The UK gambling industry is one of the most lenient in the world at present, providing residents with access to casino games, sports betting, bingo and much more. Naturally, operators need to provide these betting possibilities to players, and they need to hold an official licence from the UK Gambling Commission to do this. Of course, there are certain terms and rules surrounding the licences these companies hold, and these need to be adhered to.
Not only that, but the operators must also contribute a certain amount of tax to the economy from their gross gambling yield (GGY). A betting duty was set at 6.75% initially, and that percentage was kept until 2001. Then, it was replaced by a 15% tax on gross profits. As of the end of 2014, the Gambling (Licensing and Advertising) Bill altered the taxation of remote gambling to a ‘point of consumption’ basis.
In 2019 though, the gambling levy was increased to 21%, which is a mandatory tax rate for online and land-based betting companies to pay. How does this percentage contribute to the United Kingdom’s economy, though? Where does the money go and what does it actually contribute to?
Of course, one of the most obvious contributions that the gambling industry makes to the UK economy is the creation of jobs for people. According to the UKGC, there were 106,670 direct employees within the gambling sector in 2018. In total, there were 32 million people in employment in the UK at this time, so those in the gambling sector made up a 0.33% share. Granted, that does look like quite a minimal number, although when compared with other industries, it is a significant figure.
To put this figure into a little bit more perspective, the whole agriculture, forestry and fishing industries combined employ around 333,000 people. These three sectors offer some of the largest exports and imports for the UK, and while the 333k figure is three times larger than those employed in the gambling industry, you have to remember that these are some of the biggest sectors in the UK.
The largest workforce is held by Ladbrokes Coral, thanks to the merger that occurred between the two companies in 2016. Over 30,000 people are employed by the company, and this is followed on by William Hill a 16,000 employees, and Paddy Power with 8,000. Of course, all of these companies have their own high street betting shops in operation, too. Therefore, it stands to reason that they would have more employees than a company like Bet365 (3,500), which operates solely online.
Of course, whether this remains the case for a considerable time more is questionable. Land-based betting shops have been closing down frequently over the past few years, and many people have lost their jobs in this sector as a result.
That being said, while there is still a demand for land-based establishments to remain in operation, jobs will remain available in this area. The higher the demand and the higher the overall value of the total bets placed, the more capabilities there are for increases in wages in this area. If there is more money to work with in the gambling sector in general, then this gives more possibilities for it to be distributed in larger portions amongst employees and the like.
As noted earlier, gambling operators must contribute tax towards the economy as a result of the Gambling Act 2005. It was reported in May of 2019 that the UKGC received around £14.5 billion in GGY for 2017-18, although this was a slight decrease on the previous reported period. Each different gaming duty brings in different amounts of money, and this is then put back into the country’s economy.
Like we mentioned earlier, the increase on remote gambling duty from 15% to 21% took place at the end of 2019. This was introduced as a direct response to the limitations imposed on fixed odds betting terminals (FOBTs) in a bid to assist with problem gambling. Naturally, this was done so as to offset the money that was lost from the reduction in FOBT betting limits.
When it comes to the old 15% duty for the year 2017/18, it was reported that £2.86 billion was paid into the UK economy for that period. Of course, with the rise in gambling tax to 21%, a significant increase in that figure was expected.
|Tax Paid by Gambling Industry
|2000 – 2001
|2002 – 2003
|2009 – 2010
|2013 – 2014
|2015 – 2016
|2017 – 2018
|2018 – 2019
From the table above, you can see how the taxes paid by the gambling industry really started to increase in value from the 2014 period and has continued growing since then.
As part of the Gambling Act 2005, it is stated that the UKGC has the ability to expend this money (with the consent of the Treasury and the Secretary of State) for purposes relating to the following:
- Problem gambling and addiction
- Other forms of harm or exploitation associated with gambling
- Any of the licensing objectives
Contribution to Sport
The government is also known for contributing funds to sports, and these can often be significant sums of money. Horse racing has often received a prime focus of these contributions, due to the horse racing betting levy. This was designed so as to allow the money taken by bookmakers to be pumped back into the sport. In 2017, the rules surrounding this levy were also adjusted, allowing for a greater investment in it, too.
Because of this, a 10% levy was added to any profits that are taken directly from horse racing via all UK bookmakers. Due to this, around £90 million per year is granted to the horse racing sector, thanks to taxes taken from sportsbooks. That is actually a vital contribution to keep the sport in operation. So, how is the money actually invested from these contributions?
