Trade body UK Interactive Entertainment (Ukie) credited the 12.4% growth from 2016 to “an ever expanding audience”.
Game software accounted for the majority of sales, with online and digital games the most popular.
Non-digital boxed games also saw a surprise small rise in sales, driven by the popularity of titles such as Fifa 18, Call of Duty and Grand Theft Auto.
The growth in gaming sales came despite the fact that wages have been rising at a slower pace than inflation – and shoppers have less disposable income to spend in stores.
Console sales were up by almost a third on the previous year.
Dorian Bloch, senior client insight director for entertainment, at market research firm GfK, said the Nintendo Switch, Sony’s PS4 Pro and Microsoft’s Xbox One X, had helped drive the strong performance in the sector.
“It is clear that the console gaming market is now enjoying a renaissance,” he added.
The success of new game sales meant there was less success for second-hand game sales, which fell just over 15% last year.
Best-selling box games in the UK in 2017
•1 FIFA 18 – Electronic Arts
•2 Call Of Duty: WWII – Activision Blizzard
•3 Grand Theft Auto V – Rockstar/Take 2
•4 Assassin’s Creed Origins – Ubisoft
•5 Star Wars Battlefront II – Electronic Arts
•6 Crash Bandicoot N.Sane Trilogy – Activision Blizzard
•7 Destiny 2 – Activision Blizzard
•8 Gran Turismo: Sport – Sony Computer Ent.
•9 Tom Clancy’s Ghost Recon: Wildlands – Ubisoft
•10 Horizon Zero Dawn – Sony Computer Entertainment
Dr Jo Twist, chief executive of Ukie, said the growth showed that UK consumers had “a strong appetite” for gaming.
“New hardware such as the Switch have driven retail sales, virtual reality hardware looks healthy and digital games across all platforms continue to grow,” she added.