Online Gambling and its Economic Impact
Posted by Harry Kane on Tuesday, October 12, 2021
Whenever the iGaming market in the UK and across the globe is discussed, it’s often in overwhelmingly negative terms, with most of the news emphasis placed on perceived societal harms and the regulatory changes imposed by the UK Gambling Commission (UKGC).
While there’s some good reason for this; it actually does a disservice to the positive impacts of online gambling in the UK, including those that are decidedly economic in their nature.
We’ll explore this further in the post below, while taking a closer look at how online gambling can boost economic growth and productivity in a number of different ways.
Addressing the Societal Harm Caused by Gambling
Before we delve into the economic benefits that arise as a result of online gambling in the UK, it’s important to recognise that the iGaming market does cause at least some level of societal harm on these shores. However, it’s also worth noting that some of the best casino bonuses in the UK allow players to gamble without putting their money at risk.
It’s also important to consider this in detail, particularly as tackling and resolving these issues is central to the longevity and long-term prosperity of the industry as a whole.
Between 2008 and the end of 2019, the number of active and unique online gambling accounts has almost doubled in the UK, from 16 million to a whopping 30 million. Of this number, the UKGC estimated that up to 300,000 could be classed as problem gamblers, which means that they’re either displaying compulsive behaviour or wagering in a way that’s disrupting their lives and finances.
While the proportion of problem gamblers within the marketplace is thought to have remained largely unchanged during this period, there’s no doubt that the rapid growth of online gambling is creating a larger number of compulsive gamblers who regularly wager outside of their means.
Not only this, but other studies have revealed that even gamblers who aren’t classed as displaying problematic behaviour could be at risk of gambling-related harm over an extended period of time.
One particular study by The New Scientist was especially interesting, as it reviewed anonymised data from a UK bank of around 6.5 million respondents, of whom approximately 40% gambled on a regular or recurring basis.
It subsequently sought to see what financial, social and health outcomes disproportionately affected those who gambled over a period of seven years, in order to gain a detailed insight (albeit one that isn’t fully representative of the UK population) into the longer-term impacts of gambling.
Perhaps unsurprisingly, the study found that people who wager, even with a relatively small amount of their weekly or monthly income, were incrementally more likely to experience a small increase in potentially distressing financial outcomes. This may include falling behind will their bills or missing mortgage repayments or incurring debt through the failure to settle short-term and payday loans.
The risk also increases incrementally in line with higher rates of gaming, suggesting that some societal harms may be easy to overlook outside of the problem gambling community.
This is an interesting observation, especially when you consider that the overwhelming number of UK gamblers wager relatively small amounts of money on a weekly or annual basis. More specifically, the average UK gambler bets just £2.57 per week, or just over £133 over the course of a typical year.
So, while this broad demographic would rarely be categorised as being problem gamblers, the findings from the New Scientists suggest that they could still be at risk if they bet regularly across a number of different verticals.
Another significant concern is posed by underage gambling in the UK, with an in-depth study by the UKGC highlighting how this issue has evolved during the digital age.
For example, it’s thought that more than 50% of all 17-year-olds currently residing in the UK are participating in some form of gambling activity on a regular basis, while a further 54% of people within this age demographic have engaged in a specific betting activity within the past 12 months.
Beyond this, a separate survey commissioned by the UKGC revealed that up to 450,000 children between the ages of 11 and 16 are regular bettors, with this of huge concern to both the regulator and responsible gambling operators alike.
This number also dwarves the number of children in the same age group who drink, smoke and consume drugs on a regular basis, suggesting that this may pose far greater societal harm in the near and medium-term. However, we can’t know for sure what will be the future of online slots and other gambling games.
The good thing is that both regulators and legislative powers in the UK are aware of these challenges and committed to resolving them, but it cannot be denied that online gambling is linked directly to some worrisome social harms in the modern age.
What’s the Economic Impact of Online Gambling?
Ultimately, the bettors only represent one side of the narrative when addressing the iGaming market in the UK, and it’s fair to surmise that most modern-day operators have a vested interest in tackling gambling-related harm and creating a safer market for players.
We should also recognise the lucrative and profitable nature of the iGaming market in the UK, which generated a staggering £5.7 billion in the year ending September 2020. A big chunk of the profits comes from reputable gambling sites, such as Betvictor.
This is the result of a progressive, albeit increasingly stringent, regulatory climate, which allows access to widespread verticals and generates significant tax revenue as a result (we’ll touch more on this a little later in the article).
Because of this, the iGaming market delivers a number of economic benefits in the UK, and we’ve summarised some of these below:
#1. Employment
If we cast our eyes over the full datasets from 2019, we see that the overall gambling industry in the UK employed a little over 100,000 people.
Just over 50,000 of this number worked in the sports betting sector, with a further 13,129 operating at land-based casinos across the length and breadth of the UK.
