Latest research from TIGA, the trade associated representing the UK video games industry, has revealed that UK games studios are cautiously optimistic about their business in 2024 – but have highlighted some key challenges for the year ahead.

Video games companies are building on a positive performance in 2023, as 41% of respondents reported that their company’s net profits increased year on year.

Further, nearly two thirds (62%) stated that their workforce grew in 2023.

Staff and Recruitment

Looking ahead to 2024, recruitment remains key to sustaining and growing businesses in the industry.

Nearly three in four (73%) of respondents plan to grow their organisation’s workforce over the coming year, just shy of 75% in 2022.

A fifth expect their workforce to remain at its current levels, while only 6% anticipate their workforce will diminish.

A third (33%) have cited skills shortages and skills gaps as the biggest obstacle to the success of their business in 2024.

However, this compares to 53% in TIGA’s previous Business Opinion Survey.

Investment

When it comes to investing in their business – covering areas such as R&D, training, new games development, ect – businesses seemed mostly positive, but still conflicted.

44% of respondents said their investment outlooks were more optimistic than last year, with 36% saying their outlook was unchanged.

About a fifth (19%), however, said the outlook for investment was less optimistic than it was a year ago.

Performance

70% of respondents reported that their company was performing either ‘very well’ or ‘well’, compared to 75% last year.

About a quarter (27%) said that their company was performing ‘neither well nor badly’, while just three per cent said that their company was performing ‘badly’ or ‘very badly’.

Still, 46% said they were optimistic about their prospects compared to last year, and 54% forecast an increase in their net profits over the coming year.

While last year, 66% believe that the economic and business climate was fair to the video games industry, this figure dropped 20%.

Costs and Pricing

As in many other industries, costs are rising, with 77% of survey respondents anticipating that their company outgoings on staff, equipment, energy, etc., are likely to increase this year.

This compares to 86% who said the same last year.

When it comes to passing those costs onto consumers, 35% of games businesses expect to increase prices, but the lion’s share – 56% – anticipate their prices will remain the same.

Obstacles to Success

The UK video games development and digital publishing sector is operating in a challenging environment which is characterised by higher business costs and relatively suppressed consumer and business discretionary expenditure.

This was reflected in the survey, with a third (33%) of businesses citing skills shortages and skills gaps as the biggest obstacle to the success of their business, compared to 53% last year.

Another third highlighted discoverability as a struggle, with 12% referring to a limited access to finance.

Brexit has also brought its own woes for the games industry, with 71% saying the UK’s exit from the EU has harmed their business.

Some of these respondents reported that it was becoming harder and more time consuming to recruit skilled workers from the EU because of the end of free movement, the cost of visas and because the UK was seen as a less hospitable location.

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In previous surveys, respondents have also expressed concern at not being able to access EU funding schemes like Creative Europe or Horizon 2020.

29% reported that the UK’s decision to leave had not had any repercussions, and no respondents said that the UK’s departure from the EU had had a positive impact.

Dr Richard Wilson OBE, CEO of TIGA, said: “Our report reveals a cautiously optimistic outlook among UK games studios, building on a positive performance in 2023. This includes increases in net profits for 41% of respondents, workforce growth for 62% of organisations, and widespread utilisation of Government tax incentives and schemes.

“However, it is important to acknowledge the challenges we face, including rising costs and a relatively suppressed consumer and business expenditure environment. Skills shortages, discoverability, access to finance, and other obstacles remain concerns.

“To address these challenges, TIGA is advocating for several measures, including an increased rate of relief for the Video Games Expenditure Credit (VGEC), the creation of a Video Games Investment Fund (VGIF), and the resurrection of the Skills Investment Fund (SIF). We also recommend continued support for the UK Games Fund, funding for BTEC qualifications, and the introduction of an Industrial Secondments Programme (ISP).

“The UK video games sector is a high-skills, high-technology industry with significant export potential. By maintaining and enhancing support for these initiatives and ensuring a migration system that facilitates the recruitment of highly skilled individuals, the UK can continue to be a global leader in video games development. Together, we can navigate the challenges ahead and power our sector forward.”