UK Bookmakers’ plea to government
The UK bookmakers made their yearly pre-budget presentation to the Treasury Secretary Sarah McCarthy -Fry MP at the end of February.
Ladbrokes’ results were out the week before and William Hill’ results followed the week after.
It is now accepted that the retail betting industry is now no more resilient to the recession than other industries and the trends in revenue follow closely the course of gross domestic product (GDP).
GBGC modelled this in early 2009, tracking the 1992 recession and we found a correlation between a rise and fall in GDP with betting turnover. For every 1% drop in GDP a 3% fall in turnover would ensue. However, a one percentage point fall in turnover hit net profit even harder, with a 10% reduction.
The 4.5% fall in GDP is, therefore, quite serious and the small percentage rise for Q4 2010 was a welcome sign of partial recovery.
In addition, media rights for retail bookmakers are now costing 100% more than they were a few years ago. There are media reports that VAT could rise to 20% after the General Election, and horseracing is threatening to ask the Horserace Betting Levy Board to end the levy free threshold for small betting shops.
This could cause shop numbers to fall, with those remaining having to shoulder the cost of the media rights which defy market forces and only go up in value in spite of the fact that horseracing is a declining product.
Government also finds itself in a difficult position because debt has risen dramatically. At some point taxes must be raised and spending cut. This is not the time to ask for relief but it is reasonable to ask for the status quo to be maintained.
The bookmakers and the investors in the listed companies would now like some certainty over B2 class slot machines (fixed odds betting terminals). The DCMS has now had B2 machines under review for far too long. A business cannot plan if 40% of its entire income is under constant threat of review.