The Lifetime Value of Video Games Tax Relief

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11 Oct

New research by Games Investor Consulting has revealed that Video Games Tax Relief has triggered over £2 billion in additional UK economic growth since its introduction in 2014. Using data published by the Government in August 2023, GIC has shown that UK games companies received over £1.1bn from the UK Treasury between 2014 and 2022.

Video Games Tax Relief has triggered £2.4 billion in new economic growth after disbursing £1.1 billion to UK games studios since 2014

The research estimates that the UK games development sector has invested an additional £1.2 billion in employment of over 15,000 new creative roles since VGTR was announced in 2012. Nearly 28,000 new jobs have been supported in a country-wide supply chain that services over 2,200 games development companies.

We estimate that the Treasury has received £1.1 billion in new tax income from UK games development companies as a result of growth triggered primarily by VGTR between its announcement in 2012 and April 2023.

VGTR has had a huge impact on the UK games development sector which was radically different in 2011.

After 4 straight years of headcount decline and over 200 company closures, by 2011 only 330 games development companies survived and the creative workforce had fallen to below 9,000.

Some global companies had been shutting down their UK studios and investing in heavily subsidised territories such as Canada, France and many US states. If that decline had continued, it is likely that the UK games development sector would be a fraction of today’s, under pressure from increasing state subsidies in Germany, Australia, Poland, Netherlands, Belgium, Scandinavia, US and Canada amongst others.

The Games Up? campaign was founded by GIC to highlight the threat to the UK sector and was supported by some of the UK’s largest games companies as well as both trade bodies. Games Up? quantified the damage done through the first ever census of the UK games industry in 2008, establishing the sector’s economic impact for the first time and mapping the locations of games companies to their constituency MPs. The campaign had also proposed the solution to the alarming decline, making the economic and cultural case for a new games tax relief to rival Film Tax Relief.

In 2012, after years of lobbying by TIGA, GIC and senior industry figures, the Government finally announced a plan for Video Games Tax Relief. That same year, the UK’s development sector started to grow again, even though 2 years would pass before the legislation took effect. Big international games companies began investing again to take advantage of the coming Relief. Institutional investor confidence started to return that UK studios could thrive in the increasingly competitive international games development industry. Growth has been continuous since 2012.

A record 24,000 games development staff were recorded in GIC’s 2023 survey for TIGA.

GIC and TIGA make the case that there is a direct causal link between VGTR and the growth of the UK games development sector, which went from 3.5 per cent average annual decline in headcount between 2008 and 2011 to averaging 7 per cent growth per annum between 2012 and 2014, and 10.1 per cent growth per annum between 2014 and 2023.

If you include all the jobs saved, then VGTR helped games companies generate and protect nearly 18,000 development jobs and 32,000 supply chain jobs. That represents over £3 billion in new GDP contributions from the sector since VGTR’s announcement, a healthy return on investment.

Dr Richard Wilson OBE, TIGA CEO, said: “TIGA successfully campaigned for the introduction of Video Games Tax Relief for over six years, engaging with and convincing the Scottish Government, the last Labour Government, the Coalition Government and finally the European Commission in the process. TIGA was the only organisation to consistently lobby for this vital measure. Video Games Tax Relief has been transformational for the UK video games industry. VGTR has enabled our sector to compete on a more level playing field against our overseas competitors, especially in North America. VGTR has created thousands of jobs, spurred millions of pounds in investment and boosted economic growth. It has contributed to a renaissance in the UK video games industry.”

GIC has conducted 12 major surveys of UK games development, publishing and service companies since 2008 (mainly for TIGA), speaking to hundreds of studios each year, reviewing Companies House and industry list data, adding new market entrants and removing closed studios to maintain a comprehensive list of active UK studios, their developer headcounts and commercial profiles.

GIC is a specialist games business consultancy founded in 2003 that researches the games sector, advises institutions on games investment and helps games companies prepare to raise investment.