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What next for the UK gaming sector now the country is in recession?


New York Times


The BBC reported another day of job closures set to hit the UK, with department store chain John Lewis and pharmacy chain Boots the latest to announce job cuts in the country. 5,300 jobs could go between the two companies as they struggle with a downturn in retail sales. The list, quite depressingly, seems to be growing at the moment and few sectors are spared. 

With the country now, like many others, in recession, I am concerned about a bloodbath in industries such as game development. 

This made me think about the impact a COVID-19 recession could have on the gaming sector. The UK is not only one of the largest markets for video games (£5.7bn in 2019 according to the BBC) in the world but is a major force in creating them. UK studios include Rockstar North, Codemasters, Travellers' Tales, Sumo Digital, Sports Interactive Games, Criterion, Rare and Rocksteady to name but a few. Cities like Brighton and Hove, Guildford and Newcastle Upon Tyne are home to major talent. Then there's the small army of indie game developers in the UK...

I could go on and on and on.

Gaming isn't recession proof

November could be a massive month for the gaming sector with the launch of the Xbox Series X and Playstation 5 (fingers crossed they will launch at the traditional November time). Games like Cyberpunk 2077 will also be launching then and should sell well, given the developer's pedigree. 

The major problem surrounding the launch will be the threat of a recession. Selling a console for $599/£599 in the UK and elsewhere when the economy is suffering will hurt its chances of success. During these times, gaming becomes a luxury and not a necessity. Why spend £65/$70 on a game for the PlayStation 5 when there's a mortgage payment due? 

Dark Clouds On The Horizon

Part of the problem could start next month when companies in the UK have to pay to National Insurance and pension costs for furloughed employees. For gaming companies, these additional costs might not be worth it. What would be the point when you are not making any money?

The government will pay 70% of furloughed employees' wages in September, with this falling to 60% in October. The scheme ends on October 31st. What will happen then is anybody's guess. 

While the Chancellor Rishi Sunak announced a scheme yesterday to encourage firms to keep furloughed staff on and more help for young people to get into work, this might not be enough. I wouldn't be surprised if job cuts were announced by some large game publishers, with cuts at studios in the UK. 

Fears Expressed By TIGA Members

The UK's trade association for the game industry, TIGA, recently commissioned a survey on the impact of COVID-19 among its members. 

The financial cost of the pandemic was one of the main concerns. The report said: "Games businesses were also asked about the degree of concern they have about the financial impact of coronavirus on their organisation. Nearly half of respondents said that they were ‘very concerned’
or ‘extremely concerned’ (46%)"

In a separate question, a significant percentage of respondents said they expected their revenue to fall significantly during the pandemic. The survey said: " A majority of respondents (56%) said that they expected that their organisation’s income would decrease during the coronavirus pandemic when compared to the previous financial year."

Conclusions


Any recession caused by COVID-19 could cause major damage to the UK gaming industry. Contracts could be cancelled, mobile ad revenue may fall and jobs could be shed. While the government has promised support for the economy, more needs to be done to help industries like game development. 

With the UK now in recession, more needs to be done to help prevent any major job losses. The ending of the furlough scheme should perhaps be reconsidered to avoid any major economic damage in the long term. 



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