The government’s decision to scrap video game tax relief has caused both Sony and Activision Blizzard to reconsider investing further in the UK, a development that could affect umbrella company contractors.
George Osborne announced last week that the Labour government’s plans to offer tax breaks to companies making video games were poorly targeted and the coalition preferred to encourage growth throughout the entire business sector. He abandoned the previous government’s plans and instead cut national insurance and corporation tax.
However, the CEO of Activision Blizzard, Robert Kotick, has hit out at his decision saying that his company needs incentives if they are going to carry on investing in the UK. Kotick explained that the UK has a rich pool of employment talent but countries in Eastern Europe, Canada and Singapore are now looking more attractive. In Canada, for example, video games companies reportedly get up to 40% tax relief on salaries.
Sony on the other hand has promised to continue investing in the UK at its current level but the company’s UK MD warned some developments that had been pencilled in for the UK might now go abroad because of the chancellor’s decision.
Video game manufacturers in Dundee have also warned that they might leave Scotland. Dundee has a particularly strong gaming industry due to specialised video games software engineering courses run by Abertay University.
TIGA, the Gaming trade association in the UK, is confident that the tax relief on video games will eventually be reintroduced. Without this, games developers in the UK have increased costs which makes it harder for them to be competitive in the global market.
The UK has slipped down to 5th place (from 3rd) as the largest global developer of computer games. Between July 2008 and July 2009, around 1,000 jobs were lost as 44 video game businesses closed down.
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Image: Danbo Crushed by PS3 Controller by craigmdennis
