There is the old adage in gambling to “stop at a winner”. I have had two fairly good years with my predictions. I should quit while ahead, but people like predictions, so here we go for 2016.

United Kingdom 

The UK consumer has had a good run this last twelve months: salaries have started to rise, energy is cheaper, and mortgage rates remain low. Consequently UK gambling revenues are up. 2016 is the year after the general election and tough decisions are normally made early in the new parliament so that there is some latitude for concessions when the election falls in 2020.

The gambling sector escaped mention in the recent spending review. The Chancellor, however, gave up on plans to phase out tax credits. He was overcome by an entitlement culture that seems ingrained into the fabric of British life. So we have tax credits and a living wage. Theoretically the betting shop gambler should be better off from both. The question is whether some of this will be siphoned off by raising the rate of GPT from the current 15% or a tax on winning bets, something that has gained currency in other countries.
Social responsibility will cause a 3% fall in revenue. The combination of tax increases coupled with a campaign by operators will cause some customers to reduce stakes or not bet. We have seen it in tobacco and alcohol.
Point of Consumption Tax: no clear pattern has yet emerged on the level of tax collected by Revenue and Customs from POCT. The released figures bear no relation to reality. Why? Are they embarrassed by the amount collected or do they want to move the rate up and then divulge the figures? Or are they just in a pickle?

Predictions for UK gambling

1. POCT was forecast to raise £280m in its first year. GBGC estimates it will be closer to £475m.
2. Social responsibility requirements will cost the industry 3% in revenue terms or 10% of net profit before tax in 2016, rising over the next five years to 15% in today’s terms and 35% of profits.
3. Given that the Chancellor does not seem to be able to overcome the entitlement culture in the UK he faces opposition to any change to the benefit system. I believe tax increases will follow which will be detrimental to gambling either by way of VAT or a direct increase in gambling taxes.
4. Top picks for consolidation targets are: 888, Unibet, Bet Victor, and Skybet. A merger between Skybet and 888 would work. The mergers taking place already will create a ‘mask’ on corporate performance.
5. The Competition and Markets Authority (CMA) will see that the combined business of Coral and Ladbrokes will take a 45% market share for betting shops. In 1998 the same merger would have produced a market share of 30%. In spite of the changes that have taken place since 1998 many shops will have to be sold. According to the Local Data Company 19 percent of Ladbrokes shops have a Coral shop just 200 yards away. You could be looking at an 800 to 1,000 shop sale programme. Buyers could be Paddy Power, William Hill, Betfred, or private equity.
William Hill used to complain that they could not grow their business because a 2,200 cap was placed on the number of shops they could own. Yet the proposed merger creates a 4,050 shop estate. William Hill will no doubt argue that their business has been unfairly restrained over the years.
If the CMA is consistent the 2200 cap will remain in place or they will advise the merger not to go ahead as they did in 1998.
Prediction: a compromise that allows William Hill to grow its base number of shops, probably buying some out of the merger, with up to one thousand shops either closing or being transferred.
6. The UEFA European Football tournament 2016 will exceed betting revenue expectations. Virtually all of the major countries have qualified and several EU members have introduced internet gambling regulation since the last tournament in 2012. We expect total gambling turnover for the UEFA European Championship 2016 to be in the region of US$6 billion.