The referendum is over but the political and economic fallout is only just beginning. Writing last month ahead of the vote I suggested…

Gambling and the post-EU UK

• Pound trashed
• Gibraltar between a rock and a hard place
• A big win for horseracing

The referendum is over but the political and economic fallout is only just beginning. Writing last month ahead of the vote I suggested…

• People living south of Oxford marginally favour Remain, but the further north from central London you go the closer it becomes. 

• From Oxford going north I believe Vote Leave has it. People tell me that they have been priced out of work by immigrants who are prepared to share housing and work for less. They feel forgotten and let down. 

• Business people employing immigrants favour Remain. 

• People working for large corporations favour Remain. They have been told to vote that way by their employers. 

• Small to medium sized business not employing migrant labour want out of the EU. 

That is more or less what happened. I had backed Leave at 9/2, after all it is a binary bet and the polls were swaying from one to the other. But closer to the day, I bottled it and cashed out. I have been kicking myself ever since.
So what has happened in the weeks after the vote, apart from the un-British comments about the older voters, and those without university degrees? 

The pound has been trashed: Remain voters will say it is a consequence of Brexit. It is not. The UK has a huge current account deficit. The deficit will be partially corrected by devaluation, increasing the cost of imported goods and making exports cheaper. This is Government policy to allow the GB£ to fall. It is why the governor of the Bank of England said he intended to lower interest rates. If the governor increased interest rates by 0.25 percentage points instead, the GB£ would soar. 

The effect on the internet gambling industry will be to enhance GBP£ reported earnings so long as income is derived in USD or Euros, or for that matter most currencies other than GB£. It will be good for London casinos as foreign tourists find a holiday cheaper in London. 

It will not help the betting shops or provincial casinos. Inflation will kick in at some point, again Government policy, so as to shrink the debt. The bookies, AGC’s and provincial casinos will face rising costs, not compensated for by revenue increases.

Gibraltarians voted 96% to stay in the EU: The result went the other way. It brings to mind that Tom Hanks moment in Apollo 13, when he said to ground control, “Houston we have a problem”. I have this image of Phill Brear from the Gibraltar Gambling Commission calling up the EU, “Brussels we have a problem, we want to be in the EU.” The EU response, “Ask Spain”. 

The problem is not Brussels, it is Spain. On previous occasions Spain stated it would shut the border between Spain and Gibraltar if the UK left the EU. Spain has offered shared sovereignty to keep the border open. But because of the past, there is little trust between the parties. Gibraltarians believe Spain will eliminate their financial services industry. Spain has its own gambling laws, as does the UK. How would that square with Gibraltar? Would Spain interfere? 

Could Gibraltar apply for membership on its own account? Spain has already objected to Scotland fearful that Catalonia and the Basque region would follow, leading to the break up of Spain. 

Forgive the pun, but Gibraltar is between a rock and a hard place. Ten thousand people cross the border every day, many to work in banks and e-gaming. There is not enough accommodation in Gibraltar to cater for all. There is, however, two years to resolve this. Nevertheless, listed e-gaming companies located in Gibraltar saw their shares tumble after the referendum result was announced.

The fundamentals remain the same as they did before the Brexit vote. You still have to licence and pay the tax in most EU countries to take bets – all countries are coming round to this. The real downside is the cost to hop from one jurisdiction to another. But it is a one off cost and, besides, most companies are operating in more than one country, so some infrastructure already exists. The big risk for sports betting firms is the next point. 

The big winner will be British horseracing. In all the talks I attended over the future of the Horserace Betting Levy Board, ministers were continually blocked from doing what they wanted by the illegal state aid requirements from Brussels. Freed from the EU, ministers can offer racing a differential rate of VAT on breeding, the continuation of the Levy, price for a product, the list is endless. Bookmakers will carry the cost for some of these decisions.

What has really happened so far as the wider economy is concerned post-Brexit is nothing! The terms to trade with EU are the same. Free movement of goods services and people remain in place. But “project fear” prior to the vote was so over the top, it has spilled over into the post referendum phase. Indeed, the vacuum created by the Prime Minister resigning and the Bank of England governor trashing the GB£ has added to the fear. Probably for good reason. The general public is already being manipulated and positioned to accept negotiated terms to which it would not ordinarily agree. Even intelligent, sensible people seem completely fearful of the future. 

I have lived through a countless number of crises and recessions and this is a walk in the park by comparison. It does not take account of the potential upside. Whoever is elected Prime Minister, when terms are to be discussed with the EU, their negotiating hand is very strong.

by Warwick Bartlett