Brexit's Long Shadow: How It Will Shape The Global Games Biz

With key deadlines looming and much left uncertain, here's everything we know about where Brexit stands right now, for readers outside of the UK. (Image source: Politico)

As 2019 begins, all eyes in the UK are on the impending Brexit deadline. On March 29th, it will be two years since the Government activated Article 50 of the Treaty of Lisbon - the official declaration required for a member state to leave the European Union, at which point the UK will officially be split off from the EU. The intention of Article 50 is to give a leaving member-state two years to negotiate trade and other logistical deals with EU members and other countries in order to keep the country moving once it goes solo. That’s the intention, anyway.

The UK’s government has so far been unable to negotiate a deal that pleases everyone (or, seemingly, anyone). A deal must be approved by Parliament and, with no majority in the House of Commons, the Conservative government is having a hard time getting the votes for its current deal. With only three months left on the clock, there are worries that this could result in a ‘no deal’ Brexit. In the worst case, this means nothing gets exported from the UK, no international flights land in UK airports, and no life-saving medicines can be moved into the country until new arrangements are put in place.

Put like that, there are certainly bigger fish to fry when it comes to the impact of Brexit, but what does it mean for the UK games industry? According to many in the industry, disaster. That’s why a group of industry veterans banded together to form Games4EU, a lobbying group for the games sector that seeks to either mitigate the damage, or entirely prevent it.

Tracey McGarrigan is one of those founders, having had high-ranking marketing and PR roles at the likes of Green Man Gaming and Bossa Studios. She now has her own PR agency within the games sector, Ansible PR & Communications.

Tracey McGarrigan (Image: Twitter)
Tracey McGarrigan (Image: Twitter)

“I probably spent the first two years after the UK voted to leave the EU in shock,” McGarrigan explains. “Then back in June 2018, myself, George Osborn [please note, this is not George Osborne who was Chancellor of the Exchequer until 2016. He gets this a lot. - Ed], and Jas Purewal, as well as other people from the game industry, got active and joined 700,000 people during the first People’s Vote march in London.”

The People’s Vote is a movement to call a second referendum for Brexit. The original vote in 2016 saw only a 52% pro-leave result (51.9% if we’re nit picking) and, with knowledge and experience gleaned since then, there’s strong evidence (YouGov polls show the majority of UK constituencies would now vote Remain) that a second vote could see the UK remain in the European Union after all. Should such a vote be organised by the government.

“We noticed many other pro-EU groups were at the march too, (Tech for UK, Open Britain, etc) but only through following each other’s social feeds did we fully realise that the games industry didn’t march together,” McGarrigan continues. “We strongly felt that we had been passive in conversations about Brexit for too long, so we founded Games4EU to give our industry a voice, and to bring people together to discuss the future. Our mission is to demonstrate the harm that Brexit will do to our sector, and to campaign to create the conditions to remain in, or be as closely tied as possible to the EU. We are dedicated to explaining and fighting the impact of the UK leaving the EU on the interactive entertainment industry.”

Major impacts of Brexit on the UK games industry

Brexit could mean the loss of livelihoods and the closure of studios for even the most entrenched in the industry, but how exactly does that come about? What is it about leaving the EU that means games companies will lose money and personnel?

“One of the first tasks we set ourselves was to create our Brexit Guide,” McGarrigan explains. “At 51 pages long, for the first time since the 2016 vote, we’ve looked at in detail what the devastating drawbacks that a no deal, hard or blind Brexit are. We’ve identified 6 main concerns that the UK will face:

"Interactive entertainment businesses will face considerable uncertainty and bureaucracy, driving up costs and impeding day-to-day business.”

This has already happened. Because different sectors across the UK have been waiting for two years to find out exactly what Brexit means, companies have already had to hedge their bets. That means fewer European Union residents being hired, less risk being taken and the movement of companies’ European headquarters out of the UK onto mainland Europe.

“Products and services will be more expensive, harder to access, delayed or even partly or wholly unavailable in the UK.”

