June 6, 2019

A Reality Check for the UK Gambling Business 

Gambling is popular around the world, even in my small area across the pond. The gambling industry generates over £2.3 billion towards the United Kingdom GDP, making a considerable contribution to the economy, and also, creating more than 40,000 jobs. In general, the industry has an economic footprint of over £5 billion and will continue to thrive well into the future.

But, with every single booming business comes problems that are cause for concern. The UK gambling world is currently dealing with high profits, higher stakes, and worries of losses dealing with gambling addiction. What’s going on right now might just be the reality check needed. 

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The Birth of Online Gambling

Online gambling is still relatively new. Since the enactment of the Free Trade and Processing Act in Bermuda and Antigua in the 90s, the industry has continued to flourish, and several companies have been licensed to provide online gambling services, for example online casino Cashino.

The Caribbean governmhttps://cashino.coment was the first to legalize and regulate online gaming. In 1994, however, a UK developer named Microgaming was the first to develop and launch the first online casino.
The launch was a groundbreaking event in the development and operation of online casinos, and the developer is still popular to date.

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1995 saw the inauguration of CryptoLogic, which became a successful innovation with
internet money transfers thanks to its fast and safer processes. The brand later launched
InterCasino, which is one of the oldest online casinos, and still present to date. In the same
year, Microgaming launched its online version of popular games such as roulette, poker, and
blackjack. Also, NetEnt, a novice in the gambling field back then, launched its online games,
therefore, proving itself to be at the apex of the industry until today.

From the widespread developments, online gambling businesses all over the UK continue to
provide sports betting, eSports, in-play betting, horse racing betting, bingo, novelty betting,
slots, roulette, baccarat, blackjack, poker and all other forms of betting in the same
structure. In general, online gambling became increasingly popular, and in 1996, there were
15 online casinos, which became 200 in the following year. Planet poker launched Texas
Hold’Em in 1998, therefore making online gaming more accessible over the internet.

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This trend continues to grow, but there’s a major caveat worth noting..

What Is the Implication on the UK Economy?

The UK’s gambling industry has continued to balloon in size over the years, thanks to the rapid
growth of online games and the loosening up of gambling laws. The enactment of the
Gambling Act 2005, which came into effect in 2007, opened the doors for TV advertising for
sports betting, poker, and online casinos, therefore giving betting companies direct access to
people.

The act also laid out the regulation governing online gambling as well as fixed-odds
betting terminals, the machines that would allow punters to bet to a maximum of £100 for
every 20 seconds.

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The industry’s total income, along with the revenue paid to the UK Treasury, has soared
since then going by the figures published by the Gambling Commission. The gross gambling
yield, which is the amount won by gambling companies from players, was estimated to be
£8.36 billion in the financial year beginning April 2008, shortly after the enactment of the
act.

This figure, however, climbed 65% to reach a record high of £13.8 billion in the year to
September 2016, which was fueled majorly by an upsurge in the National Lottery spending,
FOBTs, and online gaming. Income generated from remote betting – online poker, online
casinos, and online bingo, was recorded as £817 million in 2009 but has since reached £4.5
billion, which is more than a third of the industry’s value.

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However, these numbers aren’t always correct. Income from online betting could be exaggerated by the inclusion of income from overseas-based casinos from 2014. Either way, the profits are definitely there.

New Losses Mark Worries

Unfortunately, the amount lost by British gamblers on FOBTs has risen by 73% since 2009,
from approximately £1bn to £1.8bn, despite the number of machines going up by only 9 percent
over the same period to 34,388. These figures indicate that gamblers are losing even larger
sums. Each machine generates an estimate of £52,887 each year, which, according to the
figures, is approximately double the national average wage.

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The Association of British Bookmakers (ABB) has criticized a proposal to reduce maximum
stakes on FOBTs from £100 to £2, saying that this would damage the economy and the
industry. Over 20,000 of the industry’s 106,678 UK jobs could be lost, and over 8,000
bookmaking shops closed. The move would also deny the treasury approximately £1bn in
revenue by 2020.

Despite ABB denying that there is a linkage between problem gambling and FOBTs, the UK
gambling commission has however found that 11.5% of those who use the machine in
bookmakers are problem gamblers. The figure rose from 7.2% in 2012.

Statistically, the commission claimed that the number of problem gamblers in the UK was
stable. The commission also found that men were more likely to be problem gamblers
compared to women. Only 0.2% of adult women were found to be problem gamblers
compared to 1.5% for men and 2.3% for men between the ages of 25-34.

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New Gambling Regulations

After the enactment of the 2014 UK Gambling Bill, online casinos were required to remit a
15% point of consumption tax, and get a license from the Gambling Commission. To get
approved by the commission, some operators then had to adjust their sites, while others
had to rebrand.

According to research conducted by KPMG, The Remote Gambling Association has reported
that a tax rate of more than 10% has a considerable increase in the cost of operating in the
British market. Therefore companies in the industry can now benefit from re-evaluating their
positions. This new regulation could have a knock effect for UK players as well, with the
operators who choose to remain in the UK opting to offset the high tax rate by increasing
costs to their players.

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What the Future Holds for the Online Gambling Business in the UK

Future regulations have the potential of having an impact on the sector’s contribution to the
economy. Irrespective of high pressures, high street betting outlets are still operational, serving more than 8 million customers each year. Challenges are still there with the gambling industry being the only industry that pays more in revenue to the UK treasury than it generates in profit.

The new higher tax rates could have a considerable effect on companies’ earnings as well as
pretax profits, and this could lead to the closure of both big name and independent betting
shops. However, the industry still makes a profit of £600 million and contributes
approximately £1bn to the economy. It’s now the period to focus on stability, create more
jobs, and try to navigate through the challenges created by new regulations.

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The online gambling industry in the UK and around the world continues to welcome new
legislation formulated to control the market. Despite making a profit and generating more
revenue even with the current regulations, experts suggest that higher tax rates may have
far-reaching consequences for the industry. Whether that’s the right bet, though, remains to be seen. 

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