According to a new report released by NESTA, the National Endowment for Science, Technology and the Arts, the UK computer games development sector is in trouble.
The sector is, the report says, at risk of being overtaken by Korea, Canada and China in 2009 due to a severe skills shortage, funding crisis and the poor record for online development.
The report, Raise the Game, examines the competitiveness of the UK's games development sector and the impact that government support in other countries is having on allowing games makers to retain their talent.
The report concludes that the UK games development sector will slip to 5th position in the global rankings in 2009 - a further slip from 3rd position in 2007.
The report details a lack of global scale publishers, limited access to finance and skill shortages as the key factors constraining the UK capacity to generate new game ideas and innovative genres.
Ian Livingstone, creative director at Eidos and ‘father' of Lara Croft, commented on the report's findings: 'Despite the creative and technical talent that exists in the UK, in the last six years half of the independent development studios have closed or have been bought by foreign companies that see greater value in our studios and intellectual property than we do ourselves.'
'The UK is becoming a work-for-hire nation and this trend seems certain to continue unless the government takes action. Cash tills at games stores might be ringing loudly but not through sales of games developed in the UK,' he added.
The report also identifies increased competition from countries such as Canada, where developers receive government support through generous tax breaks that make it increasingly attractive for studios and developers to relocate there.
'The generous tax breaks on offer from other countries are resulting in a mass exodus of some of the best talent in the UK. In order to put a halt to this, the UK needs to wake up to the value in this sector and beat these foreign incentives with our own supportive measures,' said Jonathan Kestenbaum, chief executive of NESTA.
Video games sales are expected to overtake music and DVD sales in the UK and currently generate a global annual growth rate of 11.4 per cent. The industry has a projected global turnover of £46bn in 2010.
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