The Future For The UK Gaming Industry Post-Brexit

The United Kingdom has voted to leave the European Union. Following the referendum, the Pound Sterling dropped to its lowest level against the US Dollar since 1985, and the FTSE 250 slumped 11.5 percent. Since then, the United Kingdom has also lost its AAA credit rating with S&P, as well as Moody’s and Fitch dropping their credit rating to negative.

The UK gaming industry is the sixth largest in the world in terms of consumer revenues; after China, USA, Japan, South Korea and Germany. The UK games industry was worth £4.2bn in 2015, up 7.4 percent from 2014, a growing market that now faces uncertainty due to a referendum that recently voted to leave the European Union.

The UK games industry relies heavily on recruiting internationally. Remaining within the single market, and maintaining freedom of movement (however unpopular politically) is crucial to keeping the talent in a competitive industry. It will take at least two years for the UK to negotiate an agreement for withdrawal from the EU, and this uncertainty could force talent to leave elsewhere.

There are also concerns that the big companies that have set up offices in the UK could scale back investment. Microsoft, Sony, EA and Ubisoft have all invested in creating development studios in the UK, as well as many UK developers under control from a foreign parent company (such as the parent company for Rockstar North being Take-Two).

However, should the Pound remain low against the US dollar, this could make exporting cheaper, and therefore could increase sales internationally. Such a scenario could make the UK gaming industry much more competitive and increase output and jobs.

Regulation has also been a constant thorn in the side of many small and medium sized UK developers. One such example is the introduction of pan-european VAT laws in 2014, which aimed to stop big business such as Amazon, Apple and Google from exploiting tax loopholes by establishing a European Headquarters in low-tax countries such as Luxembourg. This requires enterprises to charge and account for VAT in each of the twenty-eight member states where they sell, resulting in a chaotic administration nightmare for smaller companies that don’t have the same resources as much larger companies.

This doesn’t take into consideration other variables in the situation though. If the UK isn’t in the EU, it will likely lose EU grant programs such as Creative Europe, which has already benefited UK studios like The Chinese Room and Italic Pig. Such investment would have to be from the UK Government should the grant programs to the UK gaming industry stop, and this remains uncertain until further news is announced.

This should represent both a challenge and an opportunity for the UK. To make a success of an uncertain position, the UK government would need to match current funding from the European Union, as well as create a business environment that isn’t damaged too heavily by regulation and red tape. The low Pound Sterling is unlikely to last long which means exports cannot rely on the competitive exchange rate in the long term, this might mean more investment to keep the UK gaming industry competitive in the global market.

All this will be counter-productive, however, should the UK lose access to the European single market and lose the ability to freely access talent from across the continent. Without a large talent pool, many small to medium size game developers in the UK will struggle to stay competitive with European rivals. Such a situation might not only halt growth with developers, but create a talent drain where the best talent in the UK moves to Europe or elsewhere to find the lucrative jobs.

There is an uncertain future currently, and the UK gaming industry remains in the balance until negotiations begin. For the immediate short-term, game developers can take advantage of the low Pound Sterling; but their long term future won’t be known for at least two years.