How Will Brexit Impact on the UK’s Online Casinos?

Posted by Harry Kane on Thursday, June 22, 2017

On Monday, the long-awaited Brexit negotiations between the UK and the EU began in earnest. The initial portents were slightly concerning for the UK, who immediately abandoned their position on the negotiating timetable while their European counterparts confirmed that they would make no concessions.

The uncertainty is likely to continue for the foreseeable future too, as people continue to speculate on the impact that Brexit will have on specific industries.

The thriving online casino industry in the UK offers a relevant example, so let’s take a look at how Brexit is likely to impact on one of Britain’s biggest growth markets:

Brexit and Online Gambling in the UK: A Look Ahead

Thanks to progressive regulatory measures and a proactive outlook, online gambling has become one of the biggest and most profitable markets in the UK. The industry was worth more than £85 million in 2015, for example, while UK gamblers staked an impressive £4.5 billion in the year ending September 2016.

While few economists have suggested that the market will decline considerably in the wake of Brexit, there are some concerns troubling operators. Most of these revolve around Gibraltar, which officially remains a part of the UK and voted heavily to remain in the EU during last years’ referendum. This principality is also a significant offshore location for operators within the market, while an estimated 25% of Gibraltar’s GDP comes from virtual gambling.

The main issue is that many of Gibraltar’s workers reside in Spain, and currently have impunity to travel to and from British territory as citizens of the EU. Once the UK have left, however, this freedom of movement is likely to cease, meaning that employees within the online gambling sector will feel the effect. As a result of this, some of the 30 large-scale gambling operators may be forced to relocate their operations, removing them from the UK market and creating a period of uncertainty.

This could have negative connotations for both the British economy and the market as a whole, while there are also likely to be further changes relating to taxation. After all, brands leverage offshore havens such as Gibraltar to avoid strict UK tax legislation and optimise their profits, but this will not be an option post-Brexit. Put simply, companies may be required to either sacrifice profits, increase profits or move abroad, as they choose between increasing their tax payments or maintaining low overheads.

The Last Word: The Value of the Pound and Reasons for Optimism

Other, if slightly less pressing, issues relate to the depreciation of the pound, which means that operators achieve less income and profit from players. This is a trend that will be repeated across all consumer markets in the UK, and even though the value of the pound will continue to fluctuate it is undoubtedly trading within an increasingly oppressive range at present.

While there may be short-term issues for the online gambling sector in the UK, however, the level of demand and growth that exists in the industry (along with the innovation being applied by operators) means that it is one of the best-equipped to consolidate during Brexit. Even the potential for rising prices may not impact too negatively on customers, thanks to the flexible nature of the freemium business model that underpins the sector!