UK gaming startups increased by one-fifth in 2023

AI may be cutting development costs

Number of computer gaming companies in the UK increased to 2,450 last year in a surge fuelled by layoffs at big studios.

The number of computer gaming companies in the UK increased by 22 per cent in 2023, from 2,008 to 2,450, but the surge in startups was fuelled by layoffs at larger companies in the sector.

London led the way with an increase of 30 per cent. It accounts for more than half of the computer gaming companies in the UK, with a figure of 1,374 organisations. However, the South East, North West and Scotland saw an overall decline in number.

No other part of the UK even comes close to London, with the South East the next biggest with 205 companies and the East of England seeing an 83 per cent increase to 189.

That's according to research by tax consultancy RSM UK.

Richard Heap, a partner at RSM UK, said that while the growth in the sector was encouraging, the difficulties that led to the surge in startups has continued into 2024. As a result, the growth in startups will almost certainly continue into this year.

"There's no denying that layoffs in the sector were rife throughout last year, and 2024 got off to an equally difficult start. Redundancies continue as companies grapple with a dearth of investment appetite, soaring costs, and consumer demand reverting to normal levels following an explosion of interest during lockdown.

"[But] while layoffs are often seen as damaging to the gaming industry, they can fuel growth, as these individuals may have taken the leap of starting their own company. With more staff reductions made at the beginning of this year, UK gaming incorporations could be set for another uptick," he said.

As compute power increased relentlessly every year since the inception of the home computer in the 1980s, computer games shifted from the kind of thing that could be created by a couple of talented teenagers in their bedrooms to highly labour intensive and expensive creations requiring large teams of specialists. These include, more recently, developers specialising in AI to make for more challenging games.

Moreover, the computer games industry is much like publishing and film in that it is typically only a handful of releases that make a handsome profit, with a long tail of thousands of games that struggle to break even. One big failure can therefore break a company almost overnight.

However, AI may also help to cut overheads in the development process, believes Heap.

"The hype around artificial intelligence is particularly prevalent in the gaming industry. The process behind bringing a video game to life is often long, labour intensive and expensive. AI can speed up this process, making it an extremely powerful tool, but it also requires people with the right skills to use the technology effectively," he said.