Is There a Genuine Case for Cracking Down on iGaming in the UK?

Posted by Harry Kane on Tuesday, May 31, 2022

If we look at a one of the most recent reports from the UK Gambling Commission (UKGC), the UK’s online gambling industry generated a gross gaming yield of £5.7 billion in the year ending September 2022. This highlighted a modest increase of 1.2% compared to the previous year, while further incremental growth is tentatively being forecast for the near-term.

However, near and medium-term growth could be impacted in the wake of the UK government’s upcoming gambling review, with a white paper due to be released shortly. This will highlight key issues and the potential social harms of iGaming, while also laying out some reformative proposals to change both the nature and the perception of the industry.

In this article, we’ll explore the recent growth of the iGaming market in the UK and the industry’s positive economic contributions, while asking whether it’s actually counterproductive to create overly burdensome legislation.

Addressing iGaming Growth in the UK

It’s argued that increased mobile usage is one of the key driving factors behind annual iGaming growth on these shores, with the latest UKGC report highlighting that 57% of all online gambling activity is carried out on a smartphone or tablet.

This figure has increased by an impressive 4% since the year ending September 2021, when 53% of online gamblers regularly wagered using their mobile device. This is certainly making the online gambling market and its numerous verticals more accessible to UK customers, with the number of new online gambling registration in Great Britain totalling 32.65 million as recently as March 2022.

The relentless growth of esports is also creating new and lucrative online betting markets in the UK. Here, punters can wager on a growing range of markets pertaining to competitive video game tournaments, which usually revolve around franchises such as Dota 2, FIFA, League of Legends, Overwatch and Fortnite.

In the year between October 2021 and September 2022, esports betting generated £20 million in GGY, with this figure having increased by a whopping 33% when compared to the previous 12 months. Esports betting is also driving higher levels of engagement and gambling activity among younger customers, thanks largely to their existing interest in video games and the crossover between two lucrative markets.

These factors represent natural market forces that are central to the real-time and future growth of iGaming, while betting brands are well placed to capitalise on them going forward. This will enable them to increase their revenues further over time, contributing to a popular and generative marketplace.

The Positive Economic Impact of iGaming in the UK

This growth also has positive connotations for the UK economy, and recent governments have never been shy about leveraging inflated iGaming revenues to increase Treasury inflows. This was borne out in the wake of the fixed-odds betting terminal cap in April 2019, when the government legislated to slash the maximum FOBT wagering threshold from £100 to just £2.

Not only did this see land-based bookmaker revenues decline by approximately 56%, but it also delivered a spate of store closures and job losses. At the same time, the Treasury recorded a significant hit to its coffers, but moved to compensate for this by hiking the Remote Gaming Duty (RGD) that’s applied to iGaming brands from 15% to 21%.

According to further data releases from the UKGC, the online gambling industry as a whole is thought to contribute more than £2.5 billion to the UK economy every single year. In addition to tax levies, this also comprises license fees that are paid to the UK government, public service funding and contributions to infrastructure spending.

According to the latest estimates, it’s also thought that the iGaming industry has created more than 100,000 jobs throughout the UK labour market. Many of these exist within the creative industries, with the demand for software developers and content creators rising exponentially as the market grows and player demographics continue to diversify over time.

Outside of the creative spaces, the iGaming industry has created job opportunities such as customer service agents and marketing specialists, who play key roles in creating differentiators in an increasingly competitive space. Overall, this has helped to compensate for some of the job losses that were experienced in the offline gambling sector, as online brands have evolved to claim a larger market share.

Will Aggressive Legislation Prove Counterproductive?

These positive economic contributions are regularly overlooked, with the media often preferring to focus almost exclusively on news stories such as the recent decision by the UKGC to fine William Hill £19.2 million for social responsibility and anti-money laundering failures. It’s this climate that’s partially driving the government’s desire to legislate iGaming in the UK, with ani-gambling lobbyists also highly influential in this respect.

Certainly, the upcoming whitepaper is set to see a number of significant iGaming reforms, including a potential £2 betting cap on online slots and a blanket ban on digital advertising. These measures will have a direct impact on iGaming revenues, although brands could at least minimise impact on profitability by tailoring their payouts accordingly.

As a result, some operators may become less generative, while smaller and independent brands could reduce their operations while cutting jobs. This would have an obvious and adverse economic impact, and while it may initially reduce gambling-related harms in society, it would do little to tackle the underlying reasons why people wager irresponsibly in the first place.

However, the whitepaper may also impose a mandatory levy on operators in the UK, which would compel them to contribute a fixed percentage of their profits to problem

gambling charities and initiatives in the UK. Currently, the government enables operators to make voluntary contributions to such causes, but this has been slammed as wholly inadequate by anti-gambling lobbyists.

This seems like a fair, proportionate and responsible measure, especially if the mandatory levy is fixed at a nominal 1%. However, it can be argued that simultaneously and aggressively restricting earnings will impact the subsequent contributions made to gambling charities, and this is an aspect of iGaming reform that may require detailed consideration.

It could certainly prove counterproductive, and while there’s even an ethical argument about selective government intervention in some industries ahead of others, some of the measures proposed don’t make immediate economic sense. So, although it’s inevitable that the UK iGaming space will be heavily restricted in the months’ ahead, we can only hope that this doesn’t come at too great an economic cost.