From Deadline|London editor Tim Adler: The amount spent on developing UK videogames could increase by almost 10% a year, now that the government’s announced the incentive. The new tax break should be up-and-running this time next year. I predicted back in August that the UK government was going to give the games business the same kind of support the film industry already gets. The detail still has to be worked out though. And the devil’s always in the detail.

Trade body Tiga estimates development spending could rise by £457 million ($680 million) over five years. Computer games are currently a £1 billion industry here. Games made here in Britain include the Grand Theft Auto franchise. We used to ranked third in the world. Now we’ve dropped down to fifth place. The number of people employed has fallen by 7% since July 2008. Worse, 15% of games developers went out of business in the 12 months to July 2009, says Tiga. British developers that closed included Swordfish, Midway North and part of Kuju Entertainment.

Tiga estimates that the tax relief will create, or at least keep, 3,500 college-level jobs here in Britain. The UK games industry employs 27,000 people, including 9,550 highly-skilled jobs. Staffing levels among French games developers have increased by 20% since France introduced a 20% tax break a couple of years ago.

Games developers have argued for years that they should be supported like film producers. Foreign tax incentives have seen an exodus of games developers leaving the UK to work in countries that support the industry. US publishers decided where to site games development based on which country is offering what – just as Hollywood plan overseas filming based largely on local tax breaks. Australia, Canada, France, South Korea and the US already offer tax breaks. The C$500 million ($490 million) that Canada’s spent on supporting its games industry has generated $1.5 billion of inward investment. Eidos, creator of Lara Croft, closed down its London studio and moved to Canada.

Richard Wilson, CEO of Tiga, says, “There’s going to be a burst of creativity in the sector, more investment and more jobs.”

“This is fantastic news for the UK games industry, whose position as one of the world leaders in games development has gradually been eroded as other countries such as Canada and France encouraged games companies and developers to relocate with the offer of targeted tax breaks,” Cliona Kirby, a lawyer at Olswang who helped lobby for the tax break, tells me.

The announcement’s also significant for the UK Film Council, which will have its remit extended to cover games. The UKFC administers the film tax credit and will oversee the videogame tax break as well.

Olswang’s designed a cultural point test to ensure government cash goes to support culturally British video games, and not just lift up the US games sector. Movie producers have to comply with a cultural test if they want tax cash. It’s difficult to see how making culturally British games squares with the latest Grand Theft Auto adventures of gangstas Gay Tony and Sonny Forelli though.