UK tax situation "sucks" - Ninja Theory

By Robert Purchese Published 26 July, 2010

"It scares me," adds Jagex CEO.

Top UK developers Jagex (RuneScape) and Ninja Theory (Enslaved) have told Eurogamer exactly what they think about the coalition government's about-turn on tax breaks for the videogames industry.

"I think it sucks, frankly," said Tameem Antoniades, co-founder of Ninja Theory. "With those tax breaks, with that support, we could have been... We could have grown UK talent and aimed for number one - to be the top producer of videogames in the world. We would have attracted the investment needed to achieve that."

"Without it, there's a danger we just don't grow."

Mark Gerhard, CEO of Jagex - the UK's biggest and richest publisher - said he was "scared" of what the ramifications might be.

"It scares me, because the UK loses out massively, not just on a game employers, but the whole engineering, sciences that are required to feed this. We do stand a risk of losing our very best people to territories that have advantageous tax breaks," he warned.

"It's something [the British government] should do if they want to keep a healthy, vibrant local community."

Gerhard added: "I know, personally, that there's been a whole exodus of talent [abroad]. Highly skilled individuals will be employed anywhere, in any country. We're already in the middle of it. It's something the government has to respond to soon."

Tameem Antoniades' new game Enslaved places a hefty emphasis on a film-like presentation and recreating professionally acted sequences in game. But to achieve that, Antoniades and Ninja Theory have to pay a higher price than their cousins in film.

More on Enslaved: Odyssey to the West

"It's outrageous that when we do a shoot for a game we have to pay more than movies do, because they get tax breaks for doing that and we don't. So the lines between games and movies are blurring but the tax breaks aren't," he said.

Gerhard praised UK developer union TIGA and the work done lobbying for tax breaks. But while he's outwardly proud to be a pillar of the UK developer scene, Gerhard accepts it "comes at a premium".

"You could set up a development shop at half the cost in Vancouver. The government would pay 60 per cent of your salaries for 12 months, generous tax breaks, universities right next to your development studio - there's a lot of very compelling reasons to move. If the business was driven by money we certainly would," Gerhard revealed.

"I'm using Canada as an extreme example, but you've got - across the pond - France. They pay almost half the tax for creative development."

"There's a huge amount, huge amount, of R&D that we do as a business that just goes into remaining relevant. These are big investments. Right now, the only way that pays back is if we also release a product that is a big success and we can recoup the entire costs.

"There's no recognition that you're advancing the science and the space," he added. "Whereas if we were doing biomedical, for example, there would be."

In June, George Osbourne - Chancellor of the UK's coalition government - said "planned tax relief for the videogames industry will be cancelled". At this month's Develop Conference in Brighton, Tory Culture Minister Ed Vaizey said the games industry "would need to make its case again".

In closing, however, Gerhard urged perspective before pitchfork campaigning for tax breaks.

"At the same time it's hard: no one's got money - the government's run out," he said. "Why should the UK industry get tax breaks when they're cutting hospitals and police? And that's a difficult tension. I don't have the answer to that."

Picture of Robert.

About Robert Purchese

Bertie is Eurogamer's Senior Staff Writer. When he's not hunting down news stories he's often found playing with his kids or gabbling about fantasy games and strange online worlds.

Read more articles from Robert by visiting the Robert Purchese archive page.

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Comments (44) Latest comment 2 years ago

Comments threads automatically close after 30 days, but please feel free to continue chatting on the forum!

  • mingster #1 2 years ago

    We have to save billions and cut money everywhere, schools, hospitals, public sevices.
    Why should the VG industry be given a break?
    What makes them so special?

  • M_of_the_sys #2 2 years ago

    @mingster

    That's exactly what he said at the end of the article if you bothered to read it all.

  • lostlain #3 2 years ago

    I agree mingster! Even though he did say it!

  • TeaFiend #4 2 years ago

    @mingster:
    Why continue to give them to certain entertainment areas?

