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What Theresa May's Brexit speech means for the UK games industry

Dr Jo Twist discusses what comes next for games as UKIE embarks on data gathering mission

This week, Prime Minister Theresa May delivered her much-anticipated Brexit speech, which, seven months after the referendum result, finally provided some clarity on what 'Brexit means Brexit' truly means.

In those months, UKIE has been consulting intensively with the sector through our working groups and via surveys, and feeding those results directly to government, and ensuring the concerns of interactive entertainment are heard in papers submitted to government. It is a critical time to make sure we are front and centre of a future proof Industrial Strategy.

UK-wide consultation.

We're now embarking on a huge evidence gathering drive by launching a new industry-wide Brexit consultation and undertaking a 10-stop Brexit roundtable tour across the country - to hear directly from you about your key concerns and what principles a new immigration system should be built around. We want to be sure that we're putting across the industry's accurate views, ideas and concerns to government and ensure you help shape our policies.

Only by uniting in voice and through evidence will we make the strongest case to government to build the best conditions possible in a post-EU UK.

This nationwide intelligence gathering will inform the questions around the key issues of access to talent, access to markets, free flow data and the funding reforms brought about by exiting the EU ahead of Government's negotiations.

What does Brexit mean?

The clarity provided by the Prime Minister this week will not be to everyone's liking and is far from providing us with certainty as to what the final version of our future relationship with the EU will resemble once it has been approved by our 27 European neighbours.

So what have we learned about the type of deal we'll be seeking and the impact it could have on UK games businesses?

"Since the run-up to the referendum it's been clear that ensuring that games businesses continue to have access to the people they need to grow and thrive is our number one concern.

Access to talent

People make and sell games, not bots. Since the run-up to the referendum it's been clear that ensuring that games businesses continue to have access to the people they need to grow and thrive is our number one concern. These skills bleed extensively into other innovation and creative sectors and are vital for our future competitive economy. 70% of companies we surveyed said access to talent is "critically" important to the industry and that the most detrimental aspect of Brexit would be new difficulties in sourcing high-skilled EU people who bring with them experience, specific skills and perspectives.

Following May's speech, this remains our number one concern. She did not say much to reassure and counteract the rhetoric we've heard. Whilst she did say she wants to guarantee the right of EU nationals in Britain and that the UK will always want high-skilled immigration, she remains wedded to net immigration targets and vowed to control "the number of people coming to Britain from the EU."

While we wait for the Home Office to give an indication of the kind of immigration system that might work for EU citizens, it is crucial that we present the data and evidence to prove to policy makers that the future of our industry and others depends on maintaining this flow of diverse, top global talent entering the industry. We also have to remind them not to get distracted away from investing in our own homegrown talent, too.

Access to markets

It is now clear that the UK will no longer be part of the single market as the government will commit to prioritising controls on EU immigration and withdrawing from the jurisdiction of the European court of justice - two aims incompatible with single market membership. Instead, May said she will instead be seeking an extensive, ambitious, and bespoke free trade agreement with the greatest possible access to the single market.

We also know that full membership of the customs union is looking unlikely as it would prevent us from negotiating comprehensive agreements with our new trading partners. In a customs union, members agree to charge the same import duties as each other and usually allow free trade between themselves. Instead, we will be looking for some form of agreement with the EU, whether part or independent of the customs union, for the UK to have tariff-free access to EU markets.

"As an industry that still has a sizeable market in selling physical products - including new VR headsets and consoles - it's important to ensure that UK-EU trade in physical games products is kept tariff-free"

Since the outcome of the referendum, we have been calling on government to protect the ease of trade that games businesses currently enjoy because of our EU membership. As an industry that still has a sizeable market in selling physical products - including new VR headsets and consoles - it's important to ensure that UK-EU trade in physical games products is kept tariff-free.

At UKIE we have been taking crash-courses in understanding the shape of other international trade deals and what they look like in a digital economy - because we are also a sector that largely relies on the free flow of data across borders. We can safely say that trading with the EU on WTO rules would still provide us with the ability to have tariff free trade on key games products, such as consoles and boxed games, thanks to the recent extension of the Information Technology Agreement.

We've also been asked to consider what non-tariff barriers to trade look like in a digital world where a publisher or developer can export their game to millions of consumers around the world at the press of a button. And whilst it's less clear to what extent our industry should be concerned with traditional trade barriers, one thing that has become evident from speaking with our members is how crucial maintaining the free flow of data between the UK and EU will be going forward.

The interaction and associated data flows between players, games and platforms is intrinsic to our creative business and the possibility of these data flows being impeded are unimaginable. That's why we've been calling on government to ensure the free movement of data continues following our exit from the EU by obtaining a declaration that we have acceptable safeguards in place for data protection.

Building a Global Britain that works for the games industry

We must remember that Brexit is only one side of the equation, and we remain committed to ensuring that the UK is the best place in the world to make and sell games, and to capitalise on the opportunities that will emerge as we begin our departure from the EU.

The recommendations we put forward in our Blueprint for Growth report ring as true today as they did in 2015, and chime well with the Prime Minister's new Industrial Strategy for a "truly global" post-referendum Britain. But we are refreshing that with a Brexit lens. We are working closely with government to ensure that games and creative industries are central to the forthcoming Industrial Strategy which must be future proof for a digital economy.

Remember: the UK is ranked third best country in the world for the ability to attract, retain, train and educate skilled workers, and we are well-equipped to deal with changes and opportunities brought by technology and innovation. This is our lifeblood. We also attracted more tech investment than that of any other European country in 2016. We want to keep it that way.

