party will have in place its own independent system of subsidy control and that neither Party is bound to follow the rules of the other. The UK is still free to maintain and enhance VGTR. However, the Agreement includes provisions which enable either Party to take ‘appropriate rebalancing measures’ if ‘material impacts on trade or investment between the Parties are arising as a result of significant divergencies between the Parties’ subsidy regimes.
- Access to finance – Outside of the EU, the UK games industry will not be able to access schemes such as Creative Europe and the Horizon 2020 programmes. The UK Government should replace access to these schemes with alternative grant programmes such as a Video Games Investment Fund (VGIF).
The UK and EU have agreed to no measures which would prevent the creation of a Video Games Investment Fund. However, as outlined above, the treaty provides for ‘rebalancing measures’ if ‘material impacts’ to trade or investment are arising because of different subsidy regimes. On Horizon 2020, the UK Government has stated that it intends to participate in Horizon, with further detail coming in protocols published alongside the main Agreement.
- Access to talent – TIGA research indicates that approximately 20 per cent of the games development workforce originates from other EU countries and 5 per cent come from other countries outside the EU. The UK Government should ensure that our post-Brexit migration system does not impair the ability of UK universities to recruit from the EU.
The UK and EU have agreed a range of measures affecting the movement of people between the EU and UK. This includes an agreement to allow visa-free travel for most short-term visits (90 days in any 180-day period) and provisions which allow the UK to establish its own immigration system. Free movement between the EU and UK ended on 31 December 2020.
- Permit the free flow of data between the UK and the EU – Games development requires the use of a large amount of personal and non-personal data and the free flow of this personal and non-personal data between the UK and EU is essential to games publishing and to the operation of online games platforms. It is therefore important that the free flow of data continues between the UK and the EU after exit day.
The UK and EU have agreed to Title III of the agreement, which aims to facilitate digital trade, to address unjustified barriers to trade enabled by electronic means and to ensure an open, secure, and trustworthy online environment for businesses and consumers. The Agreement helps to facilitate cross-border flow of data by prohibiting requirements to store or process data in a certain location.
The Agreement does not include a determination that the UK provides an adequate level of protection for personal data. However, it includes a provision to provide for the continued free flow of personal data from the EU and EEA EFTA States to the UK until adequacy decisions are adopted, and for ‘no longer than 6 months’. The UK has, on a transitional basis, deemed the EU and EEA EFTA States to be adequate to allow for data flows from the UK. Additionally, the EU and UK agreed to protect cross-border data flows to facilitate trade in the digital economy and recognise individuals right to protection of personal data.
TIGA considers it important, for the UK video games industry, that an adequacy agreement on data protection is reached between the EU and UK. Given that the UK has enshrined EU GDPR standards in domestic law, the UK Government is confident that such an agreement can be reached. However, companies should prepare for the possibility that the 6-month data bridge collapses. To this end, the Information Commissioner’s Office recommends that businesses put in place a ‘standard contractual clause (SCC)’. More information is available here.
- Protecting rights of games companies in relation to intellectual property – Overall, regulatory alignment with IP to the EU is generally advantageous for games companies because of the reduction in costs of complying with separate IP laws. However, as the Government has chosen to diverge (at least in part), the Government can take the opportunity to reform IP law to address imbalances and lack of certainty in the current system.
The UK and EU have agreed to commitments on registered IP rights such as patents, trademarks and designs, and unregistered rights such as copyright, trade secrets and unregistered designs. Under Title V of the EU/UK agreement, the parties agree to ‘facilitate the production, provision and commercialisation of innovative and creative products and services’ and to ‘ensure an adequate and effective level of protection and enforcement of intellectual property rights.’ Furthermore, the UK Government highlights the regulatory flexibility, made available in the agreement, which should allow the UK to develop an intellectual property system in line with domestic priorities.
- State aid – It is crucially important for the games industry that future UK state aid policy permits the maintenance and potential enhancement of VGTR, the introduction of a VGIF, the continuation of schemes such as the UK Games Fund; the operation of Coronavirus inspired support measures such as the Bounce Back Loans scheme; and Government schemes to encourage investment in training.
The UK and EU have agreed to end the EU State Aid regime in Great Britain and allow for the introduction of the UK’s own subsidy system. The UK Government has stated that its future subsidy system will allow a new state aid regime to better support businesses to grow in the best interests of UK industries. However, the treaty provides for ‘rebalancing measures’ if ‘material impacts’ to trade or investment are arising because of different subsidy regimes.
- Labour, environment, and climate change standards – As set out in the revised Political Declaration, a UK – EU trade deal should maintain employment, environment, and climate change standards at the current levels
The UK and EU have agreed to reciprocal commitments not to reduce the level of worker protections or employment rights in a way that might have an effect on trade. Similarly, the UK and EU have agreed commitments on not reducing the level of environmental or climate protections in a way that might impact trade.
Dr Richard Wilson OBE, CEO of TIGA, said:
“The video games sector is an export focused, high skill, high technology industry. The UK/EU trade deal avoids quotas, tariffs, and barriers to physical trade, whilst enabling the UK Government to maintain VGTR and introduce a VGIF. It is important that a 6-month transition period for the continued free flow of personal data has been agreed and it is vital that the European Commission’s adequacy assessment enables the free flow of data between the two jurisdictions beyond this point. The deal does not include specific measures allowing studios to recruit highly skilled people from the EU, leaving decisions on the future of immigration to the UK Government.
“The UK Government should proceed now to further strengthen the UK games industry by enhancing VGTR and creating a VGIF. The UK and the EU should work also together to build on this Agreement and establish a framework for favourable trade in services, which represent approximately 80 per cent of UK GDP.
“Additionally, it is important that as the UK attempts to replace Erasmus +, with the Turing Scheme, it offers the same benefits to students in higher education. This should include opportunities to enable UK students to engage with different and new ideas, cultures and techniques.”