  • Burnt-Kona Verified Senior Artist, Full Fat Productions #5 2 years ago

    The difference in cutting budgets to public services and giving a tax break to an industry is that the boosted industry (hopefully) pays more in the long run back into the economy.

    Given that North Carolina has just unvieled a package of benefits for developers in that reside in that state, it's bcoming not so much the grass being greener on the other side, but whole fields of lush green.

    As a developer, when I was made redundant earier in the year, relocating to Canada was a serious option, with only family keeping me on this side of a Atlantic. Still, need to locate myself further from family, as the development scene in the South West has completely collapsed.
    Edited by 1 at 26/07/10 @ 14:25

  • dsmx #6 2 years ago

    You can't justify giving tax breaks to an industry that quite clearly isn't struggling when everywhere else is getting increased taxes and cutbacks in services.

  • TeaFiend #7 2 years ago

    @dsmx:
    See Sony, Sega, Free Radical...

  • dsmx #8 2 years ago

    Sony aren't struggling there set to announce a profit. Sega haven't made any games themselves recently that have sold well and free radical bet the farm on 1 game that didn't turn out anywhere near as good as it could of been. A tax break wouldn't of saved free radical anyway.
    Edited by 1 at 26/07/10 @ 14:36

  • M_of_the_sys #9 2 years ago

    Sony aren't struggling

    Weren't the profits down for SCEE but Sony on a whole were ok?

  • Burnt-Kona Verified Senior Artist, Full Fat Productions #10 2 years ago

    Create decent game - get shafted by publisher - go bust ;)

    The industry isn't struggling as a whole in the UK. Those with the backing of huge publishers are OK. We aren't growing, either. When looking for new positions this year, there were a hell of a lot less studios than when I first started back in 2000.

    Calling it a tax break was always going to make it a very hard sell to the public. It's a reduction in the cost of developing in the UK. They aren't giving money away, saying "here, have a couple of million to make some games"

    Without it, more money and talent will continue to go abroad, and the government won't see a penny from them. Ask a little less to encourage publishers to spend more in the UK, or let the more countries overtake us in game development?

  • randompanda #11 2 years ago

    It's just common sense - you want to encourage these people to operate in the UK as opposed to going abroard, which in turn provides us with jobs and taxable revenue.

    If they go bust or go abroad, the government gets nothing.

    Cutting funding to the NHS is not the same as giving tax breaks.

  • BabyJesus #12 2 years ago

    There isn't a snowballs chance in hell they'll risk votes over supporting the videogames industry.

    The Daily Mail contingent would go into meltdown.

  • randompanda #13 2 years ago

    It's just common sense - you want to encourage these people to operate in the UK as opposed to going abroad, which in turn provides us with jobs and taxable revenue.

    If they go bust or go abroad, the government gets nothing.

    Cutting funding to the NHS is not the same as giving tax breaks.
    Edited by 1 at 26/07/10 @ 14:52

  • TeaFiend #14 2 years ago

    Sony and Sega let go a lot of people in the UK. Wasn't it 70-100 at Sega? And Sony did a massive developer cull in Liverpool.

  • AOFanboi #15 2 years ago

    @heretostay

    The issue is rather: Have higher expenses due to the tax regime than companies in Canada, Austin etc. = fail - or move.

  • MrChuckles #16 2 years ago

    US publisher looks to make a new FPS. Costs in the UK are 60% higher than Canada, so unsurpringly they get a studio in Canada to make it. This means:

    A) That company in the UK can't compete with ones in Canada for the same work, meaning however good they are, publishers are less likely to risk more money in the UK, meaning that company is less likely to survive.
    B) UK Company now doesn't make the game, therefore does not expand, therefore generates a lot less income, therefore pays a lot less tax to the UK government who gets less money. Also does not make huge profits for the game release, meaning none of that is taxed, and again, Canada gets more tax income. Nom nom...

    Tbh, i wouldn't mind working in Canada, maybe my next project :)... I'm not patriotic patriotic to the UK as racists and chavs seem to be our most common members of society these days...

