The global games software industry was worth a staggering £11bn at the end of 2001 according to a report by the Department of Trade and Industry, but more investment is needed if the UK is to keep up with the increasingly fast pace of gaming technology.

The report, From Exuberant Youth to Sustainable Maturity, forecasts global games software sales will reach £20bn by 2007. The majority of growth will be driven by console games, mobile platforms and interactive TV, with PC games increasing much more slowly in value, says the study.

But the main problem for the UK's software developers, which is highlighted by the report, is the increasing gap between the cost of producing games and the price buyers are willing to pay for them.

"As platforms become more powerful and storage increases massively so the expectations of consumers grow ever more demanding," says the report. "With a development project lasting up to 18-24 months with a team of around 20-30 costing £1-2m, small UK developers are increasingly stretched for both staff and funding."

This problem exists in many countries throughout the world, where retail prices have risen by just 50 percent in the last 10 years.

"Buyers want to pay less, but technology is costing manufacturers more, putting pressure on them to sell more games to cover costs," said a spokesman at Elspa (European Leisure Software Publishers Association). "In the UK manufacturing costs can prove higher than in other countries anyway, so this pressure is really being felt here."

But despite these problems UK-developed titles took the top spot in both the US and UK markets in 2001, with Grand Theft Auto 3 winning in the US and Who Wants to be a Millionaire in the UK.

The DTI has promised to invest in a UK tradestand at gaming conference E3 in Los Angeles and to fund a major technology fact-finding mission to Canada, the US and France to see how other major players are coping with the pressures of the market. It has not yet released an official figure for this investment.

"The games industry is an important part of the economy and the Government is determined to play its part in helping it towards a successful future," said e-Commerce minister Stephen Timms.

The UK is currently the third largest market for computer games, behind the US and Japan, generating over £1bn in revenues each year and employing more than 20,000 people.

The full report can be viewed here.