Richard Wilson: Games industry needs tax breaks to compete

WHILE the German economy has pulled itself out of recession through an export led recovery, the UK's recovery is more uncertain. Despite a 25 per cent devaluation of sterling since 2008, the UK continues to run a trade deficit.

We need a strategy for growth. In particular, we need to back industries with growth potential where the UK has a competitive advantage. Video games development is one such sector.

Games development contributes approximately 1 billion to UK gross domestic product (GDP) and employs 9,000 highly skilled development staff, The sector is export oriented: 95 per cent of UK video games are exported. The industry is R&D intensive: two-fifths of studios have a budget earmarked for R&D purposes.

Crucially, the video game sector offers opportunities for growth and high value, high technology job creation for Scotland. Estimates from PWC suggest that the global market for video games will grow from $52.5bn (33bn) in 2009 to $86.8bn in 2014.

Scotland should be in a strong position to win a share of this growing market. Scottish games businesses have produced some of the world's most successful video games including the Grand Theft Auto, Lemmings and Crackdown series. Scotland has 10 per cent of the UK's total games firms.

Yet Scotland's video games industry will not fulfil its potential and the UK will not win a significant share of the growing global video games market if the government continues to neglect this dynamic sector.

Our key competitors - including Australia, Canada, France, South Korea, Singapore and the US - all provide national or regional tax breaks for games production or other significant financial incentives. The UK does not. As a result, investment and employment in the UK development sector is shrinking. Over the past two years, the UK video games development sector has suffered from a 9 per cent fall in employment and annual investment has fallen from 458 million to 417m.

Tiga, the trade association representing the UK video games industry, has campaigned for the introduction of a video games tax relief to enable the industry to compete on a level playing field. Labour introduced the tax break in the March Budget but then the coalition government rejected the measure in the June Budget.

This was a foolish decision. New research to be published next week by Tiga shows that, over five years, games tax relief would create or safeguard 9,519 direct and indirect jobs (including 3,366 jobs in the games industry), 431m investment in development expenditure, 393m in tax to the Treasury, at a cost of 194m in tax relief.

In other words, games tax relief more than pays for itself. The relief would benefit Scotland directly by creating or safeguarding 28m in investment. Without games tax relief, highly-skilled jobs and investment will be in jeopardy.

The coalition government has already accepted the principle of sector specific tax breaks.It continues to operate the 100m a year film tax credit. If a tax break is good for the film industry why does it not provide one for video games? The government's inconsistency makes no economic sense.

Politicians have a simple choice: they can introduce games tax relief to enable the Scottish games industry to soar ahead and make a powerful contribution to an export-led economic recovery. Or they can remain slaves to inertia, fail the test of leadership, do nothing and let our overseas competitors steal the lion's share of the growing video games market.

We have a chance in the March Budget to shake the Westminster government from its torpor. Scottish MPs and MSPs must grasp this opportunity and get the UK government to introduce games tax relief. It's time to back a high-tech, high-skilled, export-focused industry.

• Dr Richard Wilson is chief executive of Tiga, the UK games industry trade association.