The wheels of Brexit are firmly in motion and politicians, advisors and business people across industry are scrambling to make sense of the seismic changes about to hit Britain and the EU. Dan Matthews explains
Every business sector in Europe is affected, but perhaps none more so than the UK’s gaming industry, whose tendrils reach deep into Europe and whose biggest players are perched on the isolated British outpost of Gibraltar.
The tiny territory that juts out from the Spanish mainland has attracted dozens of online gambling businesses – many of which are large and publicly traded – partly because it is sparingly regulated, but mainly because of its light-touch tax treatment.
Future of Gibraltar under threat?
The move to Gibraltar started in the eighties, but the advent of online gaming fueled a surge which has redoubled in the last 10 years with the astronomical rise of mobile gaming. Today the sector employs more than 4,000 people in this tiny territory alone.
According to the Association for UK Interactive Entertainment, revenue from digital and online gaming hit £1.22 billion in 2016, up more than 11% on the previous year. But the growth of mobile gaming came in just under 17% at nearly £1 billion, up from £851 million in 2015.
Gaming, sport and gambling have become increasingly intertwined and having a punt has never been easier via your mobile phone. Yet all of this has upped the stakes when it comes to Brexit.
Contributing to a white paper on the Gibraltan gaming industry by CasinoUK, chief minister Fabian Picardo voiced serious concerns about the potential impact of a ‘hard Brexit’ on the status of the territory.
“I think a hard Brexit would be very, very challenging to the economic model that has been the source of our prosperity for 30 years,” he said.
Picardo added that in order for mobile gaming companies to continue trading freely, Gibraltar might need a special agreement with the EU, replicating other non-members enjoying favourable trade terms.
“We are part of the physical continent of Europe. We’ll be looking for a relationship with the EU that may differ from the UK’s, perhaps an associate-style status. There are models: Andorra, Greenland, Liechtenstein. As part of the UK’s exit, we’d like an agreement to continue to give us single market access, and freedom of movement.”
But this is by no means guaranteed. In March, the European Council published guidelines on Brexit talks with a special clause for Gibraltar.
It stated, “no agreement between the EU and the United Kingdom may apply to the territory of Gibraltar without agreement between the Kingdom of Spain and the United Kingdom,” which means Spain has the right to veto a trade deal between Gibraltar and the rest of the EU.
The struggle for tech talent
But the challenges facing mobile gaming companies don’t end there. The UK referendum on exiting the EU was fought, broadly, on the right to control immigration into the country, but the tech industry relies heavily on skilled labour from Europe to support the development of new games.
TechUK, a sector lobby group representing around 900 technology driven companies, says Brexit poses a major risk to the UK’s cutting edge businesses. Research by the group found that 45% of the country’s job vacancies are filled by foreign born workers.
It said recruitment from the EU was strong because of restrictive rules impacting hiring from further afield.
Quoted in the CasinoUK whitepaper, Jane McConnell a Guardian columnist who also works as a community manager for Pixelbomb games in Manchester, said sourcing talent – particularly coders – from the EU is standard practice in the gaming sector.
“The fact of the matter is that many homegrown employment candidates aren’t as well-equipped as their European candidates,” she wrote.
“Cherry-picking from Europe and its economic area is normal business practice for plugging gaps in the talent pool, especially for experienced programmers. These positions are notoriously difficult to fill in the industry.”
Any limits on EU immigration, even means tested entry, could have a big impact on mobile gaming companies as talent either dries up or because more complicated to source. Operators will likely lobby hard for a smooth transition to non-EU status and protections for the talent pool.
Commenting on the findings, Michael Keegan, chair of Fujitsu UK, said: “Companies will be looking for a robust legal basis for cross-border data flows, that the UK remains open to the very best global talent, and that British businesses are able to compete fairly across European markets.”
If many of the challenges for mobile gaming companies are in the post, at least one has already hit home. The deflated pound, which sank after the leave vote and has barely clawed back losses in the 11 months since, makes sourcing from the EU more expensive.
In the immediate aftermath of the Brexit vote last year, the pound fell around 10% versus the dollar in a flash crash the like of which not seen since the 1970s. Responding, Michel Kopec, senior business manager for Better Collective, illustrated how it would punish the gaming sector.
“Bookmakers and their suppliers are going to feel the pinch almost instantly, as many operate across the EU where prices for services will be hit by the poor pound,” he said.
“Income for many international affiliates that are rooted in the currency are going to be hit by the payments they’re taking in GBP, with many based in countries such as Denmark, Malta and Germany. This will be a huge issue in the short term, and it’ll take robust planning to weather the storm and emerge on the other side.
“On the regulatory front, bookmakers and affiliates shouldn’t be affected for now, as the Gambling Act regime is a stable one, with many organisations well briefed and prepared for any potential changes.”
In short, Brexit poses a number of threats to the UK’s mobile gaming sector and the process requires careful management to protect its growing businesses. With Article 50 triggered and negotiations between Britain and its EU partners – now more accurately labelled ‘rivals’ – about to begin, companies will be keeping a close eye on developments.