Brexit's shadow looms over 2018

A handful of concessions and walk-backs seem to have pulled Britain away from the brink of the most catastrophic version of Brexit - a "no-deal" exit which would see the country falling back on the World Trade Organisation's rules, and faced with beginning the long process of arranging trade deals with key partners (including the EU itself) from a standing start.

While certain groups and individuals fetishise this outcome, most business leaders are horrified by the prospect - not least in the games industry, a vital UK creative industry that could face enormous damage from an extreme Brexit outcome. The progress made in softening the UK government's approach to Brexit and finding compromise solutions to difficult issues like the Irish border means that the worst possible outcome for the games business looks a little more unlikely; but the shadow of this political situation and the uncertainty it has created will sit heavy on the industry throughout 2018.

This year, the UK industry has highlighted a number of ways in which Brexit threatens its current way of doing business. The most commonly cited and worried-about aspect is the question of how the country's game studios will fill their requirements for skilled staff without easy access to the EU's labour markets. This is not a problem unique to the games business, of course; almost every skilled sector in the UK faces a similar quandary.

"The entire industry has grown up in a climate where access to EU workers was a given"

Game development, however, requires very highly skilled staff from a wide number of different fields; putting together the team needed to create a modern video game is an almost unique recruitment challenge. Game studio bosses who have addressed the issue of Brexit have highlighted the preponderance of EU nationals on their staff; if the process for hiring the required staff from overseas is not made as smooth and painless as possible, as quickly as possible, the resulting skills shortages will spell trouble for companies which often already operate close to their limit in order to meet milestones and other deadlines.

Nobody can say just how difficult it will be to recruit staff, or how tough it will be for companies that can't get the staff they need, because this isn't something the UK games industry has experienced before; freedom of movement for EU workers predates the video games business itself. The entire industry has grown up in a climate where access to EU workers was a given; even if the visa rules the government establishes for skilled game development staff are as flexible and simple as possible, it will still represent a major shift in the difficulty of building and maintaining a games company in the UK.

What most companies have been less concerned about, for the most part, are trade regulations. The physical challenges to trade presented by Brexit - especially a disorderly, no-deal kind of Brexit - largely don't concern a creative industry like videogames. The physical hardware shipped to consumers is largely sourced from outside the EU (though manufacturers would likely need to make some new distribution arrangements to avoid excessive costs or delays in the event of the UK leaving the customs union), and the transfer of digital assets and goods is not impinged upon by trucks being backed up at inspection booths in Dover.

There are, however, significant concerns in this area which some people in the industry began to get very uncomfortable about as the prospect of a "no-deal" Brexit loomed in recent weeks. The WTO rules to which Britain would fall back in the event of such a deal aren't actually particularly great in their handling of digital products; in fact, what our industry might think of as "products" (digital games sold to consumers, or digital assets created and sent back to a publisher) are classified as "services" by the WTO's rules and subject to a fairly bare-bones set of regulations that aren't terribly well suited to handling them.

"Companies in the mobile and social sectors seem willing to examine options like Ireland or the Netherlands to avoid negative impact from Brexit"

Discussions about updating the WTO's rules on digital products and information technology have been ongoing for years, and haven't gone very far; instead, there is a patchwork of different treaties and agreements in place which create a loose framework for how digital trade functions, most of which Britain would not automatically be party to were it to leave the EU without an agreement in place. The loss of full access to the EU's single market for services and digital products would be a blow to many companies in itself; the potential legal and regulatory wrangles faced by companies doing something as simple as work-for-hire for publishers in other jurisdictions would also create significant headaches and costs.

That outcome, at least, looks a bit more distant now than it did last week. Indeed, many within the industry will likely be optimistic now of a deal that sees the UK retain much of its market access and regulatory harmonisation with the EU, and allows the games industry to essentially take a business-as-usual approach on trade. At the same time, though, this uncertainty is having the same effect on the games business as it is on just about every other sector in the UK - depressing the mood for expansion and capital investment until such time as a bit more certainty prevails, and pushing more footloose businesses to think about whether relocation is a sensible option. Mood on this latter topic is strongly divided among business leaders in games, but companies in the mobile and social sectors in particular seem to be willing to examine options like Ireland or the Netherlands to avoid negative impact from Brexit.

Few in the games industry are optimistic about Brexit - there are some notable contrarians, but for the most part the industry's business leaders' most optimistic stance tends to be "the impact might not be as bad as we think", rather than any possibility of a positive influence. For those, the optimal path for Brexit (short of calling the whole thing off, one assumes) would have been for the end of 2017 to have come with a sense of certainty; a knowledge of how the deal was shaping up, what future relationships would look like, and what the options and opportunities for British creative industries in a post-Brexit world would be.

We don't have that. The country has skated past a few of the thinnest patches of ice and avoided being plunged into the chaos of a no-deal scenario, so we're also a long way away from the most pessimistic scenario; call it a score draw. Certainty, though is thin on the ground, and that's always, always bad for business, scaring off investors, adding unpredictability to deals and contracts, and depressing hiring and expansion.

Even those UK studios who scoff at the idea of relocation will be battening down the hatches in many regards in 2018, at least until such time as the country's future looks more certain and settled. The faster that certainty is reached, the faster the industry can get back to business.