How Close Are We to the End of the Offline Gambling Industry?

Posted by Harry Kane on Thursday, July 4, 2019

There’s no doubt that iGaming in the UK is established as one of the fastest-growing entities in the world, and one that continues to drive the region’s gambling industry. However, the exponential growth of online gambling may be papering over the cracks in the offline sector of the industry, at least if the most recent figures are anything to go by.

It’s clear that iGaming is certainly growing at the expense of offline gambling in the UK, with the former now accounting for 39% of the industry as a whole. This number has increased considerably since the beginning of 2018, as bricks-and-mortar establishments become less influential and generative with every passing year.

Now, these percentages are, undoubtfully, very low. An industry of such size hardly undergoes something like this. And we cannot stop ourselves from thinking about what we should expect, after all. With all the gamblers around and all those nice casinos, people rarely stop to think how serious is this issue. In the following lines we will talk if the end could really be near for offline gambling? Let’s take a look.

What’s the State of Offline Gambling in the UK?

Whilst the number of bricks-and-mortar casinos in the UK increased by one in the six months ending September 2018, every other offline vertical declined during this period.

More specifically, the number of licensed arcades in Great Britain fell by a whopping 5.3% to just 1,639, whilst further drops are expected over the course of the next few years.

Additionally, the number of active bingo premises declined by 1.1% in September 2018, settling at around 650.

Whilst this number has remained relatively steady (if in decline) for the last few years, it’s important to provide some context by recalling that thousands of bingo halls were in operation during the 1960s.

At this time, UK bingo club membership peaked at an incredible 14 million, and in truth it has found itself trapped in a gradual but irreversible decline ever since.

Interestingly, even the number of open betting shops in Great Britain declined in the six months ending September 2018, falling by 1.5% to 8,423.

Whilst this may represent a relatively gradual decline, it also represents the continuation of a worrying trend that is being exacerbated by a number of challenging regulatory and legislative factors.

Why is Offline Gambling in Decline?

The decline in the number of betting shops and bookmakers in the UK is particularly interesting, especially given the fact that these entities contributed heavily to the £8.9 billion generated through offline gambling channels in the year ending September 2018.

We’ve seen a clear trend in the performance of bricks-and-mortar bookmakers since 2010, with numbers steadily declining despite brief fluctuations over a period of months.

Nationally, the UK’s high streets boasted 8,423 betting shops at the end of 2018, from a grand total of 11,470 gambling businesses nationwide. This number actually increased by a little under 1% in relation to 2017’s figures, highlighting a short-term and marginal trend that’s unlikely to be sustained going forward.

If we cast our eyes back to 2010, we see that there were around 11,790 gambling business active on the UK’s high streets, 520 more than are currently active. This may seem like a relatively minor shift, but it’s indicative of a prolonged decline and a portent of what’s likely to come in the future.

This trend is also prevalent in cities throughout the UK, with Nottinghamshire providing a prime example. 2018 saw five additional gambling businesses launched in the region during a 12-month period, although overall there were a total of five more betting shops open eight years ago.

The question that remains, of course, is what factors are triggering this continued decline? The most obvious is the rise of online and mobile gambling, of course, but other issues are combining to place a more significant drain on the offline sector.

One of the most pertinent is the recently unveiled FOBT cap, which was rolled out in April after months of speculation and procrastination from the UK Treasury. This has brought the maximum betting threshold for FOBTs down from £100 to just £2, devastating operator’s projected profits and their share values in the process.

To put this into context, bookmakers reported a total FOBT spend of £1.7 billion in the year ending 2015 alone, with players able to wager up to £300 per minute per machine. These entities accounted for a staggering 56% of all betting shop profits during this period too, making bookies increasingly reliant on them over time.

Whilst the market has yet to see the full impact of this legislation (although firms began to prepare for the roll-out when the decision was announced last year), it could ultimately devastate offline sports betting in the UK.

Some projections have suggested that the vast majority of the region’s 8,423 betting shops could ultimately be closed, leading to significant job losses and signalling the death knell for offline gambling nationwide.

The Last Word – Is the End Nigh for Offline Gambling?

Even conservative estimates about the impact of the FOBT cap are far from favourable, with the Association of British Bookmakers (ABB) suggesting that the number of betting shops could be halved over the course of the next 18 months.

More specifically, the ABB claims that between 3,000 and 4,000 betting shops will close nationwide by the end of 2020, culminating in job losses of between 15,000 and 20,000. This will also exacerbate the continued diminishment of the UK high street, perpetuating a cycle of loss and decline that will be hard to recover from.

With the NHS also set to open a gambling addiction centre specifically for children (and more than 400,000 youngsters aged between 11 and 16 categorised as being problem gamblers), the legislative climate in the UK is unlikely to change any time soon.

This makes any potential losses to the offline gambling sector in the wake of the FOBT cap largely irreversible, meaning that operators may ultimately abandon this medium as it becomes increasingly unprofitable.

With operators already eschewing bricks-and-mortar store fronts and bingo halls in favour of online channels, the demise of offline gambling in the UK has been inevitable ever since the digital age was first ushered in. However, the decline of the industry is undoubtedly being exacerbated by external social and legislative conditions, turning a slow death into a sudden and abrupt end.