Westminster Scottish Affairs Committee

I had a big blog post written up on various redundancies, companies folding, and how they related to game development budgets. Re-reading it now though I’m not happy about it: too much hyperbole and supposition, and very little in the way of hard facts. I’m going to scrap and re-write it I think; and rather than dwelling on the down-beat, focus instead on a general view of the overly large budgets / scope of current-gen games. Anyway, in the meantime, here’s the response I wrote up to the Westminster Scottish Affairs Committee, who are investigating the implications for the Scottish industry of the scrapping of the tax breaks scheme, which has been proposed, ignored, accepted, and then scrapped. Not that I think it affects the Scottish industry much now – RTW might have made use of it, none of the remaining developers really stand to gain very much from it as it was. Anyway, I don’t mind making my response open.

Executive Summary:

If the government wants to help the games industry, rather than through relief on corporation tax, it should do so by improving the quality of the talent pool. By supporting education, apprenticeships and internships within games developers, and making it easier and cheaper to hire talented but inexperienced staff. In doing so, it will help maintain the UK’s competitiveness as a creative centre, and the returns in increased profitability for UK developers should pay for the incentive schemes. Any incentive scheme which rewards large non-UK publishers will in my view be less effective than one which supports the myriad of smaller developers, many of which are wholly UK-owned.

Full Response:

Sadly, since the original request for input to this inquiry, the Scottish games industry has suffered a serious blow in the loss of Realtime Worlds. I would like to start by raising my voice against the ridiculous notion put forth by various MPs to the media that the previously cancelled tax-breaks proposal would have somehow prevented this company’s failure. The scheme proposed relief on corporation tax, and Realtime Worlds’ issues were certainly not down to being too heavily taxed.

I run a small studio that provides development support services to the wider games industry, primarily in the UK. We are members of the trade association TIGA, whom I believe will also contribute to this inquiry. TIGA were instrumental in persuading the previous government to take up the proposed tax relief scheme, but I must confess that I am not and never have been entirely convinced that their proposal is the best approach to boost the industry.

When the current government announced the scheme would be scrapped, I cannot say that I was concerned. It had never been implemented, only proposed in loose terms by the previous government. I doubt it would have ever made it to implementation. Its absence will not hurt the Scottish games industry, where the only sizeable developer left (Rockstar North) is foreign owned, and solid for other reasons than financial ones. The smaller developers left here are not in a position to expand massively, tax-breaks or not.

While corporation tax-breaks would I’m sure attract inward investment to the UK as a whole, their nature is such that the biggest winners in such a scheme are large, multi-national publisher/developer corporations. Implementing tax breaks might attract them to form or expand studios here, but aside from the direct investment here, their profits still largely go abroad. Once in place, it seems to me that removing those tax-breaks would quickly lead to studios being declared unprofitable and being shut down again, such is the fickle nature of games development.

Furthermore, subsidising the industry solely because the French and Canadian governments do seems to me to be a dead end road that can only end in subsidies escalating out of control. Yes, we are losing development talent to Canada, and the more developers that go out of business here, the more of our talented workforce will emigrate there. But when studios go bust, their talent doesn’t just leave the country, some also leave the industry, and our available workforce pool is diminished. The tightening belts of the publishers and financiers of the industry don’t allow developers the leeway they need to recruit and train new talent, and that hurts the industry both now and in the long term.

I don’t want to see subsidies for general game development. I don’t want to see incentives to make culturally British games (although I do think that there should be more of them made). What I think the government should be doing is to support what makes the UK competitive in the world market: our creative talent. We need more developers doing innovative, creative things. We can’t compete with Eastern Europe or Asia on labour cost, but we can compete on labour quality. But for that developers have to be able to take in new talent, new ideas, and reinforce a waning labour pool.

I would propose subsidies for education and training. And since the only kind of training that is really effective in the games industry is on-the-job, what I would like to see is more support from the government to get students and young people inside developers and doing real work. Apprenticeships for game developers almost. I’d like to see real financial support for developers who want to take on inexperienced but talented people. That might take the form of subsidised placements, internships, or PAYE relief on students. The universities like Abertay are doing well with their industry outreach efforts, but with better financial support they could do far better. The developers want the talent, but they can’t afford to take risks in hiring, or to get the people up to a useful level of productivity. The universities want to get their graduates into the industry. The government wants the students in jobs, and it wants the developers healthy and profitable.

So in summation, if the government wants to help the games industry, it should do so by reducing the real costs UK developers have: the staff. In doing so they will enrich the talent pool, maintain the UK’s competitiveness as a creative centre, and the returns in increased profitability should pay for the incentive schemes.

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Last modified: August 14 2014.