The government is considering tax breaks to encourage members of the computer games industry to stay in the UK.
New culture secretary Ben Bradshaw hinted in a House of Commons debate that tax breaks could be introduced. His suggestion comes just a week before the Digital Britain report is due to be released.
He said, "We do recognise the importance of the video games industry to the British economy. Research and development tax credits are available for the industry, and we are looking at introducing further tax breaks.
"We will deal with the issue of classification, and other announcements will form part of the final report."
He said it is crucial for the UK to work hard to attract the gaming industry, because many talented developers are emigrating, particularly to places like Canada.
He said, "If we are going to get through this recession we are going to have to do it through digital investment.
"Games designers are leaving the country in their droves, principally to Canada. We need to support the industry with better higher education as well as tax breaks."
He added that there is a "whole industry of jobs for the future at stake" and said if the government does not act the UK will start to fall down the league tables.
Watson added he would continue to campaign on digital issues despite stepping down as minister.