While the spectre of Brexit continues to impact on the UK, there are some national industries that are continuing to thrive. Take Britain’s betting industry, for example, which according to a recent report by Deloitte directly contributes in excess of £2.3 billion to the nation’s GDP.
This is the result of a progressive approach to legalising and regulating sports betting in the UK, which has in turn monetized the sector and enabled the government to access additional tax revenues.
The macroeconomic climate is creating something of a perfect storm for the market, however, while other factors mean that there are likely to be challenges ahead for the remainder of 2017 and beyond.
The Facts and Figures Behind the Growth
Aside from generating £2.3 billion towards the UK’s GDP, the British betting industry is also a key creator of jobs. More specifically, it directly supported 38,800 positions of employment in 2011, and this has increased incrementally as major high-street brands such as Ladbrokes have increased their offline presence since this time.
Paddy Power is the latest bookmaker chain to reveal significant first-quarter growth numbers in 2017, with revenues increasing to £416 million and showcasing a 23% rise on the corresponding figures from the previous year.
Not only this, but this growth industry also have a more far-reaching impact on the nation’s economy as a whole, with a cumulative economic footprint of £5 billion in terms of Gross Added Value (GAV). Much of this has to do with the market’s continued willingness to invest in the UK high-street, which has become an increasingly overlooked entity in the age of digital technology and e-commerce.
Behind the Headline Numbers: The Challenges Facing Bookmakers
This growth aside, the industry is facing a number of familiar and unique challenges in the current climate. In terms of the former, bookmakers have suffered from numerous political upsets in recent times, including the EU referendum vote and the election of Donald Trump as U.S. President. Leicester City’s 5000/1 title triumph and Champions League run also qualified as one of Freebets upsets of the season, and altogether these events cost British bookmakers considerable sums of money.
The macroeconomic climate, which has been partially triggered by Brexit and exacerbated by the upcoming General Election, is also likely to take its toll later in 2017. As the value of the pound continues to trade within an increasingly narrow range against the U.S. Dollar (USD) and the Euro (EUR), for example, so too retail inflation has soared to 9% and taxation levies in the industry have increased.
The latter point is particularly important, as the betting market often emerges as a so-called ‘soft target’ for HM Treasury during challenging economic times. As if to underline this, the Machine Games Duty (MGD) tax now applies a 20% levy to corporeal fruit machines and similar similar slots, and is thought to have cost operators an additional £60 million per annum (which equates to an estimated £7,000 per shop).
Can the Market Continue to Thrive?
The robust growth of the UK’s traditional betting sector will come as a surprise to some, particularly given the exponential rise of the online market. In fact, technological advancement has actively enabled major high-street bookmakers to grow, by enhancing the typical customer experience and making it easier for customers to place in-store wagers.
Whether this can be sustained has yet to be seen, particularly with the online sports betting and casino market claiming an ever-expanding market share (virtual casinos generated 33% of all gambling revenues in 2016). The traditional industry is certainly poised to enjoy continued success in the near-term, however, while it is also well-placed to cope with a challenging macroeconomic climate while evolving further as a result.
