Sections

From the archives: Brexit to Desktop?

What the UK industry was saying about leaving the EU before it actually happened

The UK has now narrowly voted itself out of the EU, and Prime Minister David Cameron has resigned. What does it mean for the domestic games industry? Here's what its most prominent figures were saying a few weeks ago, before the referendum.

On the 23rd June 2016, the British electorate will have to make an incredibly important decision that will shape the future of the political, economic and social landscape of the country.

The referendum on whether the UK remains in or leaves the European Union is the first opportunity to vote directly on the country's political relationship with Europe in over 50 years, but the binary framework of a yes or no decision has led to a clouded debate. With both sides engaging in rhetoric that borders on hyperbole, attempting to find clarity on what will happen if Brexit occurs has been frustrating for many voters.

This applies as much to representatives of the games industry as it does to anyone else. As an outward facing and internationalised industry, it appears that UK businesses are strongly in favour of remain - mostly due to the perceived problems that Brexit will cause to free trade and recruitment.

Nevertheless, it also remains clear that many are unsure of what would happen if we left the European Union, as well as how such a decision could affect the legal framework underpinning many businesses.

An outward looking industry

As it currently stands, the UK games industry appears to be strongly in favour of remaining in the European Union.

A recent anonymous survey conducted by UKIE, which generated 62 responses, found that 80.6% of respondents favoured remaining in the European Union - with only 3.2% saying they would prefer to leave.

"As it currently stands, the UK games industry appears to be strongly in favour of remaining in the European Union"

Although that sample size is relatively small, such figures align closely with the sentiment expressed by tech start-up businesses in a recent Tech UK survey. It also stands in contrast to the views of the public presented by YouGov in a poll on May 25th, which showed remain and leave neck and neck on 41%.

So why the difference? Firstly, UKIE's survey indicated that many businesses are concerned about the impact of Brexit on their day-to-day operations. Asked to rank their concerns from strongest to weakest, access to skilled staff and difficulties buying and selling in the European Union came out on top as a primary worry for games businesses.

And when I spoke to Ian Livingstone, Chairman of Sumo Digital and prominent Remain campaigner, about the issue, he highlighted the belief of many UK games businesses that leaving the EU could put them in a tricky legal position.

"If we are not at the table we have no voice on how this market is being shaped.  EU consumer law, competition law, copyright law, audio-visual content regulation, data protection law are all being reviewed, with the role of games-critical online platforms also coming under scrutiny," he said. "Significant departures from rules on cross-border commerce may make it more difficult for UK-based companies to offer games direct to the whole EU market," - potentially posing problems to UK games businesses.

However, the precise legal impact of Brexit on games businesses didn't feel particularly clear to many - which is one of the main reasons why the Osborne Clarke event took place.

The legal case for Remain

Before we dive head first into the law, there are a couple of important caveats.

The first is that Osborne Clarke's position on the referendum as a company is neutral. Though individuals at the company are free to hold their own opinions, at a workshop like this one individual partners are held to a standard of analytical neutrality when advising on this topic.

Second, and perhaps more importantly, the event was run under Chatham House rules. As a result, that means we do not have direct quotes from anyone in the forthcoming section, but we are able to report what was said and the spirit within which it was shared.

Osborne Clarke covered four main areas of law that both applied to the games industry and could be impacted by Brexit: consumer law, data protection law, employment law and copyright law.

"If we are not at the table we have no voice on how this market is being shaped"

Ian Livingstone CBE

Over the course of the seminar, there were a couple of areas where it felt as if the Remain option gave games businesses a legal advantage over leaving.

The most prominent area for this was consumer and competition law, where it felt like leaving the European Union would put UK games businesses and individual consumers at a real disadvantage. There were a number of reasons for this, but the biggest is that British games businesses would leave the still developing Digital Single Market (DSM) initiative.

Although it won't offer a Europe-wide framework to allow pure free trade of digital services and goods, the DSM intends to harmonize the sale of digital goods across the continent in a similar way to physical goods. It is likely it'll help consumers to compare product prices across the continent easily (say on Steam) and it aims to stop companies geo-fencing content. So if you've got a PSN account in the UK, you would be able to, theoretically, download your purchases on a PS4 in France without restrictions.

