Budget: no tax breaks for gaming industry

There will be no tax breaks for the gaming industry in the emergency budget, chancellor George Osborne has announced.

Yves Guillemot, chief executive of Ubisoft, Europe's largest video game publisher, said that incentives were needed for firms to "take risks".

Britain's previous government floated the idea of extending the 20% tax break enjoyed by the film industry to the video games development sector.

But the changes were never implemented.

"We will not go ahead with the poorly-targeted tax relief for the video games industry. There will be a small reduction in the rates for capital allowances, which will remain broadly in-line with economic depreciation," said Chancellor George Osborne.

Dr Richard Wilson, chief executive of the video game trade association TIGA said the decision was "a kick in the teeth" for the industry.

"We are extremely disappointed by the announcement," he told BBC News.

"If we don't have games tax relief we will lose millions of pounds of investment."

He also said the news was a "betrayal" of promises made by both the Conservative and Liberal Democrat parties prior to the general election.

Mike Rawlinson, director general of the Entertainment and Leisure Software Publishers Association (ELSPA) said the move was "a bad decision".

Many, including Ubisoft chief executive, were hoping for a tax break

"(It) doesn't recognise the economic value the industry could bring to the UK," he told BBC technology correspondent Rory Cellan-Jones.

It was a view echoed by Ubisoft's chief executive.

"The UK needs to react to what's happening in the industry and help the creatives in the UK," said Mr Guillemot.

Other countries are more generous. In Canada, the governments of Ontario and Quebec already offer significant tax breaks for developers, while earlier this month, the state of British Columbia (BC) also entered the fray, announcing significant tax breaks of their own.

"The enactment of this program has already resulted in an increase in our investment in BC and will continue to raise BC's profile as the international digital media centre," said Brian Ward, senior vice president of studios for Activision.

High costs

Incentives like these have helped numerous firms relocate development studios to the area and have now overtaken the UK in terms of video game development.

"What was good in the last few months was that the pound went down, so the cost of creating games went down," said Mr Guillemot.

"When we created [the video game] Driver in England we saw a really big difference when the pound went down, but now the cost is getting too high."

A report by PricewaterhouseCoopers (PWC) expects revenues from the entertainment and media market will grow by 20% over the next few years.

Despite the optimism exhibited at last years E3, revenue in the video games market fell 7.7% last year, to £2.6bn ($3.8bn). This was despite the release in November 2009 of Call of Duty: Modern Warfare 2, the best selling video game of all time.

Strong sales

PWC thinks the future looks more optimistic, predicting a 10% growth over the next four years, with much of that growth fuelled by the rise in online gaming.

That view is shared by many in the games industry.

In an interview with BBC News, Frank Gibeau, the president of Electronic Arts game label, was optimistic.

"Things are good right now, so we are now seeing some very strong game sales in the first half of this year and as we look forward to the future, it's going to be a good future for games," he said.