The government’s newly published Digital Britain report has outlined three principal challenges threatening the status of the UK videogames industry and the actions required to address them, including the possibility of introducing tax relief for the sector.

“Firstly, while the UK offers many benefits to investors, it is competing for investment against lower-cost countries,” said the report, pointing out that some companies are choosing to invest overseas rather than in the UK to exploit lower costs, and in territories such as Canada that offer sector-specific support for game developers.

The UK is currently the world’s third largest games producer by revenue behind the US and Japan, according to the report, but at its current rate of decline it will slip from third in the world rankings to fifth this year, behind Canada and, for the first time, South Korea.

“Secondly, there is a shortage of skills. Instability and lack of adequate skills provision threatens to undermine the growth of the UK games industry, damaging the UK’s position in this growing sector.”

UK studios have expressed concern about the loss of experienced staff that have chosen to relocate to companies in the US and Canada, while UK studios are said to be “actively avoiding” recruiting from many of the UK’s higher education games courses, “most of which they regard as inadequate, preferring maths and science graduates.

“Thirdly, there are few indigenous UK IP owners. Although the UK games development community is recognised for its ability to create original IP, most independent studios do not have access to adequate support in order to maintain ownership of this content, and have to relinquish often 100 percent of the IP rights to (mainly) non-UK publishers, in return for initial investment.”

Digital Britain recommended three actions to address the challenges set out in the report.

“The Government has committed to work with the industry to collect and review the evidence for a tax relief to promote the sustainable production for online or physical sale of culturally British video games. This work will balance any potential support with the need for fair competition and ensure value for money for taxpayers.”

Its objectives are to support the creation and retention of new IP and technology in the UK, and the emergence and growth of new companies.

Secondly, it cited the forthcoming higher education framework and its shift in incentives from purely demand-led emphasis in courses towards meeting recognised skill gaps.

“Developing and promoting graduate and post-graduate courses that combine ‘hard’ excellence in science, technology and mathematical skills with the ‘softer’ excellence in business and creative skills mark a sea change in the government’s approach to the Skills for Digital Britain,” it said.

“Thirdly we will examine the options arising from a feasibility study into a new Usability Centre for Video Games. The feasibility study, commissioned by the North West Regional Development Agency together with industry partners, conducted preliminary research into the industry appetite for a videogames centre of excellence in the UK. The report proposes a model of support which combines usability testing, applied research, internship training and public interface components in a single facility to be based in the MediaCity complex in Salford.

“The primary aim of such a Centre is to address issues around skills development offering graduates the work related training necessary to enable them to secure their first job in the industry and helping to bridge the current gap. The opportunities offered would build on existing training and skills work such as that established by the University of Abertay, Dundee, who have demonstrated how to successfully equip graduates for work in the industry.”