The UK games industry is struggling with Brexit

The UK games development industry is suffering from a labour shortage. Partly driven by the pandemic and a surge in demand for games, this shortage -- and its attendant inflation in salaries -- has been exacerbated by the implementation of Brexit, which has added significant expense and time-investment to hiring talent from Britain's neighbors in the European Union.

"We have over 300 jobs advertised live on our website right now, and another 300 waiting in the pipeline," says Simon Hope, recruitment director at employment agency Aardvark Swift. "It's crazy, really crazy. Ultimately, there's only so many people to go around."

Hope says that prior to Brexit, around 20% of his placements in the UK came direct from the EU. That number has now dropped to 5%, mainly due to a reluctance among EU nationals to move to a country that is now outside the EU. In the past two years, an estimated 200,000 EU nationals have left Britain to return to the continent.

Most of Aardvark Swift's clients are UK-based game studios and publishers. Prior to Brexit, hiring an EU employee required minimal paperwork. Now, companies must sponsor each potential employee from the EU, apply for visas, and pay expensive healthcare surcharges ("high four figures, and that's before family members," says Hope) which previously existed only at a nominal level. Employers must prove that they have made a valid attempt to seek out applications from UK citizens.

Hope estimates that the entire process can now take three-to-four months. Little wonder that potential applicants prefer to take jobs inside the EU.

Jon Holmes, founder and studio director at Liverpool-based Milky Tea, says hiring new talent is a major headache, which threatens company's bottom line. "Before Brexit, three quarters of our applications came from the EU," he says. "That's gone. British companies are all scrapping for the same talent, and that's pushed salaries up at least 20%, which makes a big difference, especially if you're making a lot of hires."

Holmes says that although there are short-term workarounds, like hiring contractors and emphasising a commitment to remote work, they all have their costs and practical downsides. Longer term, he says, Britain could become a far less attractive destination for international development talent than in the pre-Brexit era.

"We've had offers on the table, and then been turned down, because someone else has come in with a ridiculous offer," he says. "It's created a volatile environment. Five years ago, a producer's salary was pretty well understood. Now, I couldn't say with any confidence."

"The future is about bringing on junior talent, but you have to first invest in years of training... And there's just not enough universities to fulfill demand."

Jon Holmes, Milky Tea

John Clark, CEO at Curve, says: "If you look at countries like Poland, Serbia, Spain and others in the EU, you see those regions supporting their studios with investment. Nationals returning home to those countries, either because of the pandemic, or Brexit, or both, are finding good places to work in their home countries. They are being made to feel safe and secure at a time when Brexit makes them feel uncertain about the UK."

Curve's chairman Stuart Dinsey is a former chair of the Association for UK Interactive Entertainment. He points out that plenty of other countries and other industries are struggling with COVID-related labour shortages, and wage inflation. In such circumstances, high competition for talent and visa delays are understandable.

"Skilled workers can get a Tier 2 visa and the salary thresholds are low enough that it's not a problem for this industry," he says. "I think it's more of a sentiment problem. There has been a reduction in the number of EU nationals living in the UK as a result of Brexit. There's no shadow of a doubt, that's had an impact. But UK companies are still hiring people from the EU."

The UK, says Clark, remains an attractive destination for talent, with a host of potential employers ranging from ambitious start-ups to international giants. "We have the biggest footprint of games industry professionals in Europe, and a host of companies where people all over the world want to work," he says.

Even so, the current climate calls for practical solutions, as those same companies compete with one another to hit their release date and innovation targets. Since COVID, Milky Tea has committed to remote work for all employees, using central offices as social hubs and secure locations for servers and equipment. This gives the company freedom to work with contractors and freelancers in the EU, offering them long-term contracts, without counting them as full-time employees.

"We've managed to attract some really good senior recruits who might not have come to us a few years ago," says Holmes, pointing to the various benefits of remote working. "A lot of people have decided that they're never doing that two-hour commute again. They want to spend more time with their family."

However, this solution presents its own problems. "Even something like IT can become an issue," says Holmes. "We ship them equipment, we pay taxes on that, then when the equipment needs repair, it all has to be shipped back."

There are human difficulties, too. Contractors cannot claim benefits such as pensions, and many feel exposed by the lack of a full employment contract. Companies are obliged to invest in remote onboarding protocols and on helping freelancers with chores like filing their taxes.

Payroll companies are sprouting up that take care of many of these issues. They understand local tax and employment laws. But they are an additional cost, and a risk, especially during a time when demand is high, and new operators are flooding the sector.

Remote work has a host of challenges that game companies are currently struggling to resolve. At the same time, some employers (and employees) prefer the in-office option, and are keen to get back to pre-pandemic work patterns.

Another option is for UK-based companies to buy their way onto the continent, by opening or acquiring studios.

"If a company needs to hire 200 people, it might make sense to buy a studio with maybe 20 or 50 people," says Hope. "That gives them a legal entity from which they can grow. If they're hiring EU nationals from within the EU, it becomes a much simpler process."

"If a company needs to hire 200 people, it might make sense to buy a studio with maybe 20 or 50 people. If they're hiring EU nationals from within the EU, it becomes a much simpler process"

Simon Hope, Aardvark Swift

Clark adds: "As a business we are looking to increase our own portfolio and looking to acquire studios. And we certainly will look where the talent is, and if that takes us to an overseas region, where there might be skills we can add, that's something we would support."

It's an expensive option, and it's only available to larger employers. At an international level, it also strengthens other countries' abilities to create talent hubs, such as the recent growth of studios in Barcelona. At Milky Tea, Holmes worries that this will diminish the power of the UK gaming industry, most particularly in the eyes of the UK government.

"A place like Barcelona can offer lifestyle benefits, like the sunshine and all that," he says. "But they're also getting hugely generous tax breaks that are fuelling this growth, far greater than in the UK. And the more opportunities a city can offer, the greater the benefits of working there."

He says the representatives of various countries are in the UK, tempting employers to open offices in their region. And while some EU countries appear to be committed to spending money on attracting talent, the UK might waver.

"I worry that the UK government will look at the games industry, and start to rethink the benefits of VGTR [Video Games Tax Relief]. I can see them looking at ways to save money, especially after the expense of the last few years and the cost of Brexit overall."

He says that while this isn't something that's likely to happen soon, it would have a disastrous effect on the UK business. Many companies use their tax savings to invest in prototypes and training, which all lead to growth.

Longer term, British employers are beginning to work more closely with universities to create a talent pipeline that can repair the ongoing shortage. Holmes praises establishments like Teesside University and the University of Central Lancashire, with which he's cooperated on training and workplace initiatives. But he cautions that it takes a long time to take a promising graduate to a senior level.

"The future is about bringing on junior talent, but you have to first invest in years of training, even some of the basics of workplace engagement, so there's always going to be a need for experiences, senior hires. And there's just not enough universities like those to fulfill demand."

Dinsey adds that universities will not succeed in closing the talent gap as they currently stand: "The courses should be more vocational and more directed to useful skills. We need to examine whether universities are engaging enough with the major employers in this country to make sure their courses are geared towards putting people into employment."

So while there are short term fixes, and long-term opportunities for plugging the talent gap, they all have their costs and their risks. What is certainly true is that this is a problem that's not going away anytime soon. And that games industry employers in the UK are finding Brexit's restrictions difficult to navigate.

"In the games industry, we're probably stronger as a country than anywhere else in Europe," says Clark. "That makes us appealing as a country. But freedom of movement means that if I'm an employer in Sweden or France or wherever, I've got greater access to developers across the continent. And that gives them an advantage over us."