Unsurprisingly, the overall number has diminished over the course of the last decade or so, to the tune of around nine thousand employees. This has much to do with the marginal decline of brick-and-mortar casinos in the UK during this time, while the decision to introduce a controversial FOBT cap of just £2 has also triggered a number of betting shop closures and staff layoffs.
Conversely, the number of employees within the remote sector had increased incrementally since 2010, when around 7,518 staff members worked in one capacity or another.
By March 2019, this number had increased to 9,878, including software developers and a wide range of other support staff that may or may not be employed on a temporary or contractual basis.
While this number may not seem that impressive, it should be noted that more than 40% of all online gambling operators employed just four people or fewer in 2019, while more than half boasted a payroll featuring 10 staff members or less.
Not only this, but a relatively large number of brands outsource key strategic tasks (such as copywriting or web design) to employees in locations such as Malta or Gibraltar, further impacting on the number of remote iGaming employees active in the UK.
We can also see that remote employees are growing to account for a larger share of the gambling workforce as a whole in the UK, making them an increasingly important economic force within a fast-growing space.
#2. Taxation
We touched earlier on taxation, which has come under huge scrutiny in the UK of late following a number of levy changes and legislative shifts.
First came the aforementioned FOBT cap, which slashed the maximum wager for fixed-odds betting terminals in bookmakers nationwide from £100 to just £2.
Given that these terminals generated a staggering £1.7 billion in turnover in the year ending September 2015 (and accounted for 56% of all operator profit during this time), the betting cap left a significant hole in the Treasury’s tax receipts when it was officially rolled out in April 2019.
So, although the UK government was able to claim a cumulative total of £3.02 billion in tax revenue from off and online gambling companies in the year 2019/20 (which is exactly double the figure from 2000/01), the Treasury’s haul has taken a significant hit since the FOBT cap was imposed.
However, the Treasury has sought to swiftly correct this imbalance, simply by increased the so-called “Remote Gaming Duty” (RGD) levy imposed on virtual operators from 15% to a hefty 21%. This means that gambling sites, such as NetBet would have their expenses increased.
This was also rolled out in the spring of 2019, creating a much greater burden on both online and multi-channel operators while also establishing a levy that’s higher than the corresponding values in Spain and Italy.
This change was definitely reflected in the financial figures delivered between April 2020 and March 2021, when online casinos and remote betting paid a total tax amount that was 25% higher than during the previous year.
In fact, the industry’s total tax contribution of £885 million accounted for an impressive 31% of the funds collected by HM Revenue and Customs during the aforementioned time period, highlighting the sheer size of the contribution made by the iGaming marketplace to the Treasury in the UK.
This trend is unlikely to change any time soon, with further online tax hikes expected over the course of the coming months and years alongside a number of other potential legislative measures.
#3. Sports Betting and Sponsorship
The sports betting segment in the UK is another high growth sector, and one that’s inextricably linked to economic performance and wider consumer spending. However, every punter should still know how to become a responsible gambler.
For example, local and national sports play a huge role in communities and the cultural fabric in the UK, with certain events creating huge money-making opportunities for operators in similarly lucrative fields such as tourism.
It’s arguable that certain sporting events appeal to a broader base of people than ever before in the digital age, thanks in part to the advent of remote betting and wagering. The reason for this is simple; as the vast majority of horse racing, tennis, boxing and football fans enjoy nothing more than wagering on events as they unfold, creating a more immersive viewing experience that blurs the lines between multiple demographics.
If we look at nations such as France, sports betting brands have also directly invested into grassroots football and local economies, within the confines of the #AuCoeurDuFootball (#AtTheHeartOfFootball) initiative.
This equates to a direct and positive economic impact, and one that can be felt in several areas of a local community and economy.
Of course, larger-scale sponsorship agreements are also in place throughout the UK across a number of different sports, with sports betting and remote casino brands looking to become increasingly active within the national economy.
The Last Word
In many ways, it’s easy to see why online gambling is often viewed in a negative light, as the perils of certain gambling-related harms (such as addiction, mounting debt and the issue posed by underage gambling on these shores) tend to command the national headlines both on and offline.
However, there’s a delicate balance to strike when discussing online gambling in its full context, as the market (which comprises both remote sports betting and virtual casino gameplay) also delivers a number of economic benefits to society and its various members.
Employment offers a relevant case in point, with nearly 10,000 people currently employed in the iGaming market throughout the UK. While this number of hard to quantify due to the prevalence of remote and contractual workers within the sector, this number is definitely growing year-on-year at a time when the land-based gambling workforce is continuing to dwindle.
This makes iGaming an increasingly influential driver, as does its vast and fast-growing tax contributions to the Treasury.
As we’ve already touched on, the total tax revenue paid by online gambling firms increased by 25% in the financial year April 2020 to March 2021, while this number could rise even further in the coming years. Gambling sites with slot machines are becoming more popular than ever, and the top slots bonuses in the UK are only getting more generous.
These represent central and often overlooked points in the debate surrounding online gambling in the UK, as there’s a pressing need to measure such economic benefits against any perceived societal harms.