Chancellor Alastair Darling's Budget announcement of tax relief for the UK videogames industry is being hailed a "decisive breakthrough" by a group which has long lobbied for the move.

Dr Richard Wilson, the CEO of TIGA, a trade association representing the UK games industry, said the decision would create or protect 3,550 graduate level jobs.

He also claims it will increase or safeguard £457 million in development expenditure and encourage developers to adopt new business models and create new Intellectual Property.

Darling's help for the computer games industry follows comments made by Stephen Timms MP, Minister for Digital Britain less than a fortnight ago in which he said an update regarding tax breaks would be made during the Budget.

He told there was "no doubt that the computer games sector is one part of the economy where we can see very good prospects for growth in the future”.

Britain is currently the fourth biggest games producer in the world having slipped behind Canada due to tax breaks which can amount to up to 37 per cent of a game's production costs.

The UK has been behind some of the world's most notable games including Tomb Raider and Grand Theft Auto.

But research has found that the UK is one of the most expensive places to create games in the world, with what is claimed to be the lowest level of Government incentives or access to finance to encourage companies to locate or start up here.

Dr Wilson said: “This is an inspired decision. In backing TIGA’s Games Tax Relief the Government has chosen the future over the past, growth over decline, success over failure.

"Games Tax Relief is good for the UK video games industry, good for UK consumers and good for the UK economy."

He said TIGA now looked to opposition parties to give their full support to Games Tax Relief in the Finance Bill.

Videogame developers across the UK have welcomed the move. Mark Gerhard, CEO of Jagex in Cambridge, said: "The UK games industry is set for further growth and innovation.”

Colin Macdonald, Studio Manager at Realtime Worlds in Dundee said: "This decision will mean we can continue to invest in UK talent and prevent brain drain to our overseas competitors."

Philip Oliver, CEO Blitz Games Studios in Warwickshire added: “It is fantastic that the Government is supporting TIGA’s Games Tax Relief and we are sure that this measure will grow the industry, create more jobs and lead to higher tax revenues for Government in the future.

"The Government has made a wise investment by committing to TIGA’s Games Tax Relief today and the whole of the UK industry will applaud them for this decision.”