Creative Industries: Computer Games: Projecting into the futureDo we have a big game mentality?

Creative industry outlook: we're big on local heroes, but the challenge for sectors from film to software is to become a force on the global stage

Size of UK computer games market: pounds 890m

Employment: 60,000 to 80,000

Growth: unknown

IN THE fast-growing sector of devising computer games, only Japan scores higher than Britain. Three of the world's top 10 selling games originated in the UK. British-developed software titles account for 25 per cent of world sales. The UK market was worth pounds 890m last year: of this, pounds 605m came from software sales, and the rest from sales of console hardware. The industry was worth just pounds 200m eight years ago.

Most of the 60,000 to 80,000 people working in the industry are male, but the sector's biggest earner is a virtual woman. Lara Croft, the sassy heroine of Tomb Raiders, has made almost as much for her company, Eidos, as the Spice Girls have earned for EMI. In the year to April 1997 Eidos, the market leader in the UK, reported sales of pounds 376m, pounds 300m coming from Tomb Raider.

Despite the phenomenal success of UK companies in computer games, the sector faces a number of tests. It suffers from a lack of indigenous investment. Most of the finance for development has so far has come from the US, and there is a tendency for bigger American firms to snap up smaller British companies, which have the talent but lack the commercial know-how and capital, so most British-developed games are published by foreign companies. Electronic Arts of the US, for example, has bought the British firm Bullfrog. Virgin Interactive Entertainment is owned by the US Viacom. This trend is likely to strengthen as the cost and time required to produce games go up, making it extremely hard for British firms to do so independently.

Lack of resources and contacts for UK developers is preventing Britain from breaking into the lucrative Japanese market and from growing in the US. It is hardly surprising that some of the country's best and brightest talent in the computer games industry is uprooting and going to the US, where investment in training for games designers and programmers is much higher. At a recent trade fair in London, the American film producer George Lucas lured 20 of Britain's top games producers to his US enterprise.

But the biggest threat to the computer games industry in this country is copyright piracy. The sector suffers, perhaps more than any other, from illegal copying. It is estimated that the UK industry loses 25 per cent of its domestic revenues - about pounds 150m a year - through piracy. Loss of revenue to the Exchequer from foreign counterfeiting, especially in Eastern Europe and Asia, is thought to amount to pounds 100m a year.

Even so, the future for the industry in Britain is far from gloomy. The country is well-placed to exploit the small but expanding market in on- line games. Although it still has fewer than 30,000 subscribers, British Telecom, with its Wireplay service, is a world leader. Another British company, Argonaut, is developing a game, Spy v Spy, which overcomes the time delay when shooting targets over telephone lines. Film and commercial merchandise spin-offs from successful games such as Tomb Raider and WipeOut should also boost revenues for British firms.

Britain is also fighting back against the brain drain. On top of the in-house training offered by companies, new courses on computer games programming are emerging, such as the HND in computer games production on offer at St Helen's College on Merseyside. Overall, Britain remains well placed in its computer games industry which, with a few further safeguards, looks set to build on its strength.