Will Brexit wreak havoc with the UK gambling industry?
Gambling is big business here in the UK. It’s an industry that’s worth an estimated £14.5 bn, with the British public spending millions each year on various forms of betting, particularly online and via apps. As one of the biggest contributors to the UK economy, it’s little wonder why Brexit has become such a cause for concern for the government and those working in the industry.
Regardless of whether we leave with or without a deal, there’s no doubt that Brexit is going to shake things up for the UK. Change is in the air, but there’s no guarantee at this point what this change will be. It might work in the industries favour and have little effect on future profitability or it could wreak havoc beyond all repair.
In this blog, we’re going to try and figure out just what Brexit could mean for the betting industry as we draw ever closer to the 31st October deadline.
We already know that Brexit uncertainty has started to impact the retail industry in the UK. But will it also have a significant effect on the gambling industry’s bricks and mortar stores?
The reform by the British government on the rules regarding Fixed Odds Betting Terminals (otherwise known as FOBTs) saw a significant reduction in profitability for retail betting shops, as the maximum stake was changed from £100 to just £2. To reduce the amount of damage caused by this reform, the government decided to offset the loss of tax revenue by raising the duties on online gaming by 6%; taking it from 15% to 21%.
This bold move by the government has meant that a quarter of betting shops on high streets up and down the country have been closed in a bid to cut costs. William Hill, one of the biggest betting companies in the UK, alone closed around 700 of its stores because of the reform.
However, despite losing thousands of bricks and mortar betting shops and their employees in such a short space of time, industry experts don’t think that Brexit will impact the retail side of the gambling sector that drastically. While the revenue from many betting shops were down during this period, many major gambling companies such as Ladbrokes Coral saw a considerable increase in their online operations and their share prices.
So regardless of which way Brexit goes, there’s always the option of increasing their digital presence, which could also provide expansion opportunities into new markets. This could be a particularly profitable opportunity in America, now that the Supreme Court has ruled that certain states can legalise and regulate their own betting sectors.
Licensing and Regulations
When it comes to gambling regulations, the UK has got some of the strictest rules going. With political campaigns about the marketing of gambling websites to concerns being raised over social responsibility of gambling companies, it seems that these rules are only likely to get more rigid as time goes on. So, will Brexit make an impact on the licensing and regulation of UK gambling at all?
Unlike a lot of other industries, there is no central regulation when it comes to gambling in the EU. This means that each EU state has its own individual laws and licensing agreements to manage how they wish. While some most aspects of gambling illegal, others like the UK have a large regulated betting industry, known as the UK Gambling Commission.
Since an amendment to the UK Gambling Act in 2014, all companies serving UK customers, which includes online betting sites and high-street betting shops both in the UK and overseas, must have a UK Gambling Commission license. This means that to tap into the market within the UK, they need to adhere to our laws and legislation for gambling and it’s unlikely they will want to lose this revenue stream post-Brexit. It’s already been stated that all current UK laws on laws on online gambling, licenses, and procedures will be valid after we leave the EU, so it unlikely that Brexit will cause many problems in this respect.
British Overseas Territories
The one area within the UK gambling industry which could feel some significant impact from Brexit is the British Overseas Territories, also known as BOTs. The UK has jurisdiction in fourteen territories around the world and many of these locations have now become hubs for online gambling operators. Gibraltar, in particular, is now home to over 60 of the most well-known gambling firms from around the world.
The key reasons why these betting companies are choosing to locate to BOTs is their favourable tax regimes, affordable labour and the access they provided to the EU single market. However, depending on the Brexit deal being put forward by the UK government, access to the single market and freedom of movement may both become a thing of the past for gambling operators.
Losing access to the single market could mean that the industry has to abide by new trade regulations and face the possibility of certain EU countries excluding them from bidding or tendering processes. This could lead to many having to deal with the cost of relocating their offices and stores and renegotiating new taxes and trade agreements, which could mean that the cost to run their businesses is increased. If their financial standing is already jeopardised, some firms might be unable to fund such a move.
Losing freedom of movement can also add pressure onto the gambling industry, particularly for those with their organisation in Gibraltar. It’s estimated that 60% of the employees employed by gambling firms in the territory actually live over the border in Spain and they cross the border to get to and from work each day. If the bulk of their employees can no longer cross the border with ease, this could easily lead to a significant loss of staff and potential difficulties in finding local replacements.
Despite there being some potential pitfalls in their way, it seems that, for the most part, leaving the European Union won’t be too detrimental to the industry and the UK economy as a whole. But only time will tell!