Only 48 per cent of UK developers believe the country's business and economic climate is favourable to the games industry.
According to TIGA's Business Opinion Survey (BOS), 17 per cent of 54 respondents consider current economic conditions in the UK to be unfavourable, while 31 per cent sit firmly in the middle.
In 2020, 65 per cent of developers though the business landscape in the UK was favourable for games, meaning there has been a year-over-year drop in that belief.
Room to grow
However, 72 per cent of those surveyed said that they plan to grow their workforce in 2021, while 19 per cent intend to keep their current staff levels. Meanwhile, nine per cent anticipate lay-offs.
Moreover, 70 per cent of companies believe that they are performing well, increasing from 61 per cent the previous year. The increase is likely thanks to the ongoing pandemic as more people turned to games as a means of entertainment.
Meanwhile, 19 per cent of business have claimed to be in the middle, as they are not performing well, but nor are they performing poorly. That leaves 11 per cent of respondents with a less than favourable performance.
When it comes to prospects, 48 per cent are more optimistic than they were 12 months ago. Moreover, 25 per cent are neither more or less enthused than they were before, while 22 per cent have lost optimism.
As for obstacles for success, the biggest factor was still discoverability, the same as last year as 36 per cent of respondents believed it to be an issue.
Meanwhile, 25 per cited skill shortages and skill gaps as an obstacle to success, while 19 per cent claimed finance to be an issue. Furthermore, 15 per cent said that COVID-19 had a negative impact, leaving six per cent with unnamed obstacles.
"The UK video games industry is set for growth, with 72 per cent of respondents to our Business Opinion Survey expecting to increase employment over the coming year," said TIGA CEO Dr Richard Wilson.
"However, just 48 per cent of games businesses in our survey believe that the UK's economic and business environment is favourable to the sector. This is down from 65 per cent in 2019 and represents the lowest proportion of games businesses viewing the UK's environment as favourable since 2015.
"The Government can strengthen the sector by taking three actions. Firstly, enhance Video Games Tax Relief (VGTR) by raising the rate of relief from 25 to 32 per cent to ensure a favourable tax environment that promotes growth in the sector.
Wilson continued: "Secondly, introduce a Video Games Investment Fund (VGIF) to improve studios' access to finance. The VGIF would make grants or loans of between £75,000 to £500,000 available to games businesses on a matched funding basis.
"Thirdly, increase the supply of well-educated graduates who are able to work in the games industry and enable our employers to recruit highly skilled people from abroad."