Tiga report The State of the UK Video Game Development Sector, published today, says that UK developers need new financing models if they are to thrive in the current economic climate.
The report, which surveyed 100 games firms, found that 86 per cent of developers rely on their own resources, cash flow and retained profits to fund their businesses.
Moreover, developers are aware that this limited source of finance is impeding growth – 60 per cent want a greater availability of finance.
Tiga said in a statment: "The Government must enable the UK’s creative and cultural industries to achieve their potential to help counterbalance the downturn in manufacturing and financial services. The brilliant achievement of Slumdog Millionaire in winning seven awards at the BAFTAs and 8 awards at the Oscars demonstrates the inherent potential of the UK’s creative sectors."
Reiterating the call for a tax break for games development, the organisation added: "Just as Film Tax Relief plays a critical role in strengthening the UK film industry, so a tax break for games production would encourage the growth of the UK video games industry. Significantly, whereas UK Film Tax Relief costs HM Treasury £600 million over five years, a French style tax break for games production would cost only £150 million over five years."
Paul Gardner, head of computer games at law firm Osborne Clarke and report sponsor added: "Even before the current economic malaise, it was difficult for developers to raise independent finance. Where finance has been raised, the majority of arrangements involve a publisher guaranteeing repayment of the development costs.
"For most, a deal with a publisher is the only option. Developers therefore fund increasing amounts of work themselves to secure publishing deals. Understandably, few publishers finance projects outside of established genres and, equally understandably, those that do expect to own the intellectual property rights."
"The future for the video games industry remains good. Not only is the UK home to a significant pool of creative and technical talent, new opportunities for developers, such as the growth in online gaming and digital distribution, are emerging.
"However, many developers will only be able to thrive and take advantage of these new opportunities if new finance models become available. At present, it is hard to see how this can happen without a tax break for game production."