With no deals in place between the UK and European Union member states, there may be a huge increase in tariffs or a complete blockage for items coming and going from the region. ‘No deal’ means no trade deals. That includes contract work for UK developers, or external developers who work abroad. Even with deals in place, these are likely to be more expensive for the UK, who will have to subscribe to deals already put in place by trade organisations across the planet. Including the European Union. Even though one of the reasons for leaving is to gain sovereignty and create new, better deals for the region.

For clarity: European Union members are not allowed to individually negotiate trade deals with non-EU nations. The UK will be bargaining with the 27 countries that it has just had a messy divorce from.

“UK-based businesses will be compelled to relocate to EU in whole or part over time in order to comply with rules for EU trade access and to keep rights and benefits unavailable to UK-based businesses post-Brexit.”

As mentioned above, companies are already beginning to relocate their European headquarters into the EU. This hits the UK economy and vastly impacts jobs across many sectors of industry, not just games.

“Friction on UK and EU travel and sponsors being required will discourage high-skilled creative and technical staff from working here, causing over time talent scarcity and a brain drain.”

Should I stay or should I go? (Image: Sky News)
Should I stay or should I go? (Image: Sky News)

One of the major downsides to leaving the European Union (despite the UK government highlighting it as one of the main benefits) is the removal of freedom of movement. This allows any citizen of the European Union to travel freely between member states for an unlimited period of time. French, Spanish and German people can and do move to the UK with zero impediments to live and work. This has been a huge boon for the UK games industry, which celebrates a diversely creative workforce.

It also means people from the UK can retire abroad and go on holiday within the EU without visas or additional costs. The reversal of which has surprised and outraged leave-voters. It also puts a big question mark over the rights of all current EU nationals who live in the UK, and of Brits who live abroad.

“Loss of consumer rights such as refund and return rights, fair labelling and EU mobile data roaming.”

The EU has many protective rights that cover all member states. The UK will be able to dictate its own rights after Brexit in these cases, but obviously won’t be included in cross-EU programs like free data roaming.

“And finally, we’ll experience cultural diminishment.”

We’re already seeing opinion across the world change when it comes to the UK. Brexit has been, and continues to be, an embarrassment for many UK residents.

The cost of Brexit

With so little known about what Brexit will actually look like, it’s easy to read Games4EU’s main concerns as little more than a list of vague fears. In fact, Brexiteers refer to claims like these as “Project Fear”. However, there are some hefty figures that help back them up. Even in the post-fact, post-expert world that we seem to inhabit, many of these are unignorable.

“First of all, the big number; current predictions by the National Institute of Economic and Social Research (NIESR) say that the UK will be a whopping £100bn [$126.4bn] worse off per year by 2030 if we leave the EU,” McGarrigan says. “We already know that Brexit is costing the UK around £500m [$632m] a week (that’s £26bn [$32.86bn] per annum according to the Centre for European Reform, and far more than we ever paid to the EU whilst we were a member). That’s on top of the £4.2bn [$5.31bn] that has already been spent on Brexit preparations since 2016, with £2bn [$2.53bn] more to be pumped in, and an estimated £39bn [$49.3bn] fee to cover outstanding EU membership commitments still waiting in the wings.

“Our economy is now 2.5% smaller, prompting the Governor of the Bank of England, Mark Carney, to say households are £900 [$1137] worse off than they would have been had the UK voted to remain in the EU. At the end of the first decade outside the EU, research suggests that GDP per head will fall by 3%, amounting to an average cost per person of £1,090 [$1378] at today's prices - perhaps easily absorbed if you’re a millionaire, but if you’re working in the games industry on minimum wage, that’s a whole month’s salary!”

Millions across the country will be worse off after Brexit. This is a sad, inescapable truth. This isn’t specific to the UK games industry, so what could the financial impact look like to us?