  • green_nifta #17 2 years ago

    I'm thinking back to the people in first dev team I worked in, just over 10 years ago. About half of them are now working in North America; mostly in Canada. Senior/Experienced staff are getting hard to find in the UK

  • abigsmurf #18 2 years ago

    I'm three weeks into a FOIA request for all the information relating to the tax scheme being scrapped (already been messed around once, having the request moved from the House of Commons to the Treasury). Hoping I can get some key information on the company that lobbied against the tax breaks and ultimately killed the scheme.

    The time limit's 4 weeks for them to get back to me. Won't be long before I hopefully get the details (or I get pushed onto yet another department)

  • KDR_11k #19 2 years ago

    Quit whining, a bit of tax relief wouldn't have made you a better developer.

  • spadge #20 2 years ago

    It's called inward investment. Foster a stronger industry, employ more people and lose less to international competition. It's not a case of handing out more money, but getting a tax break on creating projects that lead to jobs, revenue and investment.

    With tax breaks in place, more international companies and investors would get involved with UK firms. This has happened in regions with tax breaks such as Canada, France and others.

  • Grom #21 2 years ago

    Er, "George Osbourne, leader of the coalition government"?

    Or is that George Osborne, Chancellor of the coalition government?

  • photoboy #22 2 years ago

    Let's lay the blame where it really lies: Gordon Brown. He pissed our money, gold and best companies away during the good years and saved nothing for the lean years.

    The government needs to make as much money in tax as possible to clear the deficit and build up a war chest so investment in industry can be made. In a way, I think this is a backhanded compliment to the games industry. The government must see the industry as a sturdy source of tax revenue, otherwise they wouldn't have bothered to cancel their tax break!

  • jonbwfc #23 2 years ago

    The problem I have in giving tax breaks for developers on the promise of extra taxes on future profits is this : The developers don't make most of the profits, the publishers do. When Ninja Theory made Heavenly Sword for Sony, who stood to make most money out of it? Sony, not NT. And right now, most of the publishers are not based in the UK.
    So yes, tax breaks for developers would be very good for those developers and would possibly expand the industry but that is equally true if they gave tax breaks to any other industry. If they want to make the best use of whatever 'budget' they have for tax incentives, they're going to use it in the sectors where the biggest part of the revenue generated stays in the UK, not where say 10% of it does and the rest gets carried off overseas to appear on the balance sheet of a US or Japanese company.

    When we have British developers making games for British publishers and being sold by retailers that are mainly British-based, the tax breaks will be justified. While British developers are essentially operating as 'work for hire' for foreign companies, the value of the tax breaks to the Uk economy seems, to me, to be questionable at best.

    Edited by 2 at 26/07/10 @ 17:06

  • makeamazing #24 2 years ago

    Yeah i think some people are mistaking cutting investment for hospitals/police with giving tax breaks, they are not the same. Giving tax breaks should in theory mean that more people are employed, thus meaning more money for people to spend, meaning more generated in taxes. Now if you consider not doing tax breaks and all the talent moving abroad, then what have you gained.. nothing. The UK games industry already has to bring people in from other countries, soon we wont have an industry and it will be something else we can claim we were once good at.

    I remember seeing a conservative guy on tv saying they were prepared to pay familes to move to work, these are people who had never had a job, they talked about a job 15 miles away. Many of us do more than that everyday (i do 90), so rather than give tax breaks for companies to move into an area and potentially employ people they do these hairbrain ideas... governments one after another not having a real idea of how to improve this country.

  • Shikasama #25 2 years ago

    I find it hard to sympathise with an industry trying everything it can to nickle and dime me every time I want to play a game. I couldn't give a toss wether it came from America, England or Bosnia.

  • DanWhitehead #26 2 years ago

    "The problem I have in giving tax breaks for developers on the promise of extra taxes on future profits is this : The developers don't make most of the profits, the publishers do. When Ninja Theory made Heavenly Sword for Sony, who stood to make most money out of it? Sony, not NT. And right now, most of the publishers are not based in the UK."

