• Will Brexit punish the UK’s thriving gaming industry?

    June 09, 2017

  • Will Brexit punish the UK’s thriving gaming industry?
    By Dan MatthewsBusiness Journalist

    The UK economy has many jewels in its crown: banking, retail and professional services among them, but in recent years it has cut another, online gaming.

    The tech sub-sector has flourished with a combination of tech talent, investment money, government support and benign regulation.

    Yet since the country voted to exit the European Union last June, this burgeoning market’s future is not so rock solid. Questions hang over the availability of recruits and whether other countries will be able to tempt away the most promising firms in the post-Brexit world.

    Right now, the UK gaming sector is one of the biggest in the world. The wider tech sector generated £6.7bn in private equity deals last year, according to London & Partners. Meanwhile, drilling down, there are almost 1,500 mobile games developers alone.

    Online games range from vast strategy titles to bingo and the UK’s estimated 32 million players are demographically diverse in terms of age and gender.

    Growth in the machine

    A handful of factors have fuelled growth. One is the availability and accessibility of devices on which consumer can play. 20 years ago, before the dotcom boom, gaming was a big company pursuit, dominated by global outfits such as EA, Ubisoft, Sony and Microsoft.

    Digital gaming lowered barriers to entry and latterly mobile gaming blew the doors off, allowing inventive start-ups to compete on an even playing field via app download stores and digital distribution platforms such as Steam.

    Falling costs coincided with a big increase in tech talent. In London, complementary sub-sectors such as fintech became a major draw for developers, while overarching legal structures allowed capital and resources to ebb and flow.

    “The only reason we’ve been able to set up our business is because of the scope of Britain’s employment laws, and our access to European talent throughout the free market,” says Phil Lloyd, CMO of Snatch, an augmented reality treasure hunting game.

    “Together, these have allowed London to become a melting pot for the best and brightest in the continent. Putting the capital, and in particular the Silicon Roundabout up there with the most creative and vibrant regions in Europe.”

    Rising regional tech hubs

    Outside the capital, regional hubs have sprouted. Guildford in Surrey is one of the biggest. Ben Ward, co-founder of co-working studio Rocketdesk and founder of indie game developer Supergonk, points to a number of success stories coming from the town.

    These include the ambitious exploration game No Man’s Sky by Hello Games, platform title Little Big Planet from Media Molecule, Criterion Games’ Burnout franchise and Fable produced by Lionhead Studios.

    “Guildford is one of the oldest, biggest and most successful games hubs in the UK,” says Nick Hurley, partner technology law specialist Charles Russell Speechlys and co-host of the G3 Futures event.

    “We attract talent, investment and companies from around the country and beyond. The local games industry is part of a broader cluster including nearby universities providing the technology and talent of the future. It benefits from overlaps with other creative industries, particularly film.”

    Online gambling, a soaring part of the market, has blossomed in a favourable economy while enjoying benign government regulation not seen in other developed economies like the US and parts of Europe.

    “The UK has one of the most progressive licensing and regulatory regimes worldwide. Unlike many other countries such as the US and Germany, we have a professional system in place that companies can operate within,” says James Oakes, director of ZEAL Investments which backs betting firms.

    “This in turn encourages growth and new businesses to emerge. As a result, London has become a global hub for online gaming. What’s more, by sticking to a regressive regulatory framework, the US has stifled its own online gaming sector, creating a void that UK-based companies have been able to capitalise on.”

    With regulation comes legitimacy and with legitimacy comes funding. Betting sites and lottery-style games have access to debt and investments from banks and private equity institutions, giving businesses a platform for fast-growth.

    The Brexit effect

    While the future looks rosy, it is not without risks. The UK’s decision to leave the EU has created a drawn-out period of political uncertainty of the type that inhibits economic growth.

    Research by recruitment website Hired.com suggests the UK’s foreign tech talent pool – heavily reliant on inward movement from the EU – has halved since the referendum and, perhaps partly as a result, two-fifths of games companies are thinking about moving to new shores, according to a gaming industry body.

    In Gibraltar, a major outpost for the British online gambling industry and concerns over free movement of labour, it has had a particularly chilling effect.

    A Brexit whitepaper produced by CasinoUK quotes Gibraltar’s chief minister Fabian Picardo giving a bleak view of its implications: “I think a hard Brexit would be very, very challenging to the economic model that has been the source of our prosperity for 30 years.”

    Others point out that while Brexit poses significant challenges, no one can guess how an EU divorce will play out: “From an industry-specific point of view, the impact of Brexit remains unclear,” Jake Fox, CEO of the independent casino guide, Casinopedia.

    “Like all entertainment and leisure businesses, the gaming sector could lose out if rising inflation leads to a fall in real wages or if the economy tips into a recession.

    “The freedom of movement question is also a concern for international operators. Many major companies have offices and workforces spread throughout Europe, and barriers to the free movement of talent could be problematic.”

    “This is an issue for Gibraltar, where several major online betting firms have offices and where staff require easy access to the Spanish mainland. But, like most things with Brexit, it is hard to make a true assessment until we know what the deal looks like.”

    Brexit Britain is an unknowable country. There are too many variables and a vast number of negotiating points, making predicting the future impossible. While many in the gaming industry hope for the best, the confusion and instability created by a messy divorce will restrict growth in the short-term.

    The gaming industry is fundamentally strong, but Brexit is an unwelcome stumbling block in an otherwise smooth path of progress.

  • More blog posts

We use cookies and browser capability checks to help us deliver our online services, including to learn if you enabled Flash for video or ad blocking. By using our website or by closing this message box, you agree to our use of browser capability checks, and to our use of cookies as described in our Cookie Policy.