“The impact has already been felt with the uncertainty of Brexit damaging businesses and jobs, particularly SMEs,” explains McGarrigan. “Contracts are on hold, homes can’t be sold, jobs are at risk… These are the heartbreaking stories we hear at Games4EU every day from our colleagues and peers.

“The UK is the 5th largest video game market in the world in terms of consumer revenues, which are valued at £5.11bn [$6.46bn] with approximately 32.4m people in the UK playing games, and 2261 companies of all sizes employing more than 47K people, of which 34% are workers from the EU.

“From a future funding point of view, UK interactive entertainment businesses can currently apply for EU public funding ranging from €50,000 - €100,000 [$57,000 - $114,000] at the low end up into the millions of Euros for larger projects which will be completely lost after Brexit - imagine all the games that will never get made. Our ability to trade will also take a massive blow as UK businesses would no longer have access to a massive single market which easily facilitates trade through eliminating or minimising tariffs. We will instead have to manage with issues that will create massive amounts of red tape and costs including: customs declarations, security declarations and paperwork, paying import or export charges, having to design new systems and hire new specialists, face goods inspections at the border and apply new VAT rules.

“We haven’t even mentioned GDPR, the transfer of data and data adequacy, payment processes, or the loss of the EU Charter of Fundamental Rights which leaves us at greater financial risks by removing the freedoms of equality between men and women, the rights of the child, protection for unfair dismissals, fair and just working conditions, and health care - just some of the examples. The resulting increase and passing on of hiring costs, travel and living costs for developers and others in the industry is real, but the cost to us as citizens, of who we are and how we live, work and love is also going to be catastrophic. It’s suffocating.”

How did we get here?

For a period of two years after the activation of Article 50, which took place on March 29th 2017, the UK was able to negotiate the terms of leaving the European Union. So how are we three months away from leaving, with zero deals in place? To fully go over the utter chaos that was the UK government over the last two years would require its own article, but needless to say there has been a measure of complacency and incompetence involved.

We’re already on our third Minister For Exiting The EU, after the previous two resigned the position within six months of each other. The latter of whom resigned in protest against the deal he himself had negotiated. The Conservative government is in turmoil, with rebels fighting from within against the Prime Minister, Theresa May. Thanks for a snap general election called by May a year after the Brexit vote which saw the party lose seats, the Tories don’t have a majority in the House of Commons and are being propped up by a hateful, homophobic Northern Ireland party, the DUP, at the cost of £1bn [$1.26bn] to taxpayers. As a result, the Commons continually pushes back against the only deal that May has been able to bring to the table, which is deemed unacceptable by Remainers and Leavers alike."

This is a deal which the EU has stated categorically cannot be changed. If this deal isn’t passed, the country leaves on March 29th with no logistics in place whatsoever. The government is already stockpiling food and medicines for such an outcome, which will see essentials for many, such as insulin, unable to be brought into the country.

This has been the first UK government in history to be found in contempt of Parliament. This was shortly followed by a vote of no confidence in the Prime Minister from her own political party - a vote she won, but which made clear the unstable nature of her support in Parliament.

Before Christmas a five-day debate began within the House of Commons for May’s deal, with a ‘meaningful vote’ intended for the fifth day, but on day four this was postponed by the Prime Minister because she knew it would not pass the Commons. The debate is now scheduled to resume on Wednesday January 9th.

With such chaos and uncertainty in the government, how does Games4EU choose what to do next?

“If anything, it has made us resolute in our mission to secure a People’s Vote and to create the conditions the UK needs to remain in the EU,” McGarrigan says.

The People’s Vote, once a mythical fairytale among Remainers, is looking more and more likely. Though far from certain. Among other things, it brings up questions about what options should be included in a second referendum and whether the people should be given the option to remain, or simply to choose between May’s deal and a no deal Brexit.

“On any given day, we’ve absolutely no idea what will happen next in parliament!” McGarrigan continues. “If I missed key deadlines, kept back vital information from my clients, or simply kept changing my mind as to what I had promised to deliver I’d be out of business pretty swiftly, but the government is doing exactly this, and keeps moving the goalposts in what has become an irresponsible, dangerous game.

