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The UK industry stares down a Brexit disaster

2018 in Review: There are no silver linings to Brexit for the UK industry, as uncertainty and the threat of No Deal create a difficult business climate

There's one overwhelming emotion associated with any conversation about Brexit at the tail end of 2018, and that's exhaustion.

Fear, concern and regret are mixed in there too, in proportion to the individual circumstances of the person you're talking to, but after two years of endless, tedious and infuriating coverage of the process, exhaustion with the whole topic is definitely the major emotion for most. That exhaustion begets a sense of resignation; no matter how ludicrous or stupid the antics of Westminster get -- and on that front new peaks have been scaled over the past week -- it's become genuinely hard for many people to see this ongoing charade as anything other than political melodrama divorced from the actual consequences it will bring.

Yet entirely separate from whatever daily nonsense springs from the UK's desperately unqualified and ill-equipped political set, those consequences continue to come relentlessly down the pike. On March 29 next year, a little over three months from now, the UK will leave the European Union through the automatic process of law. Nothing further needs to be done for the UK to crash out of the EU without a deal, which is a problem, because "nothing further" is about the extent of what the nation's government seems to be capable at the moment.

"For the UK's games industry, the consequences of a No Deal Bexit would be pretty serious"

Only a small minority of hardliners (whose surface doesn't generally have to be scratched very hard to discover an economic self-interest in immiserating large swathes of the UK) actually support exiting without a deal. Unfortunately, there is no majority in Parliament (or seemingly in the nation) for any other solution, and "No Deal" is the only scenario for which no majority is actually required.

For the UK's games industry, the consequences of No Deal would be pretty serious; materially impacting the ability of studios to attract and retain skilled developers, introducing problematic tariffs and trade barriers that could impact not just the selling of games overseas but also work-for-hire arrangements and outsourcing, and creating administrative problems in everything from the handling of customer data to the ability to access products and services upon which the industry relies. There are potential solutions to some of these issues, but they all incur significant resource costs and would combine to make the UK a more expensive, uncompetitive and unattractive place for the games industry to do business.

Of course, No Deal isn't the only option on the table. The Government still hopes to somehow scrape up the votes to pass its negotiated deal, which would in itself create a less favourable environment for developers than they already have (hiring, in particular, would be significantly impacted, though perhaps less so than under a No Deal scenario), but would largely see the UK buying enough time to try to negotiate a trade agreement.

"Instead of delivering longed-for certainty, 2018 has done little but pile uncertainty upon uncertainty"

Notions of a second referendum (predicated on the idea that the public should be allowed to give a second opinion now that the parameters of what is possible in an exit agreement are known) or even a straight-up cancellation of Brexit by Parliament have been floated, but remain deeply unlikely outcomes at this point. Deal or No Deal is the game we're playing here; neither option is attractive.

A further complication arises from the fact that we still don't know which of those options is going to become a reality next spring -- or whether the so-called "People's Vote" or another option will become more realistic in the interim. That uncertainty is hugely damaging in itself. Speaking to people in the UK games industry back in 2017 about Brexit -- a conversation topic that was entirely inevitable but already wearing people down -- a recurring theme was the expectation that 2018 would bring some clarity and certainty to the process.

Businesses need to know what to plan for. They crave certainty more than almost anything else. Studios need to know if they should be staffing up; publishers need to know if they can rely on a consistent legal and trade environment before committing to a partnership or project; everyone needs to know if there are new procedures they'll need to follow, new problems they'll need to solve, and new challenges they'll need to overcome. If it's to be a No Deal Brexit, that's pretty awful across the board, but it would be far better to know that now than in three months' time, and would have been better again to know it six months ago.

"The damage already done to the industry already is real, but tough to estimate... The damage that's to come grows worse with each passing moment of uncertainty"

Instead of delivering longed-for certainty, 2018 has done little but pile uncertainty upon uncertainty. With the timer running out, games industry leaders still don't have any insight into the legal and regulatory environment they'll be in within a few short months. Staff from the EU still don't know what their status will be. Some, sick of waiting for their fate to be decided by a Westminster paralysed by indecision and self-interest, have already started to leave the UK. Employers don't know if they can reasonably advertise positions to skilled EU nationals (who in turn don't know if it's worthwhile to apply for such positions) and may not be able to accurately forecast their future staffing needs anyway. Nobody knows exactly what they need to be planning for in terms of regulations and laws.

The one silver lining ought to be that all this uncertainty has driven down the value of the British Pound, making work-for-hire studios more attractive to overseas publishers. But that's a very tarnished kind of silver, since the degree of instability in the currency is more worrying for many potential business partners than its low valuation is attractive.