    The same could be said of the film industry, yet there are lots of tax breaks and investment schemes keeping British cinema alive. It's probably easier to get Lottery funding for a film that will struggle to break even than it is to get any government assistance to create a game that would sell millions. It's cheaper for Warner Bros to film Batman in London than in LA, or to film the Matrix movies in Australia, so the work goes to the technicians and workers in those countries. That's how it works in a global marketplace. It's not about handing out money, but cushioning a successful industry so that it remains competitive.

    I'm pretty sure that the problem is largely one of perception. People have an emotional attachment to British film that isn't there - yet - for British games. The Ladykillers has a greater cultural footprint than Manic Miner.

  • anomagnus #27 2 years ago

    The government of the UK will always face an uphill struggle on areas like video games thanks to the british press. I mean, you only need look at that disgusting story the Star ran a few weeks ago, saying rockstar were basing the next GTA on Raoul Moat, a story with no fact checking, to see that, for the press, games are the whipping boy of a generation.

    Sadly, for the last 20 years, the British government has been a thrall to the tabloids, and its likely that if they pushed through a tax break, during the next quiet period, it'd be a stick to be beaten with.

  • Gromit #28 2 years ago

    The point is that they are talking about lost tax revenue of around £192 million. This isn't money they have to take from somewhere else, it is just not taken in. In return for that, they can expect a return of around £400+ million.

    To keep these skilled people in the uk, make a good return and improve future prospects for the games industry in the uk, this just seems the obvious thing to do to me. I wish they could think about the issues and not the politics for once.

  • zebedee #29 2 years ago

    'In June, George Osbourne - leader of the UK's coalition government - said "planned tax relief for the videogames industry will be cancelled' - Well, he might have said that, but he's actually the Chancellor of the Exchequer. And there's no 'u' in Osborne. Apart from that, well done for relating a niche hobby to the wider world.

  • RandomRash #30 2 years ago

    Take the money out of hospitals I don't mind playing with a broken leg!

  • Pirotic #31 2 years ago

    How are Ninja Theory 'top UK developers' o_O

  • Murton #32 2 years ago

    Clearly the answer is for the industry to just cry more...

    Again, Osborne/The Conservatives didn't promise the industry anything more than to review the possibility of a tax break. They reviewed it and didn't find in favour of it. That really should be case closed but instead we're seeing TIGA followed dev after dev bitching and moaning over what could have been.

    I'm getting really quite bored of this story and the way it is mis-reported by EG in every instalment.

  • djed #33 2 years ago

    just because 'other countries' are run by socialist pigs who think everything should be free, doesn't mean the UK should follow suit.

    Instead we should add a massive import tax on games made in countries with these so-called 'tax breaks' (it's really Plan economy, subsidizing own industry to damage foreign competitors). Hey, it worked with China and clothing imports!

  • Shikasama #34 2 years ago

    Murton - It's a gaming website visited by gamers, a section of scoiety that has never had the most realistic perspective or priorities. Misreporting, faulty logic and armchair experts are the lifeblood of this group.

  • jonbwfc #35 2 years ago

    @DanWhitehead

    It's a valid point but there are at least some UK film distributors/publishing companies who have directly benefitted from the tax breaks they were given. Are there any primarily UK based games publishers?

    And anyway, the fact is it's not just cheaper to make a film in Canada because they give tax breaks. It's not such a black & white proposition. It's cheaper to make your film in the Czech republic for example simply because of economic variation - people can go to other places to make films that will always be cheaper than the UK regardless of what we do, then use the best talent in post-production, quite a lot of which is in the UK. There's no 'split' like that in the games industry - there's no 'post production' phase distinct from the actual content creation. If a game is cheaper to make in Canada or Australia, then all the game is cheaper to make there.

    The point I'm trying to show is that "well, the film industry get a tax break, why can't we have one?" is actually a poor argument that's never going to convince your hard-hearted whitehall mandarin. It's a pretty playground-level argument at the end of the day. If the games industry wants tax breaks, it needs to show conclusively that doing so benefits the UK economy more than it would be benefitted by those tax breaks going elsewhere. The games industry isn't just in competition with the film industry for the money, it's in competition with every other industry in the UK and indeed every other organisation the government could put that money into.
    Edited by 1 at 26/07/10 @ 22:26

  • Kaminari #36 2 years ago

    Chances are the UK devs are going to go the way of the dodo -- I mean, the way of the French industry of the '90s. There's a reason why Ubisoft France has relocated in Canada years ago.

