Although 2017’s forecast for the UK video game industry looks promising overall, the fight for raising institutional equity finance remains a huge uphill battle for U.K. developers.
A survey of 52 UK game developers by The Independent Games Developers Association revealed that only 11 percent of games companies succeeded in raising institutional finance 2016, while 89 percent failed. Another 33 percent failed to gain grant funding, and 21 percent couldn’t raise work-for-hire finance from publishers and other clients.
The trade association further purports that equity finance is less abundant for UK developers than for US developers and companies in other British technology sectors. The research findings prompted TIGA CEO Richard Wilson to call out for measures that the UK government needs to take to ensure continued growth in the games industry.
To start, Wilson called for enhancement to Research & Development Tax Relief and Games Tax Relief, which remain critical sources of finance for game developers, along with improved incentive schemes like the Enterprise Investment Scheme and the start-up oriented Seed Enterprise Investment Scheme. Lastly, Wilson called on the government to implement a Games Investment Fund to make grants or loans readily available to games businesses on a matched funding basis.
Other key research findings are included below:
• 73 per cent of UK games developers made at least some use of third party finance sources in the last 12 months to cover their costs.
• Work for hire from publishers or clients was used by 56 per cent of developers over the last year and this remains the most common source of third party funding for developers.
• 31 per cent of respondents had accessed grant funding (e.g. Regional Growth Fund, Innovate UK, Games Prototype Fund, UK Games Fund, Creative England, Scottish Enterprise, Creative Europe).
• 21 per cent raised debt from a financial institution.
• 19 per cent raised equity investment from individual investors (e.g. angels or friends and family).
• 10 per cent made use of project finance.
• 10 per cent raised finance via crowd funding.
• 8 per cent raised capital from an investment fund.
• 2 per cent generated finance from corporate venture capital funds.
• 2 per cent received money from a business accelerator.