VGTR isn’t perfect but at present that £100m a year looks well spent

The UK video games industry has historically received little support from the UK government. More often it’s simply the punching bag of the latest moral scare or blamed for edge cases in a multi-faceted global industry that are well beyond its control – such as skins gambling in Counterstrike. 

So it was a huge boon when the government accepted back in 2014 that the industry was one that was worthy of tax relief. A move that combined an acceptance of both its cultural and economic value to the UK by supporting development. Though based on the events of this year, it’s not exactly clear how government feels about the industry right now (though the intricacies of Brexit seem to be as beyond them as the intricacies of games monetisation).

Today, The Guardian put out an article showing that the majority of VGTR is going to a small handful of big companies. This is no surprise, tax subsidies are somewhat crude devices, they pay back to those who spend money, and those making big games and big profits are always likely to be the ones spending the most and so receiving the most back in turn.

It’s always worth remembering that when Sega, for example claimed £20m, having made both its Total War and Football Manager series in the UK (both of which to me seem very British products with a strong cultural heritage born out of our long-running obsessions with both historical conflict and football), it’s because (crude math) it spent upwards of £100m on development here to begin with.

Yes, these companies are profitable, but then all the companies that you really want to attract to your country, who have highly-skilled workforces, creative and technical skills,  huge potential for growth, and relatively small carbon footprints, are profitable.

“The UK games industry suffered considerably 10 years ago when Canada offered substantial subsidies to games companies moving there.”

 

Now, would those games continue to be made in the UK, with the same level of investment, if those tax breaks were not available is the key question? And the answer is very hard to predict, but it’s worth pointing out that there’s nothing sacred, after all the FIFA series is primarily made in Canada for instance, hardly a hotspot of footballing culture.

Today’s globalised economy is mind-bogglingly complex. That said, ideally, governments shouldn’t need to compete for the attentions of large profitable companies, but the reality is that they do. The UK games industry suffered considerably 10 years ago when Canada offered substantial subsidies to games companies moving there. With little physical infrastructure to our business it will always be vulnerable to such moves. 

Now, I’d like to say I’m hugely thankful to The Guardian on this piece and it’s broader work, doing proper investigative journalism and holding industries and government to account. And it does have a lot of good points here about how we need to get more subsidies to smaller companies, though that is largely down to the recurring problem about finding financing for games projects in the UK (to then claim the subsidy on) rather than a problem with the subsidy itself. 

“By comparison VGTR currently runs at £100m, which amounts to £4 per year per household”

 

At present we don’t, in the main, have to compete with the rest of Europe in terms of subsidies, with such moves by national governments being curtailed by the EU. Though that’s unlikely to last much longer and the vultures are already circling for our development talent. So maybe now is not the right time to upset this particular apple cart.

Finally, a little context, The Guardian itself reported back in 2015 that the total subsidies and tax breaks paid out by the UK government were around £93bn a year, or around £3,500 per UK household. By comparison VGTR currently runs at £100m, which amounts to £4 per year per household. For a more meaningful comparison, £841m in subsidies were paid to film and “high-end” TV production over the same 2018-2019 period. That’s around £35 per household per year, which is almost half the cost of a basic Netflix subscription.

While comparatively small, £4 per household is still a significant sum of money and one that the industry should be very thankful that the UK tax payer is extending to us. We must do as much as we can to justify that spend, not just in increased economic activity (which Ukie has many figures on showing that it has a huge positive impact) but also in broader returns.

Tax relief may not be perfect, but the halo effect of having creative businesses such as the games industry in the UK are huge. The fact that there are jobs in the industry on offer in the UK is a motivating factor for innumerable children learning technology skills. 

Maybe they won’t all make it into the industry, but it’s helping equip a whole next generation for the jobs of tomorrow, and letting that industry seep away to Canada, America and Asia (or to Europe when Brexit is finalised) would be viewed in retrospect as a yet another economic and cultural disaster that the UK government stood by and watched happen.

VGTR could be better, maybe a lower cap could be introduced so that the amounts paid to the very top tier are somewhat reduced – but where that line would lie is unclear and whether it would impact the number and quality of UK-based productions is a risk that I wouldn’t want to take, especially given the current uncertainties. 

We’ll be discussing the globalised nature of games development and issues such as VGTR at our upcoming Future Games Summit on November the 25th and 26th.