  • darkmorgado #37 2 years ago

    Let's be honest: did we really expect that Gideon George Oliver Osborne, a member of the aristocracy and a former member of the Bullingdon club, with a voting record as progressive as the sky is green, would EVER give backing to an industry so utterly hated by his core voters? Of course not. If the tories gave backing to the games industry, the Daily Mail would turn on them overnight, the Torygraph would cite it as favouring private industry over public services at a time when they are already frothing at the mout to try and discredit the government over the budget plans, and the FT would start fiddling their numbers yet again to try and argue that the games industry is irrelevant (probably using current figures showing the status of our industry well below its peak and therefore missing the point entirely).

    In other words... MAN IS SHOCKED THAT A CONSERVATIVE POLITICAL PARTY IS NOT PROGRESSIVE!
    Edited by 1 at 27/07/10 @ 00:40

  • dagas #38 2 years ago

    "we have to pay as much tax as everyone else. How unfair! We should have to pay less because we make games." Seriously why should one industry pay less tax than the rest. Sure the video game industry will thrive if they get a tax break, but that is true for everyone. if you are going to lower tax it should be for everyone.

  • Jazzy_Geoff #39 2 years ago

    "There's a huge amount, huge amount, of R&D that we do as a business that just goes into remaining relevant. These are big investments. Right now, the only way that pays back is if we also release a product that is a big success and we can recoup the entire costs"

    Do they not qualify for R&D tax credits then? Hmm, that would be a interesting thing to look into, professionally.

  • 5h1nj1 #40 2 years ago

    "top producer of videogames in the world"
    He stretches it too far there. :D

  • Burnt-Kona Verified Senior Artist, Full Fat Productions #41 2 years ago

    A lot of comments seem to focus on this being an issue of developers wanting money out of the government. We don't. What we want is the government to provide an incentive to publishers to place projects and studios within the UK. It's UK talent that produce gems such as LBP, Batman AA, and created the GTA series. But using UK talent is expensive when you compare it with placing a project in Canada, North Carolina, France... You won't have the 200+ teams that create titles such as Assassins Creed in the UK.

    It's the same as what is done for the UK film industry. It's not about funding British films, it's about providing an incentive to film producers to place their project and their money in the UK. It does cost the government on one hand, but brings in so much more to the other.

    [link url=http://www.tax-news.com/news/UK_Fi lm_Industry_Defends_Tax_Relief____43691.html
    ]http://ww w.tax-news.com/news/UK_Film_Ind...[/link]

    I'm not sure where this theory of game creators being expats and highly mobile comes from. UK studios are still filled with British staff. Canadian studios may have a lot of British staff, too. Maybe it's because our skills and talents seem to wanted there...

  • Bertie Verified Senior Staff Writer, Eurogamer.net #42 2 years ago

    Eek - George Osbourne is the Chancellor! Somehow I'd mixed he and Cameron up. Apologies. Edited.

  • Grom #43 2 years ago

    No worries. He hasn't got a U in his name either though ;)

  • Murton #44 2 years ago

    @ Burnt Kona

    So the tax break isn't to get some extra money for an industry that cynically and ritually culls its workforce during times of success but in fact to make it more cost effective to site games development in the UK, you then go on to name a load of UK born and based companies as examples.

    I could pick that logic to pieces but I'll stick to just one point. Is it realistic for a UK based company to pick up its entire operation and move it Canada for a drop in tax? How successful would they have to be and for how long to pay for the redundancies of their workforce who don't follow, plus their replacements, plus the new contracts, plus the migration of the company, plus the new premises plus all other extraneous costs?

    Perhaps in a video game this would be feasible, in the real world though, I'm thinking not.