By missing out on becoming a member of this, Britain will become a more difficult place to do business digitally. Companies will have to treat the UK as a distinct entity, meaning that it could become more awkward to do business in the country in comparison to our harmonised EU neighbours. And with content providers potentially fencing the UK off as a separate market, failure to remain in the EU and join the DSM could lead to the digital equivalent of trade barriers - something which could be problematic.

But it isn't only consumer and competition law where Brexit could put the UK at a disadvantage. When it comes to data protection and data privacy, it's pretty clear the UK will have to uphold European standards even if we were to leave the European Union.

There are two reasons for this, the first of which is the General Data Protection Regulation (GDPR). Negotiated over a number of years, agreed in April 2016 and set to come into force in April 2018, the GDPR intends to hand back control over personal data to individual European citizens.

Because Britain has already signed up to the measure, which includes agreeing to a single set of data protection rules across the EU, elevating the principle of privacy by design and asking users for consent to access their data, it will likely follow the measures - meaning we're tied to a European standard however we vote.

This effort to trail what Europe does will likely be supported for a second reason, which is the EU's demand that any business outside the EU provides "adequate" protection for consumer data.

"British games businesses could be held back in their efforts to trade with the EU if it were decided that the country's data protection efforts weren't up to scratch"

This is, apparently, a potential problem for the UK. Considered relatively weak on the issue of data privacy, British games businesses could be held back in their efforts to trade with the EU if it were decided that the country's data protection efforts weren't up to scratch. This means that tracing the EU standard would likely be normal for UK games businesses anyway, offering Brexit little to no advantage on this front.

Finally, changes to employment law will possibly disadvantage individuals and small businesses working in the sector.

On an employee level, leaving the European Union could mean that directives relating to holiday pay, anti-discrimination laws and termination rights could be removed - shifting UK employment law in favour of employers and weakening workers' rights.

Meanwhile, small businesses could find it harder to trade in the EU. While larger businesses might relocate their workforce or open up an office in the EU area to remain in the tent, smaller businesses that work on contract or contract business out to the continent might struggle when the UK renegotiates trade deals.

Add that to the fact that individuals travelling in the EU may need to consider tourist visas in certain territories - depending on how one-to-one national negotiations go - Brexit could cloud the legal waters for games businesses.

The Brexit Club

However, despite the evidence that Remain would provide greater security for UK games businesses, there was also plenty within the legal advice that suggested Brexit might have less effect than many believe.

The area where this felt indisputable was copyright law. Governed by the Bern Convention of 1886, copyright has always been, and is likely to remain, the preserve of nation states. EU efforts to harmonise copyright law has been successfully resisted, meaning current copyright law will likely remain in place.

Copyright aside though, there was one surprising area where Brexit would, initially, make little difference - employment law. In stark contrast to what I expected to hear, businesses hiring from Europe would likely be unaffected by Brexit in the short to medium term for a number of reasons.

The first reason is the negotiation window established once Britain says it will leave the European Union. Britain will, due to EU rules on member states planning to leave the Union, have a minimum two years to sort out its exit. But during that period, life will go as normal, meaning that employment and freedom of movement legislation won't be affected.

"Though immigration law is tightening and there could be issues with Visas if Britain were to leave Europe, roles such as game developer and animator are on the shortage skills list"

Second, EU retained rights of residence will likely be respected in the case of Brexit. In practice, this means that EU citizens currently working in the UK will almost certainl, be allowed to remain and gain retained rights of residence to allow them to stay in the country.

Third, and crucially, the games industry will likely be less affected than other sectors by Brexit because of the skills shortage it currently faces. Though immigration law is tightening and there could be issues with Visas if Britain were to leave Europe, roles such as game developer and animator are on the shortage skills list. This makes it easier to get people who fill these roles into the country, meaning that if you can find the person you want and sponsor them they can be in your company, according to the lawyers at hand, in roughly 3-8 weeks - even if we were to leave.

In short then, the risk of Brexit is perhaps not as great as it might appear to the games industry, Certainly there will be problems, particularly on the consumer law and data protection front. But at employer level, the short-term cushion of the negotiation period, the presence of key industry skills on the shortage list and, arguably, the likely reduction of workers rights could mean relatively little disruption in the short term.

The great unknown

So, in an attempt to summarise, the conclusion I took from the event is that a vote to leave the European Union would not cause the sky to fall in on June 24 2016.

In the short to mid-term there would be some disruption for the industry, which would likely hit individuals and smaller businesses. But the games industry's position as a growth sector will probably mean it can circumvent the hottest issues (e.g. immigration for work purposes), while the biggest companies will probably be able to solve their problems by hopping on a plane to Sweden or Germany - meaning they could be relatively unaffected.

