Last week – after a four year journey – tax relief for UK games studios was confirmed.
The UK games industry has long campaigned for tax relief for video games to help compete with the likes of Canada, which has been securing investment and attracting British talent with its generous financial deals.
And in 2010 the Labour Government agreed to support UK studios with tax incentives.
However, shortly after the Conservatives and Liberal Democrats took power and cancelled the plans, dubbing the relief as ‘poorly targeted’
But by 2012, the Coalition Government re-introduced them again, this time to support not just games but also the high-end TV and animation industries, too.
Despite support from the UK Government, the tax breaks were delayed in 2013 as the European Commission insisted it needed proof the tax relief for games was needed. And last week, finally, the EC has received the proof it needed.
“It's been a long hard journey, and I can't quite believe it's actually happened,” said Ed Vaizey, UK Minister for Culture, Communications and Creative Industries, who has played a key role in working with games to secure the tax breaks.
Here, in an exclusive interview with MCV, Vaizey discusses what the tax relief can do for games businesses, other things the Government will do to support small studios and what he hopes to see from developers to ensure the games industry in Britain remains world class.
Can it bring in £188m in extra revenue for the UK games industry like TIGA predicts?
I haven't seen the details of the estimate, but the key point is that we have seen how successful the film tax credit has been in terms of bringing massive investment into the UK film industry. We have seen in a year the animation tax credit effectively stop the animation industry leaving the UK, and it has gone further in making it start to really grow.
And it's the same with high-end TV drama, where a number of productions may well have left the UK – like Game of Thrones – but now they are staying but others are coming in. There's two reasons for this. There is a straightforward commercial calculation: Can I get my game made more cheaply somewhere else? But there is also a confidence measure. And I think getting the tax credit through just shows we are serious about supporting the games industry. I think there is a psychological element here if you like, which is going to be massive.
How do you expect the tax breaks will help our sector unlock other public funding support from cultural institutions such as that given to other screen industries like Lottery Funding?
Yes, I'm very keen to see the British Film Institute move to become more of an institution that supports all of the screen industries – TV, animation and games. And I think it is something we have to look at very seriously in seeing what we can do there. Creative England for example is brilliant at giving small grants to developers and helping them get started. So there is a small amount of Government funding that does support the games industry like that. And obviously Higher Education institutions like Abertay as well. We have supported them with their developers programme as well. But there needs to be an even more high profile support for the games industry in that way.
"We have seen in a year the animation tax credit
effectively stop the animation industry leaving the UK."
What's the maximum amount that can be claimed and can it be bigger?
We will provide around £35m of support a year to the sector. I don't think there's an official cap, but broadly speaking that is the level we are looking at.
What happens now?
The relief is effectively ready to claim now. We will work now with the Treasury and quite possibly the BFI, which administers all other tax credits, to make sure there is an easy system for people to claim. And in theory, the TV tax credit went live this time last year and they took a few weeks for the first production to be ready to take advantage. So we would expect someone to be applying for tax credits via The Treasury and the BFI potentially in the next few weeks.
What do you need to see from the games industry now?
Well I am a passionate supporter of the games industry so you don't have to do anything for me. What I want to see is from great games, that have to have a cultural element to them in order to qualify for tax credits. I want to see some real ambition from some of our home-grown games companies that want to grow and not necessarily be bought immediately by an American company when they get successful.
I would love to see some real, domestic, home-grown growth that expands overseas. I want to see element of - which I think there already is but even more - engagement with young people in terms of skills. The industry itself is a great poster industry for science and computer science and the kind of hard skills that Michael Gove is so keen about kids learning. So it would be great to see as many games companies as possible, when they're not busy working, engaging with young people and showing how studying science at school gets you a pretty great job at the end of it.
"I want to see some real ambition from some
of our home-grown games companies that want to
grow and not necessarily be bought
immediately by an American company."
Other countries have high tax relief, Canada's is probably the highest. But do you think the relief we've now got is enough to help us compete on an even level and prevent the brain drain that the UK has suffered historically?
I think it is a great start. You'd never say never and these things are always under review. But I don't think The Chancellor is going to return to this anytime soon, he has a suite of tax credits across all the screen industries. It is a very coherent package for anyone involved and there is a lot of cross-fertilisation between games, animation, TV and film. So there will just be a huge mass of talent in this country doing this sort of work, which is really exciting. I think it is going to be golden age for these industry. But we will always have to slightly look over our shoulder and see what others are up to. I don't want to get into an arms race on tax credits, that's one of the chief reasons that The Treasury was sceptical about a tax credit to begin with, because they took the view of: 'If you start with this, what happens next?' But it is important to keep abreast of what others are up to because we want to have a successful UK games industry based in Britain.
We have lost a few studios since the tax breaks were delayed. Was the delay unavoidable?
I think it was unavoidable. We worked incredibly hard with the Commission, but the Commission needed more convincing than it did on TV and animation, and we had to work it through, which took that additional year to do. We only got it a year behind TV and animation, so I'm really pleased.
"I don't want to get into an arms race on
tax credits, that's one of the chief reasons that
The Treasury was sceptical about a tax credit to begin with."
Will the industry continue to benefit from the Skills Investment Fund?
Yes, we are putting money into The Skills Investment Fund. All of these different pieces of the jigsaw are beginning to fall into place. Thanks to the Livingstone/Hope report we have got coding into schools now, that starts as part of the curriculum from September. It is very important that we have the right people teaching coding in schools. We have got a focus through Creative Skillset who is working with the biz on more stuff related to apprentices and higher education and further education courses. So we are building our skills pipeline in the UK to make sure we have got the right people to work in this industry.
The Trade Access Programme grant (TAP) has been a huge boost to SMEs. Will you be looking to increase those to help companies reach international markets?
I don't know if the money will increase, but I do know that whenever I go to trade shows and see people, they are genuinely very happy with the service they get from UKTI. I sometimes think that I've been set up and these people are being primed to talk to me, but I believe these people are being genuine, and they see that the UKTI gives these people a fantastic service at these trade shows. The Prime Minister is incredibly keen on increasing our exports, and he will - with The Chancellor - look at the resources available. But I think the UKTI is a big success story, and the new trade minister Ian Livingstone is a very serious figure, and those kind of big success stories tend to get backing from The Chancellor.