Can Gambling Save the UK High Street?

Posted by Harry Kane on Wednesday, January 23, 2019

In many ways, it’s easy to see why the iGaming market continues to dominate the UK’s gambling industry. After all, the GGY for the remote sector peaked at an impressive £5.4 billion in the year ending March 2018, while showcasing growth of 13.7% during this period.

Still, this market only accounts for 37.1% of the £14.4 billion gambling industry in the UK, with offline wagering and establishments such as betting shops continuing to serve as key revenue engines.

The relative success of betting shops provides a stark contrast with the modern British high street, which has been gripped by a sustained decline during the last few years. But can this trend continue, and is the gambling sector capable of saving the high streets of the UK?

The Decline of the UK High Street – What Do We Know?

While we may have seen several retailers struggle to remain profitable during the last few years, there’s no doubt that 2018 was a particularly damaging year for the British high street.

More specifically, the last 12 months have seen more retail closures than openings throughout the UK, while the number of shops, pubs and restaurants lying empty on our high streets soared by more than 4,400 during the first six months of 2018.

Pubs have been among the hardest hit, showing a 6.5% decline in numbers during this troubling period. This has been triggered by a number of factors, including a sustained fall in demand, incrementally rising running costs and a gradual change in how young adults socialise in the UK.

Beyond this, the retailers experiencing the biggest losses were electrical good stores, fashion outlets and news agents (with the latter impacted adversely by the rising demand for digital content and the wider economic climate). Estate agents also suffered heavy closures in 2018, as less homes were placed on the market against the backdrop of stagnating prices and growing uncertainty.

With these points in mind, it’s little wonder that we’ve also seen a number of major retail chains face administration in recent times, along with others who have been forced to cull tens of thousands of jobs.

These include high street staples like Evans, House of Fraser, Maplin and Poundworld, while New Look, Mothercare and Homebase have also been forced to seek legal agreements with their landlords in order to close stores and reduce rental bills.

How Are Betting Shops Bucking This Trend?

Overall, closures increased by nearly 17% to 24,205 outlets across 3,000 towns, cities and retail parks during the first six months of 2018.

Additionally, the number of new openings declined by 2.1% to 19,803 during the same period, bringing the decline of the British high street to the attention of customers and leaving more than 4,000 gaps nationwide.

There’s no doubt that betting shops buck this trend, however, with last years’ figures confirming that there were an estimated 8,406 outlets open in the UK during September 2018.

Although this represented a marginal 1.8% decrease from the number of open betting shops in March, these outlets are clearly closing at a far slower rate and performing relatively well in relation to other retailers.

One of the main reasons for this is the previous rules on permitted development, which allowed high street buildings to be converted into betting shops without planning permission. Although this regulation was reversed in 2015, it has made it far easier for operators for open multiple outlets quickly and at a reduced cost.

Not only this, but betting shops have also benefitted from the introduction of lucrative but highly controversial fixed-odds betting terminals (FOBTs), which generated £1.82 billion in the year ending September 2017 and accounted for a staggering 56% of all offline profits during this time.

In recent times, this has become a lucrative and reliable source of income for betting shops, with the existing regulations allowing punters to wager up to £300 in a single minute.

Can This Trend be Realistically Sustained in the Future?

While these factors have arguably helped the gambling industry to sustain the British high street during the last few years, they have also raised a number of social issues in some of the UK’s more impoverished locations.

This has also triggered a number of more stringent regulatory changes from the UKGC and the British government, which have in turn put the sustainability of the offline gambling sector in considerable doubt.

In terms of the former, there’s no doubt that betting brands are now disproportionately represented on high streets across the length and breadth of the UK. In relatively poor working class cities like Bradford, for example, we see a scenario where one-in-three people aged between 16 and 64 are not in work and those that are in employment earn an average weekly wage of just £476.

Despite this, the city is also home to 62 betting shops across a number of major high streets, making it the sixth most profitable local authority area for the UK gambling industry outside of London.

This trend is prevalent across working class town and cities throughout the UK, highlighting the fact that the continued growth of the offline gambling sector is not being driven by increases in disposable income or real wages.

This also represents a significant and increasingly prevalent social issue, while it suggests that the relative success of high street betting shops cannot possible be sustained indefinitely.

The issue of sustainability is hardly helped by recent regulatory changes, which have been inspired by wider economic concerns and the desire of the UKGC to safeguard the interests of potentially vulnerable gambles (particularly those who are compelled to wager more than they can afford to lose).

Not only were the rules surrounding permitted development rolled back more than three years ago, for example, but the government has also confirmed that the recently announced FOBT cap will be rolled out officially in October 2019.

This will slash the maximum betting threshold for FOBTs from £100 to just £2, meaning that punters will not be able to wager more than £6 during every 60 second period through these machines.

As a result, bookmakers will see their profits almost immediately slashed by more than 50%, while operators could see the combined closure of more than 9,000 stores throughout the United Kingdom.

So while the new FOBT legislation has been largely welcomed by the UKGC and society as a whole, it will undoubtedly create more retail closures on British high streets and exacerbate the issues currently facing offline stores and outlets in the UK.

So, while it may be fair to say that offline gambling has played a pivotal role in helping to sustain British high streets in recent years (for better or for worse), it cannot realistically be seen as a saviour of the nation’s retail sector in the future.