The video game industry is now the world’s largest entertainment sector, generating more than twice the combined revenues of the film and music industries, according to a Dentsu report.

The UK is a major player, with a strong pipeline of studios, talent and creative output. Games companies across the UK raised £2bn in funds last year; a steady increase from the £966m raised in 2024.

The sector is set for another phase of growth. The UK government’s Creative Industries Sector Plan highlights increased investment and support, positioning games as a key driver of the UK’s economy.

For founders, this could mean greater access to funding, talent and global markets — but also rising competition.

Sifted sat down with Michael French, Head of London Games Festival, John Stewart, Director of Consumer at HSBC Innovation Banking, Tom Gayner, CEO of community insight platform Levellr  and Maria Sayans, CEO of games studio Ustwo Games, to unpack the industry’s growth and what they think comes next.

What’s driving growth?

The global games industry enjoyed a sharp period of growth during the Covid-19 pandemic, when millions of people around the world were forced to shelter in their homes for long periods.

Mobile gaming has seen a big boom. Everyone has a phone and it’s so easy to connect to.

With many people stuck at home with more time on their hands than ever, many turned towards video games — including those who hadn’t taken an interest before, says Stewart.

“Mobile gaming has seen a big boom. Everyone has a phone and it’s so easy to connect to. That’s been a huge driver in how people can access gaming.”

The years since the pandemic receded have been characterised by a slight plateau in the industry’s growth. But Stewart says there are signs of a rebound emerging now.

“The plateau wasn’t necessarily a reduction in growth but more of a stabilisation and a reflection of what stage the consumer was at,” he says

Announced in June 2025, the Creative Industries Sector lays out the government’s plan to increase investment in the creative industries — including music, film, TV and games — from £17bn to £31bn by 2035.

Consumers are not just looking for great gameplay anymore. They want community, identity, and belonging.

A new £30m Games Growth Package is set to support the games industry over the next three years to back studios, talent and investment. Funding for the London Games Festival aims to strengthen investor partnerships, with hopes of doubling the investment deals made at the festival to £30m per year.

Online games distribution has become more accessible, says Sayans, who has also witnessed the industry enter a more mature phase.

“What’s growing now are specific regions and demographics,” she says. “Certain demographics that are playing more than they did before, for example, women and older audiences.

“Platforms have to be much more deliberate now in pursuing specific audiences and in building IPs and franchises that are appealing to a broad base of consumers for a long time.”

Half of the UK population now identifies as gamers — around 35.6m people — which is the largest gamer base in Europe, adds Gayner. “The numbers speak for themselves. Consumers are not just looking for great gameplay anymore. They want community, identity and belonging.”

Video games investment

Investment in the industry is never predictable, says French. The past few years have seen an increase in individual project financing rather than investment in specific longer term product roadmaps.

“Investors are supporting a singular project and will see how far it goes. They’ve become a bit conservative after some headwinds in the US around the games industry and that’s shaken some investor confidence, but they haven’t left the space.

There are many governments who are realising the importance of video games for both the culture and the economics of the 21st Century.

“They’re just going to look harder and be more stringent when looking for the right projects to support.”

Effective from January 2024, video game companies in the UK can claim a taxable credit of 34% of qualifying expenditure. It requires companies to pass a British Film Institute cultural test and have at least 10% of core costs incurred in the UK.

“When you look at small but scalable games projects, it’s at this point where IPs and future value is being created,” Sayans says. “The government should increase that tax relief to about 53%.

“There are many governments who are realising the importance of video games for both the culture and the economics of the 21st century and are investing significantly. It’s in the interest of investors and publishers.”

Future of the industry

The companies that succeed and grow the most over the next five years will be the ones that can keep users engaged for longer, says Stewart.

“It’s a shift towards using subscription models and in-game purchases. This additional revenue is key for companies who aren’t relying on investors to come in with additional funds.”

The post-launch buzz around a game and online communities are also important in retaining customers, he adds. Companies can also use AI to reduce overhead costs, whether through translation or basic programming.

AI has made it possible for smaller scaleups to rethink how they grow and promote their product, adds Sayans.

“People running game scaleups now have more options than going out and hiring a big triple A studio and filling it with hundreds of people. AI is allowing us to think outside of the models of how you structure teams and develop products.

That’s where we could do with improvements because the ideas are out there and the money’s out there. UK people are naturally entrepreneurial.

“Games companies should also take opportunities to be more thoughtful about their impact. Coming up in a couple of weeks, we have Games for Change which is a festival focusing on promoting video games for social impact.”

There has also been a shift in how publishers should think about engagement, says Gayner. “Over the next five years, we expect the winners to be the publishers who treat community as a strategic asset from day one, not a marketing afterthought.”

 In order to keep its position at the forefront of the industry, there is still work to do around skills in the UK, says French. The point when moving from a startup to a bigger company and expanding is where the “pinch point” is.

“There’s a whole conflation of things that come under skills; tuition fees, the quality of courses where we can train people that aren’t in further education to get into games,” he says.

“That’s where we could do with improvements because the ideas are out there and the money’s out there. It’s about getting more people to make them. UK people are naturally entrepreneurial.”