At the close of 2018, then, the British games industry finds itself in a position that has moved on from the close of 2017 only in that the looming deadline is now terribly, terribly close. The damage that's been done to the industry already is real, but tough to estimate; damage done in staff lost (or potential hires dissuaded), business expansions delayed, project bids rejected. The damage that's yet to come grows worse with each passing moment of uncertainty.

It's hard to take much solace from the notion that, hey, at least the cliff edge is very close, but that's where we are right now. March 29 will at least bring certainty of some form, and businesses can start to make the plans they really need for trading after Brexit -- or, as more than a few UK industry figures have hinted in private, finally make an informed decision about whether their company's future will be brighter outside the UK entirely. That's a worst case scenario, but then again, so is No Deal.

Footloose and low on inertia, many games companies could find relocation appealing, making the UK's thriving, enormously successful games industry into one of the first major casualties of the political failures of the Brexit process. Hardly a cheerful way to face into the new year, I know. Is it any wonder this discussion leaves us all feeling so exhausted?

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Latest comments (21)

Benjamin Kratsch Freelance Journalist, GLP MediaA month ago
Oh boy. Has anyone thought about the fact that literally every industry has its EU headquarter in London? Not just gaming companies, smartphone and IT corporations, banks. It's split between London and Paris. A lot of local HQs get their budgets from London.

That's a lot of jobs. And a ton of money that might get lost in the hospitality sector because more meetings might be held somewhere else. Those companies are the ones who book 4/5 star hotels, dine in restaurants, take a cab to the airport. I really fear that this Brexit disaster is going to hit the UK economy much harder than most people anticipate. And I really hope politicians understand what's at stake here and have an emergency plan.
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David Gardner General Partner, London Venture PartnersA month ago
Rob, I would be interested to know what actual additional complications will arise for games as a result of Brexit. The article mentioned hiring, my understanding is that there is a straightforward online system for non-British nationals to complete. In terms of export, as a digital product and intellectual property, I donít believe anything will change. I agree the uncertainty is concerning, but as Iíve tried to consider the issue I donít see anything as depressing or significant as what seems to be suggested in the article. Isnít the reality that Brexit +1 day will be largely the same as the day before, the requirement for excellent creativity, breakthrough ideas, productive teams and global partnerships to reach gamers around the world. Britain has always been at the forefront of this activity (as previous comments mention, many HQs are based here) and the main concern should be about continuous innovation and building global partnerships.

Edited 1 times. Last edit by David Gardner on 14th December 2018 7:03pm

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David Cornelius Software Engineer, Dire Wolf Digital, LLCA month ago
@David Gardner: games are a digital product but the lack of international trade in other industries will affect the value of the British currency in the global economy, which will still be relevant for gaming publishers/developers in the UK. I believe this would also have a negative effect on game prices for UK citizens, making gaming a more expensive hobby.
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Show all comments (21)
Tom Keresztes Programmer A month ago
@David Gardner: The straightforward online system basically required me to prove where i worked for the last ten years, with bank statements, tenancy / mortgage records, council tax and P45 / P60s. Ignoring the cost for the moment - this is not free. This granted a "residency card", that, when applying for citizenship is not admissible as proof of residency. Lets ignore too what this would mean for my family, as they wont be easily admitted. Someone i know already left - his Japanese wife had her spousal visa refused. Obviously a sham marriage, as they were only married for 7 years.
Need to say more i am not thrilled by the prospects looking ahead ? The UK games industry is already paying below competitive rates for programmers - consider the cost of life around London. Just a reality check: More of my British friends / colleagues left this country than the total number of EU citizens i know.
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David Gardner General Partner, London Venture PartnersA month ago
@David Cornelius: lower relative GBP value is theoretically good for game development (lower cost to international buyers). And now that games are free to play British consumers win :)
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David Gardner General Partner, London Venture PartnersA month ago
@Tom Keresztes: That doesnít sound good! Interesting to hear real world examples. Now that you have a residency card are you done with admin, in other words was this a one time hassle? I also know people who left the UK out of fear and frustration with the Brexit process. Thats why I feel it is important to understand if all of these articles which are so negative are bringing facts or just more fear to the issue. Letís all work together as an industry to deal with the facts so the fear can fade. Gaming is a great industry full of great people!
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Chris Ashworth Lead AI Programmer, Ubisoft Blue ByteA month ago
The only facts that are relevant right now are that EU citizens in the UK, and British citizens in the EU (like myself), do not know if we will have the right to remain in our homes and our jobs on the 30th March next year.

Do I think this useless shower in Westminster will avoid that worst case scenario happening? Probably. But when considering risks you weigh the chances of something happening versus the impact of it happening....and the impact of no deal is very serious indeed.