However, despite that, it was also impossible to escape the feeling of Brexit throwing us into a deep dark chasm of uncertainty. During the entire event, and even when speakers felt relatively confident in their analyses, caveats such as "maybe", "probably" or "possibly" would litter the conversation.

This is, obviously, partly due to the nature of the legal profession and its careful couching of terms. But it also hits at the heart of a fundamental truth of this debate: we might be okay on June 24 2016, but how will we be on the June 24 2018 or the June 24 2020.

Harold Wilson famously said that a week is a long time in politics, but British citizens, and games industry professionals, are being asked to make a Yes/No decision that will shape the political landscape for years to come.

"A vote to leave the European Union would not cause the sky to fall in on June 24 2016...[but] it was also impossible to escape the feeling of Brexit throwing us into a deep dark chasm of uncertainty"

Ultimately, we can't really know how Brexit would affect the legal aspect - or any other aspect - of the games industry because there are so many things we don't know.

As one person at the event commented, very few people will be 100% Yes or 100% No because the referendum encompasses an enormous number of complicated issues such as political identity, conception of democracy, the current state of the global economy and the current institutional state of the EU.

And that's before you even try predicting a future for the next five years, where we could see literally dozens of combinations of political leaders attempting to find a solution to an exit, which could encompass any one of three outcomes outlined by the LSE. Or something else entirely - who knows, right?

In short, legal issues for the games industry is just one small part of a messy and complicated debate. What this means for games industry professionals, then, and building on some advice from a person speaking at the event, is that it's best to shuffle the precise details of complicated debates in favour of efforts to turn abstract personal views into an informed political decision.

And though Livingstone backs Remain, the two questions he posed to me when I asked for advice on how to vote feels a better way to determine the issue at hand.

"One, is stepping into the unknown on your own good for understanding, relationships, stability, business, the economy, or anything? And two, look at the people and organisations who are for and against. Whose judgement do you most trust?"

It is the answer to questions like those, not the minutiae of complicated legal debates, that will best shape your position. And that applies as much to the general public as it does to the members of the UK games industry voting later this month.

Related stories

Discord clamps down on hate groups

Gaming chat and text app blocks alt-right server and bans users

By Will Freeman

EA and Take-Two say Trump administration is harming the games industry

“There is a constant shortage of qualified, high-skilled labour within our industry”

By James Batchelor

Latest comments (10)

George Williams Owner A year ago
All I know is that since Jan 2015, everything I purchase online now costs 20% in VAT thanks to the EU and there is little evidence to suggest the EU impacts on the UK's ability to develop games. We developed games before joining the EU and there's no doubt that will continue after.

As for Brexit, all the scenarios are based upon our Government not willing to renegotiate any trade deals or ensure that we avoid a 'World War 3' or 'Great Recession' - Cameron can't decide which will come first - but from a personal point of view, the EU does not want to reform and Camerons laughable 'deal' proved that beyond any doubt. They just want to continue sucking money out of economies to pay for their gravy train.
3Sign inorRegisterto rate and reply
Nick McCrea Gentleman, Pocket StarshipA year ago
We developed games before joining the EU and there's no doubt that will continue after
There was a UK games industry before 1973? :-)
34Sign inorRegisterto rate and reply
Tom Keresztes Programmer A year ago
Why is the EU introducing these rules?

It is an effort to ensure that Member States receive their ‘fair share’ of VAT revenue and put a stop to large multinationals basing themselves in a single low-VAT Member State (e.g. Luxembourg) and using that low VAT rate for the whole of the EU in order to keep prices down. However, these rules apply equally to smaller digital businesses.

(1) If you sell digital services directly to EU customers, then you need to ensure compliance with the new VAT rules.

