Does Spanish iGaming Growth Threaten the UK?

Posted by Harry Kane on Wednesday, December 16, 2020

Ever since the inception of iGaming in the UK, this market has blazed a trail for other sectors across the globe to follow.

This has created a scenario where the European market for online gambling has become the biggest in the world, with Spain, Italy and France also recording exponential iGaming growth over the course of the last decade.

In this post, we’ll focus on the sustained level of growth within the Spanish sector, while asking whether this could threaten the UK’s reputation as the global market leader?

The Growth of iGaming in Spain – A Look at the Numbers

According to the most recent figures, the online gambling market in Spain grew by a whopping 17.7% year-on-year in the second quarter of 2020.

The total GGY for iGaming in Spain also reached €208.9 million (£189.2 million) for the three months to June 30^th, and while this represents a 4.2% decline compared with Q1, it’s still considerably higher than the corresponding figures from 2019.

This relative growth was powered by online casino verticals, which offset a decline in virtual and mobile sports betting that has occurred since the beginning of the second quarter this year.

More specifically, online casino revenue grew to €93.5 million, with this representing a 36.5% improvement on the previous 12-month period. This growth was also borne out by rising customer stakes and wagers, which saw a 25.3% hike and reached €2.86 billion overall.

If we break these figures down further, we see that slot play was a dominant driver, with the product accounting for €51.9 million of the total casino GGR (a year-on-year increase of 30.4%).

Despite accounting for a smaller share of the total revenue (€27.0 million), live roulette grew at an even more exponential rate. In fact, this vertical’s GGY jumped by 75.2% when compared with Q2 2019, highlighting the rising popularity of real-time gameplay in the region.

It’s online poker that saw the highest levels of growth, however, with the vertical almost doubling in terms of the total revenues generated.

Overall, poker’s GGY increased by a staggering 97.4% to €38.2 million, with this forgotten vertical enjoying a sustained renaissance within an increasingly competitive iGaming market.

Even online bingo is enjoying an exponential rise, with its revenue contribution climbing by 66.9% to €5 million. Interestingly, this trend is also prevalent in the UK, where the GGY for online bingo increased by an impressive 12.5% to £198.0 million in the year ending September 2019.

How Does This Compare with the UK?

Of course, the iGaming market in the UK remains the biggest entity of its type in the world, generating an estimated GGY of £5.498 billion in the year ending September 2019.

However, this sector is also considerably more mature than its Spanish rival, and this is borne out by the growth figures for relevant verticals in the 12 months from October 2018 to September 2019.

As we’ve already touched upon, the GGY for online bingo in the UK increased by 12.5% during this period, while accounting for a £198 million share of the overall iGaming marketplace.

However, the respective growth for remote betting and casino gameplay was considerably slower, with the former expanding by 4.3% year-on-year in the UK (reaching a total yield of £2.1 billion).

The growth rate for remote casino gameplay was even lower at 3.9% during the same period, rising incrementally to £3.2 billion in the process.

Clearly, the Spanish market has more room and opportunity to grow than the UK alternative, as it’s at an earlier stage of its development and has yet to achieve full maturity. It’s also important to note that the Spanish government continues to impose measures that encourage growth within the sector, much as the UK authorities and regulators did more than a decade ago.

For example, Spain made moves to slash iGaming tax rates in its 2018 budget, reducing its gross gaming revenue levy for online operators from 25% to 20% in the process.

Beyond this, Spain has also afforded additional powers and rights to semi-autonomous regions, who have been afforded the opportunity to lower taxation further and create an even more inviting proposition for operators from across the globe.

In the “Autonomous City of Ceuta”, tax breaks have seen the levy applied to gross gambling revenue fall as low as 10% in some instances, while corporate income tax was reduced to 12.5% and the rate of VAT declined to 0.5%.

To put this into some form of context, the rate of corporate income tax for the rest of Spain is fixed at 21%, creating an attraction option for operators from the length and breadth of Europe.

Does This Pose a Threat to the UK’s iGaming Marketplace?

The question that remains, of course, is whether the sustained growth of Spain poses a direct threat to the UK marketplace?

The obvious answer is yes, not least when you consider additional challenges such as Brexit and the introduction of increasingly stringent regulations in the UK.

In terms of the former, the prospects of a no-deal Brexit remain relatively high, potentially creating a scenario where UK operators will have their access to the European market heavily restricted after December 31^st.

This may encourage some to relocate to European tax-friendly havens such as Malta, automatically diminishing the size of the UK market and the revenue generated for the Treasury.

It’s thought that the increasingly stringent regulatory approach taken by the UK Gambling Commission (UKGC) and the government is also forcing some brands to relocate overseas, with some that have already left citing this as one of the core reasons behind their decision.

Clearly, Spain provides an attractive and practical alternative in these respects, as it the country will retain access to the lucrative single market and continues to provide a relaxed taxation and regulatory climate that incentivises exponential growth.

Through its EU membership, Spain can also offer continued access to liquidity sharing pacts with nations such as Italy, France and Portugal, while continuing to tap into similar high growth markets such as Sweden, Bulgaria and the Czech Republic.

With these points in mind, it’s imperative that the authorities strive to adopt a balanced approach when regulating the UK market, as this will help to minimise any potential impact of Brexit while ensuring that the regions retains relatively high levels of growth.