Well, it would be adequate to look at the prize money received by the winning horses. The money won by the horses is then reinvested into things like facilities, healthcare and additional training for the horses, rather than specifically giving out grants to certain stables.
Sponsorship in Sports
The money invested via sponsorship deals keeps a lot of sports in action. And while the one relating to horse racing above is a mandatory levy that must be paid by all bookmakers making over £500,000 per year from sports betting, other voluntary sponsorship contributions are also made.
This is most commonly seen in the football sector, with Fulham being the first to adopt a bookmaker as their main sponsor. Betfair worked with the London-based football club for the 2002-03 season, and since that time, masses of football clubs have accepted sponsorship deals with bookmakers. A large portion of Premier League clubs have a bookmaker operating as one of their partners, if not as a main sponsor.
These sponsorship deals can range from around £1.5 million per year to £10 million per year. However, the big money in shirt sponsors actually come from outside of the sports betting world. Car manufacturer Chevrolet for example, sponsors Manchester United for £50 million per year, while Etihad Airlines pay £35 million to sponsor Manchester City.
Greyhound racing has also benefited a lot from bookmaker sponsorship in recent times. There have even been instances of bookmakers purchasing racing tracks so as to keep the sport in operation. Coral is actually the owner of four of the 22 stadiums within the United Kingdom. This came about following the merger of Coral and Ladbrokes, allowing Ian Smyth to gain control of them. With these being owned and effectively sponsored by Coral at the same time, greyhound racing is kept at the forefront of what the sportsbooks offer.
Donations to Problem Gambling
Bookmakers have also agreed to contribute certain donations towards problem gambling. An agreement was signed in 2007 between bookmakers and the Government, which dictates that 0.1% of the profits earned by bookies is to be given to charities working to combat this. That figure would amass about £13 million per year. As it happens, some of the companies actually donate a larger amount than this.
This has been a great cause of discussion and change recently, as while it was determined that bookies should donate 0.1%, not all of them were taking heed of this deal. That’s because it was a voluntary contribution, rather than a mandatory one. In 2018, contributions amounted to £10 million for the problem gambling sector. However, five big-name brands suggested that there needed to be a change to ensure that all operators are abiding by the problem gambling donations. These included William Hill, Sky Bet, Bet365, Coral Ladbrokes and Paddy Power Betfair.
Those five companies pledged to increase their voluntary donations to problem gambling within the UK from 0.1% to 1% for the proceeding five years from 2019. That new level would supposedly raise £100 million per year for the gambling addiction industry.
The Effect on Local Retail Sales
It’s not all about the money that is donated to problem gambling, dealt out in sports sponsorship and taken as taxes, though. There are additional benefits from the gambling industry, especially when it comes to the land-based sector. Physical stores providing sports betting or halls offering daily games of bingo for example, are often able to unite with other activities to provide a good day out for many people.
Many casinos also come with their own hotels attached to them, so they also have the appeal of a certain sort of tourism. Restaurants and shops can also be found inside many land-based casinos, allowing visitors to spend their money at different locations during breaks from gaming. Naturally, some people will spend some time in a casino and then go to nearby bars or cinemas or restaurants, for example.
That boosts the economy as people are spending their money in other businesses as well as the casino. Potentially, these shops would draw people in without the casino being there, but for those people who head out specifically for a night at a casino or sports betting shop, there’s a strong suggestion that they would also spend their money at other locations as well. It’s a form of entertainment and being entertained means you’re happy. Therefore, you’re probably more willing to lay money out a different locations.
As is clear from this, the gambling industry has contributed a lot towards the UK’s economy. And this doesn’t just come from one specific area, but from various areas of the industry. If casinos and sportsbooks weren’t as popular as they are today, can it really be said that as many sports would still be in operation as they are?
Additionally, without the gambling companies’ contributions towards the gambling addiction charities, would there be as much help available for those people suffering from problem gambling? Of course, that’s a bit of an ironic thing, considering that addicts really need to have access to gambling of some sort to fulfil their addiction. However, it’s a task of trying to balance a sword perfectly with regard to this.
On the whole, the UK economy has likely benefitted from the legal and regulated gambling industry. There are potential changes coming as many people have suggested that the UK Gambling Act 2005 is now quite outdated due to much gambling taking place online today. However, some things will most likely remain in place – the necessity of taxation on GGY and the demand for sponsorship from sports clubs.