UK games industry tax breaks promised

A tax credit for the UK games industry was announced in today's UK budget. Chancellor Alistair Darling aims to keep game development talent in the UK "similar to the steps which are helping restore the fortunes of the British film industry." There will be a "consultation on design" immediately, according to the budget report, with "a tax relief" to follow, "subject to state aid approval from the European Commission."

The charge for tax credits has been led by Tiga, the trade body representing independent game developers in the UK. Speaking to GameSpot UK, Dr Richard Wilson, Tiga's CEO, said he was "absolutely delighted" by the news. "It is a really good day for the industry, it's a good day for the economy, and a good day for UK consumers," he said, adding that the offered tax relief "will completely transform the UK games industry."

The tax breaks are intended to keep UK development talent in the UK, according to the chancellor in his parliamentary statement today. "We will not go back to the interventionism of the past," he said, but confirmed that various sectors of the UK industry would receive targeted help. The video games industry was singled out by the chancellor for praise and the promise of help. "This is a highly successful and growing industry, with half its sales coming from exports, and we need to keep British talent in this country," he said.

Darling also announced other measures that will indirectly help the British development sector. The chancellor said he would "secure the recovery" of the economy by offering up a £2.5 billion ($3.8 billion) package to help small and medium-sized businesses. This will be funded by last year's popular windfall tax on banks' bonus payouts, which has already raised £2 billion ($3 billion).

The chancellor also promised to create 20,000 new university places "largely in key subjects like science, technology, engineering, and maths." Decline in science and engineering graduates has been another bugbear for the UK games industry of late and has often been blamed alongside lack of production tax relief as a reason for the UK industry's decline. This will be achieved through one-off £270 milion funding delivered through a "University Modernisation Fund."

The UK games industry slipped from third in the world rankings in 2007 to fifth last year and is likely to slip to sixth--behind the USA, Canada, Japan, South Korea, and China--in 2010. From 2006 to August 2009, investment in privately held UK games companies dropped 60 percent, according to research from the National Endowment for Science, Technology and the Arts. According to NESTA, 75 percent of studio heads said that production tax credits would help them keep original IP in the UK. In the same survey, two-thirds said that such tax breaks would help them create more original IP.