Ahead of this week’s Autumn Budget, UKIE is urging the UK government to modernise the Video Games Expenditure Credit (VGEC).
The trade body is also pushing for a new fund to address the £500,000 to £2 million domestic growth capital gap, and incentives to prevent studios and talent from relocating to countries with better tax credits.
“UKIE has led sustained engagement with government on these priorities, working with our members and industry partners to build the evidence and make the case for reforms that will help British games businesses compete, attract investment and grow,” UKIE CEO Nick Poole tells GamesIndustry.biz.
Tax system modernisation
UKIE, TIGA, and the UK Video Games Council have proposed a tapered ‘games growth’ fund, offering 53% support for projects with budgets up to £15 million, and 39% for those between £15 million and £23.5 million.
“This would provide more competitive support for studios of different sizes and help attract greater investment into UK games development,” says Poole. “We are also calling for reform of the current restriction on qualifying expenditure, which is currently set at 80% and limits the support available even when significant development activity takes place in the UK.”
“The rules must also reflect how modern games are made, including live-service development, downloadable content, co-development and projects brought into the UK.”
Under the current rules, Poole notes that there are “several types of games and production models where the current rules can create barriers or uncertainty.”
He highlights how co-development projects often struggle as “international partners, or work brought into the UK, can encounter questions around qualifying expenditure and eligibility,” as well as how ongoing development for live-service games and DLC “do not always fit neatly into rules designed around more traditional production models.”
Mobile and non-narrative games “can face challenges meeting the cultural test, despite being successful examples of British game development,” while indie studios “can have a strong prototype and credible commercial potential but lack the capital to reach full production.”
The Games Scale Up Fund
Last year, the UK government launched a £30 million fund to support British game development. It began rolling out earlier this year, resulting in the largest group of funded indie studios since the UK Games Fund launched in 2015. The fund provides grants of up to £250,000.
However, Poole notes there is “a gap in support for studios looking to move beyond early-stage funding.”
“A Games Scale-Up Fund would provide growth capital to help promising studios expand, retain ownership of their IP, and attract further private investment, creating the conditions for more British success stories like Hello Games, Rebellion, and Team 17.”
Rebellion co-founder and CEO Jason Kingsley agrees, adding that these steps “would help British developers grow, create jobs and compete on the global stage.”
“A Games Scale-Up Fund would help promising studios expand, retain ownership of their IP, and attract further private investment”
“Companies like ours are increasingly developing original British IP that can be enjoyed across games, comics, film and television, but the current system of tax reliefs doesn’t fully reflect this.”
“We want to see a system that better supports businesses creating and retaining original British IP, helping them develop successful franchises across multiple formats and reinvest the value they generate back into the UK economy.”
Poole says the Games Scale Up Fund would “complement rather than duplicate the UK Games Fund,” and be provided via an “established investment vehicle, potentially working with the British Business Bank and specialist games-industry expertise.”
“Using a co-investment model in which the British Business Bank could contribute up to two-thirds of the funding alongside private investors. For example, a £50 million fund could comprise approximately £33 million in public investment and £17 million in private capital.”
International competition
Poole highlights that the UK faces strong competition from countries offering more attractive tax incentives, underscoring the need to improve the UK’s tax system.
“The UK faces growing competition from countries such as Canada (particularly Quebec), France, Ireland and Australia, all of which offer dedicated incentives to attract games development.”
Canada has “an established system of federal and provincial incentives,” France has a 30% tax credit, Ireland has a 32% Digital Games Credit, and Australia has a 30% tax offset for qualifying games development.
“Reforming VGEC is essential to ensuring the UK remains a competitive place to build and grow games businesses”
“These measures have helped make other countries attractive destinations for international investment and games production. The UK’s VGEC operates on a similar principle, but our members are calling for it to be modernised and made more competitive to ensure the UK continues to attract investment and retain skilled jobs.”
“This competition affects decisions about where to locate major development projects, co-development and specialist work, live-service operations and studio expansion. When development moves overseas, the UK can lose skilled jobs, expertise, intellectual property and the wider investment that successful studios generate.”
“Reforming VGEC is therefore essential to ensuring the UK remains a competitive place to build and grow games businesses which is why our members have been calling for it this budget.”