Warner Bros and Sony have both been working behind the scenes to get the UK government to introduce a £39 million ($63 million) annual tax break for the gaming industry. Chancellor George Osborne is considering introducing a computer games tax break in his next Budget on March 23. This would mark a U-turn for Osborne who last summer scrapped planned tax relief for the sector after the Conservatives took power. This time around he wants some good news in his Budget after months of the government just offering cuts and layoffs in the state sector. The hope is that a computer games tax break will encourage U.S. companies to come here just as the film tax break keeps Pinewood Shepperton busy with Hollywood blockbusters.
Batman: Arkham Asylum and Lego Harry Potter were both developed out of the UK by Warner Bros. Games sector lobbyist TIGA tells me that the UK computer games industry has shrunk by 9% over the past year, employing 900 fewer people. By contrast, the Canadian games sector – which does enjoy government help – has grown by 33% over the same period. Games developers are pushing for three levels of tax credit, ranging from 20-30% depending on how much a game costs to develop. Given that the average cost of developing a UK computer game is £570,000, most games would qualify for a 30% tax break. Black Ops, the smash hit US shoot ‘em up, cost around $30 million to develop but has grossed $1 billion to date. I’m told that Josh Berger, managing director of Warner Bros UK, recently had dinner with Prime Minister David Cameron alongside other stars of the arts including artist Tracey Emin. Berger has been arguing the case for the tax break with both Chancellor George Osborne and Cameron.
TIGA estimates development spending could rise by £431 million over five years. It estimates that tax incentives would create 3,366 new jobs over the same period. Sales of software in the UK last year were worth about £3 billion, while developers contributed £1 billion to the economy. 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. Worse, 131 games developers have gone out of business over the last two years, says Tiga. Last month Activision Blizzard, the world’s largest publisher of video games, shut down its Liverpool-based subsidiary which employs 200 staff.
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. Bobby Kotick, CEO of Activision, has called last year’s decision to scrap the planned tax break last year “a terrible mistake” and said there were “many other places that are encouraging the video games industry”.