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Can the UK video games industry continue to thrive?

When you think of Leamington Spa, you might imagine a quintessential Central England settlement full of retirees, parks and grand Regency architecture.

You may be surprised to learn that the place – and the surrounding area – is home to a thriving group of video game developers, employing about one in 50 people in the city and raising more than £ 100 million for the local economy .

Nicknamed ‘Silicon Spa’, its strength as a video games cluster is attributed to brothers David and Richard Darling, who founded motorsport games developer Codemasters in nearby Southam in the 1980s.

The video game industry has grown tremendously this year as people spend more time at home

The video game industry has grown tremendously this year as people spend more time at home

The developer of Formula 1 and World Rally Championship games reported doubling its half-year revenues this week following the release of three new games, including F1 2020.

It also owes this success to the fact that people spent more time at home playing games this year because of the coronavirus pandemic, which has undoubtedly damaged the global economy, but was a godsend for developers.

Another beneficiary is Sumo Group. Sheffield-based, but with an office in Leamington Spa, the creator of Forza Horizon said the increase in the number of gamers was a crucial factor in its revenue growth of more than a quarter in the first six months of the year.

Leamington Spa's video games industry employs about one in 50 of its total residents

Leamington Spa's video games industry employs about one in 50 of its total residents

Leamington Spa’s video games industry employs about one in 50 of its total residents

Chief financial officer David Wilton told This is Money that the pandemic has given a significant revival to a games industry that was thriving even before Covid-19 broke out.

David Wilton, CFO of the Sump Group, believes strong industry growth is likely to slow once lockdown rules are relaxed

David Wilton, CFO of the Sump Group, believes strong industry growth is likely to slow once lockdown rules are relaxed

David Wilton, CFO of the Sump Group, believes strong industry growth is likely to slow once lockdown rules are relaxed

“There has been continued strong growth in video games for years,” he said.

“This was boosted by the pandemic and there are both new gamers and more games being played by existing gamers.”

Recent figures from market research firm Mintel estimate that the UK video games and console industry will grow 55 percent in 2020 to £ 1.8 billion and more than £ 2 billion in value next year.

This growth was reflected in the share prices of companies like Sumo, which rose 50 percent between January and November 17, while Team17 Group’s more than doubled and Frontier Developments’ rose 90 percent.

Further research by the British game organization The Independent Game Developers’ Association found that the video game development industry has grown to both record highs and the fastest annual rate since the records began in 2007.

When asked about the industry’s key strengths, Richard Wilson, CEO of TIGA, said: “A rich legacy of game development, a large studio population and a highly experienced workforce.”

Bossa Studios boss Henrique Olifiers says working from home has posed major logistical challenges for the company

Bossa Studios boss Henrique Olifiers says working from home has posed major logistical challenges for the company

Bossa Studios boss Henrique Olifiers says working from home has posed major logistical challenges for the company

Close links between industry and universities, especially in Scotland, where the Grand Theft Auto and Red Dead Redemption II games were created, provide an efficient pipeline from study to final work.

Meanwhile, globally, the games market is predicted to rise by nearly a fifth this year, according to games analyst Newzoo, $ 15.6 billion above its previous forecast.

Some of the big old players in the industry, such as Nintendo, Activision Blizzard and Sega, have increased their dominance by posting excellent financial results in recent months.

Super Mario and Pokemon maker Nintendo tripled its first half net profit to £ 1.53 billion thanks to the high sales of its Switch consoles, where gamers can play the record-breaking commercial hit Animal Crossing: New Horizons.

And just this month, the Playstation 5, Xbox Series X and Series S went on sale and underwent the biggest launches of their product family ever, creating another potentially transforming moment for the games market.

Red Dead Redemption II was created by Rockstar North in Edinburgh, Scotland

Red Dead Redemption II was created by Rockstar North in Edinburgh, Scotland

Red Dead Redemption II was created by Rockstar North in Edinburgh, Scotland

Wilton does expect the rate of growth to weaken somewhat when restrictions begin to ease and people’s lives return to “some form of normalcy,” but he thinks it will nonetheless remain solid.

Henrique Olifiers, Head and Founder of Bossa Studios, also expects his company’s performance to continue to thrive after the ‘predictive’ results it achieved in 2020.

Still, he adds that this year has been ‘bittersweet’. The company behind the Surgeon Simulator game has fared well financially with more people working from home, but he notes that the company has been creatively influenced by the workforce working remotely.

“Adapting to a permanent remote work environment is now a high priority,” he argues, “with new practices and tools to make up for any shortcomings caused by the lack of direct on-site collaboration, particularly in the creative field.”

Game developers’ offices rely more than most on the water cooler chats, face-to-face meetings, and casual interactions that can be critical to the production of new ideas and products. Zoom meetings don’t quite make up for the real thing.

Market research firm Mintel predicts that the UK video games industry will grow 55 percent by 2020 to £ 1.8 billion and grow to over £ 2 billion next year.

Market research firm Mintel predicts that the UK video games industry will grow 55 percent by 2020 to £ 1.8 billion and grow to over £ 2 billion next year.

Market research firm Mintel predicts that the UK video games industry will grow 55 percent by 2020 to £ 1.8 billion and grow to over £ 2 billion next year.

Olifiers says technology companies are working hard to fix this. However, he stated ‘there is much more to be done in terms of adaptation and inventing new working methods. This is a major governance challenge that must be addressed. ‘

Recruitment is another major concern. “It seems remarkable that we cannot find enough people with the right skills at a time when so many industries are cutting jobs,” said CEO David Wilton.

The company recently launched a digital academy aimed at attracting graduates in the non-games industry. Two months ago, it got its first batch of interns, all of which, according to Wilton, has been done without government support.

Creative industries are highly dependent on collaboration in workplaces. But the pandemic has forced people to work from home, and this has created problems for companies like Bossa Studios

Creative industries are highly dependent on collaboration in workplaces. But the pandemic has forced people to work from home, and this has created problems for companies like Bossa Studios

Creative industries are highly dependent on collaboration in workplaces. But the pandemic has forced people to work from home, and this has created problems for companies like Bossa Studios

Enforcement of the video game tax credit, regardless of the type of trade agreement agreed with the European Union, will also be important. TIGA has lobbied hard for its introduction, and the industry’s expansion in recent years is proof of its enormous benefits.

Outside the EU, however, access to schemes such as Creative Europe and Horizon 2020 will be cut. Richard Wilson wants alternative programs to compensate for this, and the ability for data to flow freely between the UK and mainland Europe.

Sustaining the tremendous growth it has experienced will be vital if it is to help the UK economy recover from the unprecedented disaster that caused the pandemic.

Geography is a crucial advantage it possesses. Unlike the more imposing financial sector, for example, game development is not determined by a single region. Only 21 percent of the sector’s employees are based in London.

This is in line with the government’s wish to maintain the economy. If it wants to achieve this ambition, the video game industry could be a good place to find inspiration.

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