Brexit: Fear, Uncertainty Dominate UK Video Games Industry

“Even if an exit deal is agreed, it's just kicking the can down the road."

Flags wave outside Parliament as the
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Deal or no deal, the United Kingdom is scheduled to leave the European Union on March 29.

Brexit, a move voted for via public referendum in June 2016 and officially triggered in 2017, will mean the United Kingdom is no longer a member of the European Union and loses voting privileges on the EU’s laws as well as membership of the single market. The effects of this will be widespread, not least of which in the games industry, which is facing a period of great uncertainty.

“Even if an exit deal is agreed, it’s just kicking the can down the road,” says Tracey McGarrigan, CEO of Ansible PR and co-founder of Games4EU. “There’ll be years of uncertainty during any transition or implementation period as we negotiate our new relationships with the world, during which the UK will have lost its influence over EU developments such as the Digital Single Market strategy or new EU legislation.”

Games4EU is a grassroots organization founded by McGarrigan, digital entertainment lawyer Jas Purewal and founder of content marketing firm Go Editorial George Osborn to advocate for the games industry as it pertains to Brexit within the United Kingdom. They, along with their advisory team from across British games development, have been pleading their case to members of parliament that the games industry needs consideration and protection in Brexit negotiations.

As it stands, Britain follows EU directive when it comes to issues such as data adequacy – the laws that govern data usage, the backbone of online play and digital sales – which means the British government would need to draft its own legislation. The UK is the fifth largest consumer market in the world for games, with its 34.1 million players being valued at about £5 billion, and NIESR predicts that total trade, including electronic goods, between the EU and UK will drop by 46%. That’s a hefty disruption for both businesses and players.

A fearful climate has developed within studios and developers over the last two-and-a-half years.

“Consumer manufacturing faces exactly the same issues as for industrial product manufacturing, like factory equipment – Tariffs and VAT costs on goods being imported into and exported from the UK, potentially increased regulatory divergence over time, and wider economic impacts like further potential currency depreciation.,” Purewal said. “All of this would make it harder and more expensive, and therefore less attractive, to make games in the UK.”

As far as Games4EU can see, there’s no scenario where players aren’t losing out long-term. In an age where online-play and digital marketing are the norm, stepping out of the single-market just devalues Britain’s say. “If the EU moves ahead with further regulation of interactive entertainment, the current Brexit direction of travel means the regulation would go ahead without British involvement but still be binding on the UK both formally, as a result of any likely exit deal, and practically, given the size of the EU market and the publishers’ strong preference for common EU products wherever possible,” says Purewal. “If there are future UK regulatory efforts they will apply in the UK to UK business but have less weight abroad.”

A fearful climate has developed within studios and developers over the last two-and-a-half years. Multinational companies are making moves to stay in the EU; many, including Sony, have already moved some of their central offices to another European country, minimizing their presence in Britain. What once was a bustling hub of European games development is becoming less appealing for businesses and prospective hires.

“A few of my team when I was at Improbable were EU nationals. They weren’t a dominating presence but those guys were brilliant,” Nick Button-Brown, chairman of Outright Games, told Variety. “They brought in such great skills and they taught everybody else. They shared their knowledge and everybody was better from working with really good people. But they came because it was easy. They didn’t have to do any Visas, they knew they could come over, they knew they could go back. Now it’s not so easy. Now it’s lawyers and doing Visas and it slows it down, and not only that, being honest, they don’t feel that welcome.”

A well-tenured British games developer, Button-Brown has served in leadership positions within a number of studios, including a five-year stint as a manager for Crytek in Germany. He’s been networking across the UK to get companies thinking about what they need to do, offering advice and counsel. He describes workplace environments in flux, with colleagues and peers explicitly telling him they don’t feel welcome in the UK anymore as big decisions loom. “Spain, Netherlands, or Estonia? With a no deal Brexit looking increasingly realistic, this is the discussion at the last board meeting of how we to need to prepare for the future,” He explains. “No, we aren’t moving the whole company there, but we will set up an EU presence to ensure our partners can continue paying us without having to withhold part of that money due to the lack of a tax treaty and so that we have an EU VAT number allowing us to deal with that correctly.”

 “The uncertainty is such that quite frankly we don’t even know what to prepare for, nor how to go about it.”

Many aren’t sure what to do. “We don’t really have any concrete plans to prepare for no deal, mostly because we don’t know what the consequences will be,” says Vincent Scheurer, Operations Director for Payload Studios. “We probably wouldn’t be looking at any major expansions or investment in Q2 2019 until we have more clarity on what is going to happen and we will try to ensure that there is cash in the bank to deal with any unforeseen issues, but beyond that we don’t really know what we should do.” A sentiment shared by Henrique Olifiers, Co-Founder of Bossa Studios: “The uncertainty is such that quite frankly we don’t even know what to prepare for, nor how to go about it. We’ll do our best to protect our staff, fight whatever fight we need on international agreements and taxes, and make the best we can about whatever comes our way.”

Like any great economic schism, it’s the small businesses that are at the most risk. Without the EU talent pool, finding collaborators and creators has become that much harder for fledgling studios. “Specialist roles, that combine technical and creative skills, those people are difficult to find globally,” Jodie Azhar, CEO of Teazelcat Games, tells Variety. “If we’re to be concentrating a lot more on UK talent, we’ve got a much smaller pool of people to draw from, and the people with those skills are already going to be occupied and employed. It’s going to be a lot harder if we’re having to jump through hoops with EU systems, it might not be financially viable for some teams.”

About 34% of the 47,000 currently working in the UK games industry across over 2,200 companies are EU nationals, a population that has had an indelibly positive effect on British games creation. “There is a huge shortage of skilled UK programmers, and our success to date has come from being able to attract blindingly good talent from across the EU to join us,” explains McGarrigan. “Our priority is to protect staff, and give them access and support to legal and financial advice for them and their families and dependent relatives. It’s also unclear what will happen to UK game devs working and living in the EU.”

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Aside from a depleted staff pool, new British studios will also no longer have access to the EU start-up grants which range from €50,000 up to millions depending on the project. So not only is the cost of doing business going to go up, there’s less funding initiatives to give developers a dig-out. Companies with established market presence, contracts and legal teams will be fine because they have the resources to withstand turbulence; the indie projects cutting every corner don’t have that cushion. “The guys that made ‘Overcooked,’ two of them sitting in their lounge, working full time. Is it going to make their lives a bit harder? They have a UK publisher, so they’re alright,” Button-Brown says. “But the next ones may find it harder. The people who are doing the next “Overcooked”, they may struggle because of this.”

Tara Louise Reddy, CEO of Loveshark, a company started in mid-2018, says outside investors have become wary. “We have noticed that investors are more pessimistic around investing in general,” she says. “The topic of Brexit has been mentioned by several overseas investors who are now more reluctant to invest here in the UK.” Time spent trying to secure funding and find new hires is time away from making games and running the business day-to-day, critical aspects of a new studio finding its feet.

There’s no telling exactly what a post-Brexit Britain looks like – with weeks to deadline we’re still without anything even resembling an exit strategy as negotiations continue. The uneasiness is palpable as developers across the UK batten down the hatches as best they can for whatever comes next, hoping the damage is minimal. Amidst the anxiety, Button-Brown offers one practical, immediate piece of advice: “Make sure any EU nationals on your team are happy and feel safe, they feel loved and they feel secure.”

“Make it clear that we do love them, that we want them to stay. We want them to carry on helping us make great games.”