Ukie outlines urgent case for EC to introduce UK tax credit
We have responded to the European Commission investigation into the proposed UK tax credit scheme for games and called on EC to introduce tax credit as soon as possible.
We have used our response to the EC investigation to outline why there is a clear and evident market failure relating to the production of culturally British or European games being made by British studios, which the UK Government’s proposed games production tax credit scheme would address.
Ukie have set out the following reasons why the EC’s doubts are misplaced and why the aid should be approved as soon as possible:
- Games play an increasingly important role in the lives of many consumers across the world and as the Commission itself has previously recognised, games can play an important role in promoting European culture.
- In the past, games were often regarded as spin-offs from other cultural outputs such as films and music. Increasingly, successful games are now driving other outputs such as films and television series with the consequence that a lack of European cultural representation in the global games market may in time also reduce Europe's influence in other culturally important areas.
- Games are one of the most important ways in which children engage with and learn about the world, yet currently little is done to ensure that they are presented with European culture in these experiences.
- Games operate in an intensively competitive global marketplace where non-European culture is the dominant, driving force dictating which games are developed.
- Fewer people are making games in the UK, which means that fewer games are being made here. Because of the UK’s status as a major European hub for games development, this means that there is less culturally European content being created than should be the case.
- A significant proportion of games developers who may be eligible for the proposed tax credit currently spend the majority of their time “working for hire” for non-European companies or brands, i.e. developing games based on non-European cultural references for the global market. As a result, there is an existing and tangible market failure which has resulted in a lack of culturally European games being created
- This market failure is being exacerbated year on year, creating a vicious circle: as fewer culturally European games become available, it becomes harder to persuade investors and the marketplace that such games are relevant and can be successful.
- Ukie considers that the UK’s proposed measure offers the opportunity to reverse that market failure. In particular it is expected that EU-based companies which currently produce culturally non-European games would be able to devote more time to developing European culturally focused games and, just as importantly, are keen to do so.
- The more such European culturally focused games become successful as a result of the proposed aid, the greater the likelihood that the global industry will in time be prepared to invest in such products, thus removing the need for state intervention in the longer term.
- Ukie would also note that, particularly in the case of its smaller members and contrary to the Commission’s suggestion, most games are developed solely by UK-based teams.
- Ukie is strongly of the view that the UK’s proposed tax credit is a targeted, proportionate solution which represents the minimum intervention necessary to address the relevant market failures. Ukie further considers that if the aid is significantly delayed, any subsequent intervention is likely to require far greater resources to achieve similar ends.
Ukie’s full response to the EC investigation can be found here.
Ukie’s response contains evidence from some top British developers and publishers, including: David Amor, Relentless; Ed Bainbridge, former VP, Disney Interactive Studios; Simon Bradbury, Firefly; James Brooksby, Born Ready Games; Paul Canty, Preloaded; Craig Fletcher, Multiplay; Sophia George, Swallowtail Games; Darren Garrett, Littleloud; Richard Griffiths, Rogue Vector; Richard Lemarchand, former Naughty Dog; Ella Romanos, Remode Studios; Jim Rossignol, Big Robot.
Ukie worked closely with DCMS and HM Treasury in creating its response and also made sure that there was a consistent industry voice on this vital issue with TIGA. Ukie also ensured that there was support for games industry tax credits from other UK creative industries who have submitted letters of support
Ukie CEO Dr Jo Twist said: “The UK needs tax credits to make sure that we can reverse the current trend for games being made with non-European cultural themes. As the audience for games increases, it is important that developers of all sizes can make commercial decisions in a financially competitive tax system. Fewer people are making games in the UK, which means that fewer games are being made which advocate our sense of humour, our creativity and our identity as European citizens. We need to have tax credits introduced as soon as possible”.
Ukie Chairman and Chair of Mastertronic, Andy Payne said: “It has never been clearer that the UK needs these tax breaks. Video games have huge cultural reach and are now pushing creative boundaries like no other medium. But unfortunately too many games are now created without British or European themes, a problem that will continue to exist unless we get tax credits introduced. Without tax credit there will be fewer developers operating in the UK, which means fewer British games being made. The case made by Ukie clearly spells this out to the EC and we urge them to get them in place before the situation gets any worse.”
CEO of Remode Studios, Ella Romanos said: “As with many developers we operate part of our business on a work for hire basis. Whilst this remains a valuable revenue stream, tax credits would offer us a real incentive to make our own original IP incorporating British or European themes. We hope that the EC listens to the points made in Ukie’s submission so that we do receive the tax credits the UK industry urgently needs.”