It makes total sense for international talent to stay well away from the UK at present until this shambles is resolved. I certainly wouldn't consider a move back in this climate.
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Adam Campbell Game Manager, AzoomeeA month ago
@David Gardner:
lower relative GBP value is theoretically good for game development (lower cost to international buyers). And now that games are free to play British consumers win :)
Licensing costs for British companies goes up due to the week GBP. There are many ways to look at the knock on effects of this which affect us all differently.
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Ian Baverstock Co-founder, Tenshi VenturesA month ago
The only material effects of Brexit on the games industry are the devaluation of sterling (broadly good for business) and a higher barrier to recruiting & retaining EU citizens. The latter point may be offset by easier rules on hiring non-EU citizens in future.

Whilst Brexit is an enormously important constitutional, political and economic issue for the UK (and the EU) and will have significant impact in other industries, the kind of 'analysis' Rob offers here is typical of the worst kind of pro-EU scare mongering. The games industry is a global business. Its biggest platforms, customers and markets are outside the EU. The UK is a phenomenally successful base for games companies and staying in or leaving the EU has almost no significant impact on that.
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Tom Keresztes Programmer A month ago
@Ian Baverstock: Turning the UK into a cheap outsourcing destination could prove to be unfeasible - there is pretty stiff competition for this business, - and around 50% of the market (top ten only) is in the EU (US and China vs Germany, Italy, France and Spain, and, currently the UK) .
Though i would be interested to know what percentage of the Chinese market is actually reachable by western companies.
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Tom Keresztes Programmer A month ago
@David Gardner: The immigration system is far from the "fast, quick, simple, clean and polite" image most people imagine it to be. I felt very uncomfortable with having to share bank statements for one.
The only thing that was clear from the process, that the Government has no accurate statistics about the number of foreign born people living in the country.
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Ian Baverstock Co-founder, Tenshi VenturesA month ago
@Tom Keresztes: Nothing about my post implied the UK is or should be turning itself into a cheap outsourcing destination.

The EU consumer market is relatively small compared to the US and China. More importantly, that EU market is largely addressed via global platforms (Steam, app stores, console stores, etc) which have zero dependence on the EU single market/CU rules.

The EU B2B games market operates - like all non-regulated service businesses - almost entirely independently of any Single Market rules. Dependence on EU B2B customers is historically low in the UK where money has more traditionally come from the US. However even those companies with B2B customers in the EU will see almost no commercial impact from Brexit.

Perhaps you or Rob could provide any material concrete example of how being in or out of the EU makes any difference to a games company in the UK outside of hiring new EU staff and the retention of the many excellent EU citizens already working with us?
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One can only try to plan accordingly; bunker down, build up a war chest, train local talent and weather through and focus on the great british creative talent (to minimize the uncertainty of uncertainty)
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Ian Baverstock Co-founder, Tenshi VenturesA month ago
@Tom Keresztes: I said 'material example'. Rob's original article suggested Brexit was "a disaster" for the industry. Dutch loot box regulation does not constitute anything close to "a disaster". I think that Rob is passing a personal, general political opinion with this article, not making a games industry point and that, specifically with regard to the games industry, his argument does not stack up.

It comes down to access to skilled people in a post Brexit world (so EU & non-EU immigration + training, education, productivity, entrepreneurship & employment law) and, crucially, the retention of existing EU people.
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Klaus Preisinger Freelance Writing A month ago
Once you manage to nail down people on providing numbers that come from measurements, both camps of the Brexit debate will fall flat. The decision to attach your willingness to change your mind to an impossible standard of proof will do the trick every time.

The easiest test though is to look at any other industry which requires high amounts of talent, resources and product distribution. For example the car industry, or the smartphone industry, where supply, distribution and support chains of goods and people far exceed any single national or political entity. The question then becomes whether top tier competitors in these complex industries became what they are, just because of WTO rules, or because of additional international treaties regarding trade. On which level can a non-multinational software maker compete? Best German tax software? Most used France-only payment processing provider? What legal toolkit will a post-Brexit UK company have to create a multi-national chain of production and will that be enough?

Turn on the news and you see May try to salvage what she can with the EU, while the better-than-EU deals with the rest of the world are a no-show. Sry, Switzerland, you do not count. This is not made easier by the reality that nothing gets people to riot in the streets faster than a new trade agreement once it is perceived to be mostly negative.

Come 2019, the UK will still remain split between those blaming the EU and those blaming Brexit. That will be more of a problem than anything else.
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Edward Buffery Head of LQA (UK), TestronicA month ago
I'm a UK-based Head of LQA for a well established games industry service provider, and European languages remain a core part of the services we provide. Much of my testing staff are therefore Europeans hired for having exceptional linguistic skills in their native tongue. While announcements have been made about the steps they will need to go through to secure their right to remain, nevertheless they are nervous about whether the rules may change again before March, and regardless of legality they simply feel less welcome in this country than they did 2 years ago, and for sure have at least been considering their other options. I'm also sure that many potential recruits who have not yet moved to the UK are staying away until after whatever happens, happens.

