If peter molyneux made Populous than it was awesomely creative.
Yes, UK has great talent, but really it falls short on nurturing and funding.

I think Germany and Japan has better record in Quality after USA

Japan -
Devil May Cry
Resident Evil
Final Fantasy
(atleast these are very popular with Western People too)

Germany -
CRYTEK - Far Cry, Crysis - FPS(but very good)
Piranha Bytes -Gothic 1,2,3, Risen -RPG
Ascaron Entertainment - Sacred1, 2(atleast equal to diablo)
All these games are of really high quality

Sweden -
DICE - Battlefield 1942, 2, 2142(Great Game), Mirror's Edge

Poland -
People can Fly - Painkiller and expansions, Major role for artwork in Gears of war,
as much as Art style of GOW feels lot similar to Painkiller.
CD Projekt - The Witcher(one of very good RPG's)

Russia -
Gaijin Entertainment - X Blades
Ukraine -
GSC Game World - Stalker SOC, CS, COP
X- Blade

and so on

Great Britain -
Bizarre Creations (PGR), Rare (You Know What), Lionhead (Fable), Realtime Worlds (Crackdown), Criterion (Burnout), Eutechnyx (Supercar Challenge), Evolution Studios (Motorstorm), Firefly (Stronghold), Creative Assembly (Total War), Media Molocule (Little Big Planet), Ninja Theory (Heavenly Sword), Relentless (Buzz!), Revolution (Broken Sword), Studio London (Singstar), Sports Interactive (Football Manager), Reflections (Driver), Travellers Tales (Lego series), Team 17 (Worms)
(Awesome you never ever made a Great Simple First Person Shooter or RTS or RPG in your Big country and you are clearly world leader, and you have awesome creativity (I donot contest creativity of Peter Molyneux - though, but he is just one great man).
It seems UK is busy with kids and Sports games only.
And USA also has its fair share of innovation. Doom,Quake, Planescape Torment, Never Winter Nights were also very innovative first time, and these genres have survived till now and are most famous.

But other countries have a Glorious present where as UK had a glorious past
and USA seems to have very good past, present and brightest future.

But for Record
USA -
At the most minimum
id Software - Doom, Quake, Rage
Valve - Half-Life 1, 2, Counter Strike, Left 4 Dead
Epic - Unreal Tournament 1,2,3, Gears of War 1,2
Bungie - Halo 1,2
Ensemble - Age of Empires 1,2,3
Bioware - NWN 1,2, SWKOTOR, Mass Effect
Betheseda - Elder Scrolls 1,2,3,4, Fallout 3
Nihilist - Vampire Masquerade Redemption
Troika - Vampire Masquerade Bloodlines
Maxis - The Sims 1,2,3
Raven - Star Wars Jedi Outcast, Jedi Academy, X-Men Wolverine Origins
Infinity Ward/Treyarch - Call of duty 1,2,3,4,5
Ion Storm - Deus Ex
Black Isle - Planescape Torment

Need I say more.
Still ---
“If you look at the success of our film, our fashion, our music, our advertising, our architecture… we are a world leader, and those creative people are not going to go away,” Livingstone said, adding that it’s no surprise that franchises like Tomb Raider and Grand Theft Auto started life in the UK.

So you cannot stop Brain Drain, by being innovative. Everybody knows britain gaming studios are surviving by contract work and Innovative ones are migrating or closing.
Compared to Germany and Japan they are not world leaders in Game industry.

film, our fashion, our music, our advertising, - Wake Up you have been taken over by USA long time ago
our architecture - Eastern Europe is already choke full of more beautiful architecture while you are lot richer then them.

“We might outsource production,” he added, “but the creative intellectual property will continue to be built and created in the UK – that will never disappear. The creativity will never go away. You just have to balance the books somehow.”

Yes, but creative people will continue to go away to greener pastures. You just keep enlisting acountants after accountants and they will artisticly manage and balance the books, so that u will always be no. one on papers, without hard work.

So where is Britain world leader except the exchange price of Pound.
I do not want to hurt any one of any country but truth and fact cannot be looked over. And I am not USA, German or Japanese citizen. And I will happily Migrate to UK/USA as first choices if I will migrate.
But I intend to point out the artistic deterioration in Britain.
I also hate to say that Games have becomes only money spinners for publishers these days(look at myriad of faceless chineese and Korean MMORPG's, and lots of Formula Shooters)
Great Games like Half-Life, Deus Ex, Age of Empires, Planescape Torment are rarely attempted these days in mad rush to gather money only. The last innovative thing I have seen is Assasins Creed and Little Big Planet in last year. But I do not compare their impact to that of Doom, Half-Life, Deus Ex, Age of Empires, Planescape Torment and Halo(on consoles).(Except Little big Planet for PS3, but it is not a system seller)

The most probable thing seems that retail and digital download will continue to co-exist with even higher capacity dvds coming. For ex. a 300 GB HDVD was already made operational 4 years ago in labs. These things are going to explode out. Network speed with cheap rates is not keeping up with massive advancements in storage media capacity. From time immemorial we are running out of space on our disks.
This seems to continue. For movies it means mor esharpnes on bigger screens and for games it means more high res textures. Textures in movie Spiderman 3 special effects took terrabytes of storage whereas Rage uncompressed build takes almost one terrabyte, and this devs are crazy for movie like quality games, (some have approached it also like crysis). It seems storage space is going to be a lot bigger factor then carmack thinks.
For ex. Why did he decided to make Rage such a big size game(reason this is unavidable in search of superior visuals), already MGS 4 dev is crazy with long long videos and does not care of space. I really do not want to download those movies if ever, just the game. I actually deleted all movies from Devil may cry 3 to save space(There were in game and mpeg version both, mpeg took 2 gb while the game itself was about 800 mb)

may be because they are the users and their opinion matters. Physical owning is very desired for many. And download 18-24 GB of Rage seems really awful instead of single BRD. future games may be 50 GB soon. Think.

That was what every body said to Carmack but he was a man of results and ultimatley Quake 1 was completely playble on 33 MHz CPU, on software Renderer! That is why he is so much respected to this day. Also input of Assembly language guru Michael Abrash was also critical in Quake 1 performance. Abrash also wrote pixomatic software renderer for ut2004 later.
In any case at that time it was very big challenge to run a 3D game on the hardware available(doom was a 2d game with height encode in 2d map, so there were no room on rooms and one cannot look up and down. Quake 1 was pure 3d(first done by build engine of duke nukem though, still quake had the impact)