Video games industry slams tax relief pledge reversal

The video games industry has reacted furiously to the Chancellor's decision to scrap plans for tax relief, accusing the Government of breaking pre-election promises and warning of an exodus of British talent.

George Osborne's surprise decision to abandon the introduction of a video games tax relief was a "serious blow" to the industry, according to Richard Wilson, the chief executive of trade association Tiga.

"Unless the coalition Government introduces games tax relief or a similar fiscal measure then the UK will forfeit millions of pounds in inward investment, jobs will be lost and we will cease to be a leading developer of video games," Mr Wilson said. Tiga estimates the 9,000-strong sector could shrink to under 7,000 without government support.

The Culture Minister Ed Vaizey had welcomed Labour's plans for video game relief in March, saying "we have long argued for some form of fiscal support for the industry".

A month later Liberal Democrat Don Foster backed the relief. There were no reasons given for the change of heart. Michael Rawlinson, the head of separate video game body Elspa, said: "Our industry will be rightly puzzled as to how tax breaks can be lauded before an election, only to be seen as 'poorly targeted' and scrapped just six weeks later".

Gareth Edmondson, the managing director of developer Ubisoft Reflections, called it a "missed opportunity".

Tiga estimated that the tax benefits would have cost the Government £192m over five years, bringing £415m to the Treasury in tax receipts alone. Yet it warned highly skilled professionals would be drawn to countries with tax relief, such as Canada. Jason Kingsley, the chief executive of Rebellion, said the industry was suffering "death by a thousand cuts. We're doing okay, but growth is not happening. The landscape is shifting and start ups have completely stopped".

Barry Murphy, a partner at PricewaterhouseCoopers, said all research and development relief was under scrutiny and he was not "wholly surprised" video games missed out.

He warned others, including the film industry, that their relief would also be under the spotlight.