“We really are living in unprecedented political times where the government itself can’t agree on its own plans, or is otherwise completely blind to the chaos surrounding it, yet they have officially warned and expect the UK to prepare for a no deal, with little fewer than 100 days to go. So, what we can do is keep providing a platform for everyone to keep debating and campaigning, and keep putting pressure on our MPs to vote on what we know now. We have a real opportunity to halt Brexit and stop any further damage to our industry.

“Games4EU has discovered that large parts of the British economy are not ready for a no-deal Brexit, and fewer than half of businesses have initiated or even started to create contingency plans. This is largely due to the lack of information given to us by the government as to what leaving the EU will truly involve, which has meant planning has been almost impossible. This weakens our position and relationships on a global scale, the results of which we still can’t fully comprehend.”

As with most creative industries, the UK games sector is largely pro-EU and Games4EU’s work has helped many of them mobilise and speak out against Brexit.

“Over 80% of people in the UK games industry voted to remain during the referendum, so it is rather unsurprising that we have a huge number of engaged pro-EU supporters who are frustrated, saddened, and disappointed with a government that continues to fail on delivering any meaningful information for us to prepare for the future,” McGarrigan says. “Six months ago, there was very little industry discussion and no guidance from key industry stakeholders as to what impact Brexit would have in real terms on our sector, whilst MPs wouldn’t even mention the People’s Vote.

“Working together with the industry and with other pro-EU groups to provide in-depth research and analysis which wasn’t previously available, we’ve created a platform to raise the profile of the debate and now want to help all those people who wished to remain, to campaign against a hard or no deal Brexit. The reaction to this has been one of relief I think, and we’re proud that we have had thousands of companies and individuals sign letters to MPs, and are more politically vocal.”

What does this mean for the global games industry?

With so much uncertainty and chaos, it’s easy to see why foreign investors, publishers and individual developers eye the UK with skepticism and trepidation. But should they?

“There is a huge shortage of skilled UK programmers, but we will endeavour to employ people based on their skills, not on where they are from,” McGarrigan explains. “By coming to the UK, you’re joining an industry that is made up of amazingly diverse talent from all corners of the globe who together craft some of the world’s most innovative and loved titles. Consultation is now taking place for if we do leave the EU with no deal, to enable skilled workers (if sponsored by a company) to still come and work with us. This is so very important to ensure that we all work together on building a future for our industry that reflects our global audiences and reach, and importantly, we will need a globally focussed workforce to do that.

“My advice for now remains positive, and is to ask to help us spread the word that Brexit is not a done deal, and that the UK is still very much open for business.”

What next?

There are many outcomes from the debate that will take place in the Commons on the 9th of January. The Prime Minister is clearly attempting to run down the clock on her own deal so that MPs have no choice but to vote for it, rather than face a no deal. However, there are other routes that the government can go down.

Many are hoping for a second referendum, as has already been stated, but a short-term solution that isn’t as bold is that Article 50 could be extended. However there is nothing to suggest that extending Article 50 would result in anything but months of extra confusion, mismanagement and obfuscation, the likes of which we’ve seen over the last two years.

Another general election is also on the cards, but with an opposition leader who is generally in favour of Brexit, despite his MPs and party members being majority pro-EU, Remainers don’t have anyone compelling to vote for who is working in their interests.

We’ll have more clarity, hopefully, when the meaningful vote talks place in a few days.

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Jem Alexander has been in the games industry for over a decade, bouncing between journalism and in-house publisher/developer marketing and community management at the likes of Joystiq, OXM UK, Square Enix, PlayStation Europe, Riot Games and UK trade publications MCV and Develop. During his time as editor of Develop Jem gained strong insight into the games development community and process, thanks to his network of industry pros. He also freelances as a games writer, with lead writer credits on several upcoming games. You can find him on Twitter at @jemalexander or you can email him at jem.alexander@greenlitcontent.com.

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