So, please take 10 minutes to fill in the Consultation or become part of the dialogue by attending your nearest UKIE Brexit Roundtable, which we are hosting across the UK throughout January and February.

If you have jobs news to share or a new hire you want to shout about, please contact us on newhires@gamesindustry.biz

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Latest comments (10)

Nick McCrea Gentleman, Pocket StarshipA year ago
One positive of the current situation - I assume that many studios are benefiting significantly from the weak pound? Certainly at my old studio, almost all of our revenue was in dollars, our expenses in sterling, so a 20% drop in the value of the pound versus the dollar was hugely beneficial. I'd imagine there's at least a few studios in a similar position.
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Tom Keresztes Programmer A year ago
There other consideration than fiscal policy. Last year i've seen a massive exodus amongst my friends/former collagues from the UK. Talented people usually have options.
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Tom Keresztes Programmer A year ago
@Nick McCrea: Yep. Exactly the same reason why outsourcing India and China (and Eastern Europe) is common. Lower costs.
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Klaus Preisinger Freelance Writing A year ago
The WTO is only concerned about free transfer of products. However, people are not products. Sure, the UK so far never had problem attracting EU citizens (all 6.8% of the workforce that is). Transfer between EU states and you have the right bureaucracy in place to transfer your social security benefits around as well. Come 2019, why would a EU citizen work in the UK on your typical project based contract? Work permits, serious questions about transfer of social security status, insurances, and many more very personal challenges will affect the video games industry far more than the question whether some plastic from China can be shipped to the EU market free of tariffs.

Even if shipping a product remains largely unaffected due to free trade agreements, the creation and promotion of games could be deeply affected, based on the number of EU citizens affected within each studio. It is not going to be doom and gloom, just different.
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Chris Payne Managing Director & Founder, Quantum Soup StudiosA year ago
I'd like to properly understand how Brexit might affect digital sales. We've already seen Apple raise their minimum app price in the UK, presumably Steam will follow suit. At the other end...how are royalties paid from Valve into the UK taxed? How might new international trade deals affect that?

But yeah, economic issues aside, Brexit is a frighteningly isolationist and regressive strategy...
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Tom Keresztes Programmer A year ago
@Chris Payne: Think the real issue that by EU and US law you need to pay the VAT (~ sales tax) in the state the consumer lives (if you are selling from outside of the EU) If selling serious amount, you need to register for VAT in every country you sell. It gets complex really fast, but Steam and Apple handles this for you. Otherwise its a massive pain to match every country's regulations.

With Steam the final price you set already includes the VAT, so your actual income varies. The US has agreements with the EU to avoid double taxation, i presume the UK will do the same. Regulations are a different issue, but you need to talk to a professional accountant, i've only done limited business on my own.
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John Bye Lead Designer, Future Games of LondonA year ago
@Nick McCrea: the poor exchange rate may be beneficial for a while, but it's also raising the cost of imports (everything from food, fuel and energy to all those computers, consoles, smartphones and tablets we work on), which is driving up inflation, which in turn puts pressure on wages to go up too. So any benefit is probably only going to be temporary.

Not to mention that ending free movement for EU citizens will make it harder and more expensive to attract and retain skilled workers from the EU to the UK.
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Nick McCrea Gentleman, Pocket StarshipA year ago
@John. Of course, that's all correct; I offer the counterpoint merely because, even in the opinion of many economists (Paul Krugman, or Ashoka Mody, say), the falling pound isn't at all where the pain of Brexit lies. The effects of depreciating sterling are positive for some, negative for others, and very very difficult to call as net either way. Inflation will certainly rise. But long term there are many potential positive effects.

People like Krugman (who it is worth noting is vociferously anti-Brexit) suggest that Britain was suffering from a City-induced version of the Dutch Disease - namely the huge influx of foreign currency reserves the City brought in caused the pound to rise to a level which has really strangled a lot of our native industry. The economic consensus against Brexit does not in fact extend to consensus with regards to the specific effects of the falling currency.

In short, oppose Brexit by all means. There are a million and one reasons to do so; but basing the argument on only one side of the effects of the falling pound is definitely not the strongest hand here (and vice versa of course - just because there are some positives doesn't mean it's all gravy).

As a general point (and not in response to John), I always try to follow the Krugman-doctrine of avoiding what he'd call 'wishful thinking' *especially* when it's in support of my preferences. Before the Brexit vote he repeatedly warned those making declarations that there would be an immediate recession that the evidence did not support that, and if it didn't happen, people would use the lack of recession as proof that the 'experts' were wrong - this kind of hyperbolic argument is part of the reason why the reputation of experts is under challenge - some people cannot help themselves but to advance their arguments beyond the point which they are supported by evidence.

That's kind of where I am on the pound - the evidence that I read suggests that the effects are very mixed. Hence I think it's worth bearing the positives in mind.

Edited 3 times. Last edit by Nick McCrea on 19th January 2017 3:57pm

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The biggest concern has to be with talent. The introduction of Computer Science into the UK curriculum is obviously good, but until we start to see a steady stream of skilled graduates, a lot of the best triple-A studios within the country will rely on its foreign talent.
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Tom Keresztes Programmer A year ago
@John Owens: As far as remember, the actual experts did not say any of that. Financial times analysis was uncertainty and as a result pound losing value (estimated was 1.2 to 1.3 USD to GDP exchange ratio by end of 2016, and 1.22 by the end of 2017), and between 1% to 7% GDP loss *after* the UK leaves the EU, depending on conditions thereafter.

Inflation will very likely rise in the next 10 years, based on current trends it will be 2.7% by 2020. This will require an interest rate rise, or other financial source (more debt). Currently, the measured inflation is higher than the reported one (1.6 vs 1.4)
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