For example, if a games developer or music studio self-publishes and distributes its products online and direct to customers (e.g. via its website), it will be responsible for calculating and collecting VAT from customers based on their national VAT rate – in practice, this means:

Going through the MOSS process;
Investing in sales/accounting software which can automatically carry out different VAT calculations;
Ensuring you can identify the customer’s location: the guidance so far suggests that you make a reasonable effort to identify the customer’s location, which involves gathering at least two pieces of evidence – such as a billing or invoicing address; country of residence; or IP address; and
Amending your T&Cs and privacy policy to ensure that customers know about and give their consent to this use of their personal information.
11Sign inorRegisterto rate and reply
Show all comments (10)
George Williams Owner A year ago
We did before Tony Blair sold this countries soul in a failed attempt to become the first EU President.
1Sign inorRegisterto rate and reply
Morville O'Driscoll Blogger & Critic A year ago
All I know is that since Jan 2015, everything I purchase online now costs 20% in VAT thanks to the EU
An updating of value added tax rules. There was a reason major corporations had a base in Luxembourg - because it used to be the retailer who paid VAT for digital purchases in the country of supply, and Luxembourg had very low rates of VAT.

Which underscores the part I hate about the referendum - that misinformation (or poorly vetted information) is everywhere.

(Edit: Damn, too slow on that point above. :p )

With regards to the article, I think the destabilization of the pound would be a worrying issue for a global market like the games industry? Especially in digital distribution, it's an interesting quandary - a lot of games have a MSRP calculated in dollars, then converted roughly. A $60 US game equates to £40 in the UK (so a base-exchange of $1.50 to the £1, which is what the rate has hovered at give-or-take, for awhile). If the pound drops to $1.35 or less, then will publishers set a new minimum MSRP for UK games? Prices have been trending upwards here for a few months now, so a "realignment" of AAA games pricing so that £50 is the standard, not the exception, would make sense. And would mean that a AAA game would cost the same as an EasyJet flight to Spain.

Edited 2 times. Last edit by Morville O'Driscoll on 6th June 2016 1:36pm

6Sign inorRegisterto rate and reply
Aleksi Ranta Category Management Project Manager A year ago
Putting the details and "what ifs" aside and just thinking of this on a very very basic level...if we, as an EU block, cannot get a principally good idea to work for everyone, so that we everyone is content and feeling empowered, it would truly be a great shame and also show how humans just cant agree, other than agree to disagree.

Will be interesting to watch the referendum unfold.
1Sign inorRegisterto rate and reply
James Coote Independent Game Developer A year ago
I don't think it'll have much effect day-to-day on my little indie studio's ability to make and sell games. It's the less tangible things like the indie scene here in London, which attracts people from all over Europe. Even if EU indies aren't forced out the door the next day, it's a big signal saying "the future is not here"
8Sign inorRegisterto rate and reply
Chris Payne Managing Director & Founder, Quantum Soup StudiosA year ago
I'll take 20% VAT and a tiny fraction of our GDP in exchange for an unprecedented 70 years of peace in Europe and dozens of progressive environmental and human rights improvements. EU legislation has been instrumental in reducing crunch culture, despite the opt-out clause that I'm sure many of us have signed.
36Sign inorRegisterto rate and reply
Morville O'Driscoll Blogger & Critic A year ago
A drop in the pound is great for exporters and since the games industry is an export driven business probably a good thing.
For UK publishers selling abroad, it's aces. But look at where pricing decisions are usually made for AAA games - in my experience, it's always priced first in the US, and then converted for "foreign markets". This is mostly going off of PC/Steam, though, so...
However it won't last. I think the drop in the pound is to do with the uncertainty not whether leaving or remaining is good or bad.
*shrugs* Maybe. I don't think it'll drop rock-bottom, but I do think it'll be affected by a Leave vote. In the short-to-medium term I do think money will move out of sterling into more stable markets. But, hey, if I could guarantee I was right about this, I would be wayyyy richer than I am. :p

Edited 1 times. Last edit by Morville O'Driscoll on 6th June 2016 6:42pm

1Sign inorRegisterto rate and reply
Thomas Kennedy Unemployed (Seeking work) A year ago
Now I say this as a person firmly in the Leave camp so maybe I speak with some bias here.

To me I don't see the game industry taking a significant hit hell even noticing a Brexit due to a few reasons, for one talent pool wise it wouldn't be any different, I mean if somebody from the states wants to get into the UK to get into the game industry well the only difference would be they wouldn't be going into an EU country and if people in the EU want to work in the UK (or vice versa) it would probability be more akin to somebody going to work in Canada, in terms of the pound well the pound dropping would benefit UK in terms of exports but as Morville said pricing is normally dictated by America so it needs to be taken with a grain of salt .

Personally speaking I feel that the UK games industry won't take a substantial hit to warrent any form of worry but hey thats just me
3Sign inorRegisterto rate and reply

Sign in to contribute

Need an account? Register now.