Computer Games Industry

Jim Sheridan Excerpts

Wednesday 29th June 2011 Westminster Hall

[Jim McGovern (Dundee West) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Howarth, and I thank the House and the Speaker’s Office for giving me the opportunity to raise an issue of great importance to my constituency: the computer games industry.

As hon. Members will be aware, calls for the Government to provide more support to this important industry have been made for some time, and during both the previous Parliament, and this Parliament, I and many of my colleagues have asked the Government to act. The previous Labour Government committed themselves to introducing tax breaks to encourage start-up companies and overseas developers to establish operations in the UK. The election of the coalition Government saw that policy scrapped, despite the support of Liberal Democrat and Conservative Front-Bench spokespeople before the election.

The UK computer games industry is a substantial contributor to investment in the UK. In Scotland alone, £30.2 million is invested in salaries and overheads, £27.5 million is contributed to the Exchequer, and a direct and indirect contribution of £66.8 million is made to UK GDP. In the UK as a whole, those figures rise to a £1 billion contribution to GDP, and £400 million a year that goes to the Treasury.

In Dundee, the arrival of a successful games developer has been a major factor in the revival of the city’s fortunes, following the loss of major manufacturing industries in the 1980s and ’90s. The computer games industry has contributed to help Dundee fast become a destination of choice for investors. Millions of pounds have been invested into the city and much-needed high-quality jobs have been created. Such investment has also provided an opportunity for young graduates, many of whom studied in Dundee, to pursue graduate careers in the city when before they would have left to work elsewhere. That has had a tremendously positive effect on the city.

All that, however, is now at risk. Like many major industries, the computer games industry operates in a globalised economy and faces stiff competition from abroad. In that environment, just as in many others, global competition is squeezing British industry. Like ship building, general manufacturing and steel production before them, UK creative industries are being tempted away by countries that offer ever more enticing business environments. Canada is a particular threat. Last week the Entertainment Software Association of Canada produced a report highlighting the fact that Canada’s computer games industry has significantly benefited by poaching companies from the UK. It estimates that because of tax breaks, the industry will grow by 17% over the next two years. Between 2008 and 2010, the Canadian games industry grew by 33%; over the same period, the UK’s games industry fell by 9%.

We have seen recent evidence of that phenomenon in the UK when a games developer in Warrington closed and staff were offered positions in the company’s Canadian office. There is more bad news for the UK industry. The US state of Pennsylvania announced this week that it is to introduce a 25% tax break for games developers. That makes it the 17th US state to offer such support. Alongside that, the Irish Culture Minister, Jimmy Deenihan, announced at the start of this month that the Irish Government were looking to implement tax breaks to encourage games developers to move to Ireland. That is all the more concerning given what we know of Ireland’s ability to attract high-investment technology companies to its shores—its banks notwithstanding. I am referring to companies such as Microsoft and Apple.

That is why I am calling on the UK Government to reconsider their approach to Government support for the industry. There is a significant risk that our industry will be further outmanoeuvred by countries such as Canada, Ireland and the United States and we will lose the investment that communities such as those in my constituency cannot do without.

[Jim Sheridan (Paisley and Renfrewshire North) (Lab)]

I congratulate my hon. Friend on securing this debate, which is important for jobs in Dundee. As he rightly identified, just five weeks before the general election, both coalition partners promised that they would introduce tax breaks for the industry. Has my hon. Friend had any indication as to why that policy has changed?

[Jim McGovern]

I thank my hon. Friend for his intervention. I can quote from the evidence taken by the Select Committee on Scottish Affairs, which conducted an inquiry into this subject. It was said in that Committee that on 29 March—just five weeks before the general election—the then shadow Minister said that the Conservatives were

“going to support tax breaks for the video games industry…We are fully behind game tax breaks. This is my unequivocal statement. It’s been approved by George Osborne.”

However, in the very first Budget, in June 2010, they scrapped that. I have never heard a reasonable explanation of why that happened. Perhaps this afternoon we will hear one.