Games sector 'to shrink by 24 per cent after tax U-turn'

The Government's U-turn on video-games tax relief has already damaged one of Britain's most vibrant creative industries, according to new research, with the headcount in the sector set to plunge by almost a quarter by 2015 if nothing is done.

The number of employees at British video games developers has fallen by almost a tenth in the past two years, the industry's trade association, Tiga, found. It gave warning that without tax relief there would be a further 24 per cent contraction within four years.

Since 2008, the Government has lost out on direct and indirect contribution in tax revenues of £55m, while the sector's contribution to GDP was down by £132m, Tiga added.

The statistics emerged in an updated edition of the 85-page document the industry body submitted to the Labour government in 2008. The The Conservatives and Liberal Democrats had separately pledged to support the tax relief before the general election, but scrapped the plan in the emergency Budget in June.

Tiga is continuing to campaign, saying: "This measure will drive sustained growth in the UK studio sector, and assist in halting the decline in investment in British studio jobs."

Its report estimates the relief would safeguard 3,366 jobs in the games industry by 2015. Other countries have introduced tax regimes designed to attract video games groups, including Canada as well as some US states. The head of Activision recently said the UK's stance was a mistake.

Jason Kingsley, Tiga's chairman and chief executive and creative director of Rebellion, said the global market was set to grow from $52.5bn (£33bn) in 2009 to $86.8bn in 2014, but "this growth will happen overseas if we do not invest today".