It might not be a 'disaster' (yet) but we're certainly feeling it, and I know many other UK companies who also either have in-house LQA teams, or established UK partners who provide LQA for them.
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Tom Keresztes Programmer A month ago
@Ian Baverstock: My point was that the rules for the EU market will be decided in the EU, and the rules will prefer local companies.
I doubt that many western companies actually managed to get a foothold in Asia, neither in China or Japan.
Disaster might be a strong word, but you only need to look at the migration statistics to see how serious problem this will be, especially with the games industry - as it is currently prohibitive for smaller *games* companies to sponsor a visa. Just check the costs :)
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Richard Westmoreland Senior Game Designer, Codemasters BirminghamA month ago
On the plus side, the tanking pound has been temporarily a good thing for companies whose main source of income comes from other currencies. The (br)exodus of talent, however, has been pretty painful.
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I think itís fair to say Robs view is affected by his worries but I think we all can agree itís hard to discuss Brexit with clarity due to the passion swirling around it, and here I mean the reader as much as the author. That highlights the fact that Brexit isn't a policy to boost business or nibble at exports, it's a radical societal change affecting much of British life in general, with an indistinct path, presaging nobody-really-knows what ends, made worse by the fact nobody really knows why itís happening.

Iíd like to see some light at the end of the tunnel but I salute anyone remaining confidant of the post-Brexit future given the atrocious lies required from the top to prop up the project. If you donít believe this, you likely havenít had cause to be exposed to whatís going on outside the margins of our parliament-obsessed media loop. For me it was bumping against the blatant lies told by MPís, talking heads and pro-Brexit leaders about Irelandís position. I realised then that if theyíll lie this much, to so many people, theyíll lie about anything. After the EURef my hope lay in the pragmatism of Britain to see the nation through. Iíve come to realise the country is poisoned with political lies on a scale Iíve never thought possible, and thus the case for Brexit Ė which many of us are banking on - is highly likely built on sand. I canít believe evidence presented by people who dismiss any evidence that doesnít tell them what they want to hear.

As for the points raised above on our industry, as long as Iíve been in gaming the #1 most difficult aspect of hiring is attracting people from outside the UK/EU. Itís an utter ballache and has been for decades and has led to hundreds if not thousands of better staff being passed over for local talent who are simply much easier to hire. Where foreign hires happen itís the gift of wealthy companies, firmly established. This mirrors a wider, more general problem of dismissing the young and refusing to address the barriers for those coming up behind us. Post-Brexit, the British companies of tomorrow, who otherwise would be competing with the world, get it in the neck. I see that as a long-term problem.

Devaluation? I personally benefit from this as Fireproof get paid mostly in dollars. This doesnít in any way give me the warm ní fuzzies about the long-term economy in general. Letís leave aside the non-trival fact that devaluation makes the savings of every single UK household less, naturally affecting those struggling the most. The notion exports automatically explode to take up the slack of devaluation is, similar to trickle-down theory, not a moneterist law but a gospel of economic religion. To quote Ivan Rogers, the previous 2.5 yrs of collapsing devaluation have engendered ďthe most anaemic boost to UK net trade triggered by any major sterling devaluation since World War 2.Ē

Leaving the EU will take a wrecking ball to British industries acting as a gate to the EU and, coasting on the EUís powerful trade deals, the wider world. Crashing out of the EU without a withdrawal agreement, never mind a trade agreement, is the kind of change that wipes companies from the nation and yet is, as of today, the most likely path. I marvel at nominally conservative and formerly practical people seriously arguing that erecting barriers and losing trade deals is, in a reversal of 100 years of policy, data and evidence, a good thing. I see all this as a long-term problem.

Wonít the economy in general and the status of 65m working people hit every business in the country whether we like it or not? If foreign talent flees, investment stops, recession kicks in, wages drop, standards fall, worker protections disappear Ė all of which Brexit ideologues like Liam Fox, Gove, Mogg and economists like Patrick Minford wish and expect to happen for its Ďcorrectiveí affect Ė we could be looking at civil & political unrest for decades. And all this topped off with a bracing wind of xenophobia, denied here in the UK but seen laughably clear from the outside in. Any hope of the UK being competitive & attractive in this scenario is so much dust & smoke. I see that as a long-term problem.

Iím not an economist or political scientist, I do try my best to understand the politics and follow the economic case. My biggest hope for the post-Brexit future now isnít optimism Ė how could it be - but rather that Iím wrong about everything. If I am, I would absolutely love to hear that's the case.
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Charlie Scott-Skinner Senior Developer 29 days ago
@Benjamin Kratsch: I admire the optimism in your last sentence, but they lack a primary plan never mind an emergency one, and seem to be incapable of anything other than being reactive
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