The UK Gambling Sphere – The Real State of Play
Posted by Harry Kane on Wednesday, June 3, 2020
At the end of Q3 last year, the UK Gambling Commission (UKGC) unveiled its latest industry figures. This included both headline numbers and a clear vertical insight, offering an insight into the performance of a marketplace that has historically showcased incredibly high growth.
The most recent industry report was arguably the most hotly-anticipated in living memory, following a nominal decline of 0.6% in the iGaming GGY in the year ending March 2019. This raised significant concerns about the short and medium-term future of the market, both in terms of turnover and profitability.
In this post, we’ll review the key takeaways from the report,while appraising the real state of play and asking what this can tell us about the future of the marketplace.
1. Growth Has Returned to the iGaming Market in the UK
As we’ve already said, the GGY generated by the iGaming space declined by 0.6% in March 2019. This represented the first contraction of this type in the market, but fortunately this has been reversed according to the most recent figures.
Make no mistake; growth returned to every iGaming vertical in the year ending September 2019, including the remote casino space.
This returned a GGY of £3.2 billion during the period, with this representing a 3.9% increase overall (and a 3.3% hike in relation to the figures recorded prior to last year’s decline).
Similar growth was recorded in the virtual sports betting space, which accounts for an estimated 37% of the overall iGaming GGY in the UK. This peaked at £2.1 billion in the year ending September 2019, highlighting a welcome increase of 4.3% in the process and offsetting wider concerns about a decline in online horse race betting.
This meant that the combined GGY generated by online casino gameplay and sports betting increased to £5.3 billion overall, and this is without factoring in other verticals that fared well during the reporting period.
Interestingly, the online bingo sector recorded the most pronounced growth in September 2019, increasing by a whopping 12.5% to £198 million.
This underlines the renewed focus and organisation that exists in the bingo market, which continues to offer an estimated profit margin of up to 35% to operators. This has become increasingly attractive of late, particularly with £2 betting caps being proposed for online slots and similar iGaming verticals.
2. The Sustained Decline of Offline Gambling
While iGaming may have bloomed during the last reporting period, the reverse can be said for offline gambling in the UK.
This has been particularly borne out by the declining GGY of gaming machines and B2 machines (including FOBTs) nationwide, which were directly impacted by the £2 betting cap rolled out in April of last year.
In terms of the total GGY for gaming machines in Britain, this declined by a hefty 11.8% to £2.5 billion in the year ending September 2019. These figures excluded machines that required just a local authority permit, but there’s no doubt that this highlights a clear and long-term trend in the marketplace.
The decline was even more stark for aforementioned B2 machines and FOBTs, which bore the brunt of the £2 betting threshold and recorded a 46.4% decline in turnover during the reporting period.
In total, these machines generated a cumulative GGY of just £624 million in the year ending September 2019, as many of the leading bookmarkers saw their turnovers decline by nearly 50% across the board.
Ultimately, said regulatory changes and cultural shifts also impacted on the performance of land-based betting establishments in 2019. More specifically, the total GGY generated by brick-and-mortar casinos in September 2019 fell by 0.6% during the period, and while this represents a nominal decline the number is expected to fall further in the longer-term.
At the same time, the decision to cap FOBT betting also compelled bookmakers to close large numbers of storefronts and high street shops nationwide.
In total, there were 7,315 betting shops open and actively trading in the year ending September 2019, with this number having fallen by an estimated 12.1% during the reporting period.
3. The Bottom Line – An Overall Decline for Gambling in the UK
As you can probably tell from these figures, the overall gambling industry in the UK has taken a hit over the course of the reporting period.
In terms of headline numbers, the total GGY of the UK gambling industry fell to £14.3 billion, with this representing a 0.5% decline in comparison with the year ending March 2019.
If we exclude lotteries, however, the total GGY of the industry falls to £10.5 billion, while this number has actually declined by 1.9% when compared to the previous reporting period. This is an interesting observation, and one that confirms both the decline of offline gambling in the UK and the industry’s growing reliance on iGaming revenues.
These factors have also precipitated an overall decline in gambling in the UK, which is also borne out by the market’s associated labour market.
More specifically, the total number of employees working in the UK gambling industry reached 98,174 in the year ending September 2019, with this number down by 4.4% when compared with March of the same year.
This has much to do with the widespread closure of betting establishments (and particularly bookmakers) nationwide, with William Hill shutting the doors on 700 shops as their chief executive left his post in September last year.
At the same time, Ladbrokes announced that it was to close up to 1,000 stores in response to the FOBT betting cap, while the operator was also expected to shell 5,000 jobs as a direct result.
Overall, these trends are expected to continue indefinitely throughout 2020, although the longer-term is more likely to see the growth of iGaming verticals outstrip the decline of online wagering in the UK.
This will also see the iGaming space claim an increasingly dominant share of the gambling industry, with this already in excess of 37% and rising rapidly year-on-year.