The UK Becomes the Largest Online Gambling Market

Posted by Harry Kane on Tuesday, June 28, 2022

As we’ve spoken about previously, the UK government may soon unveil its White Paper and online gambling review after a series of enforced delays. This will include a number of recommendations and proposals that will have a seismic iGaming industry in the UK, including potential betting limits and blanket digital advertising bans.

Despite this, however, the market continues to go from strength to strength from a revenue perspective. In fact, the total gross gaming yield (GGY) peaked at $12.5 billion according to the most recent figures , making the UK the largest and most generative marketplace of its type anywhere in the world. But what’s behind this growth, and how will the upcoming White Paper impact on future revenues and expansion?

A Look at Online Gambling Growth in the UK

This high growth trend is tentatively expected to continue for the foreseeable future at least, as part of wider expansion within the European marketplace. Overall, the European iGaming industry is expected to grow by 8% year-on-year, before peaking at a combined value of $42.2 billion by the end of 2023.

Of course, online casino gambling and remote sports betting dominate the total GGY in the UK, contributing more than 93.1% of all revenues. Of these two niches, online casino gameplay is the single most dominant, with this including popular verticals such as online slots, roulette, blackjack and poker.

The growth and diversification of the slots’ vertical has been particularly seminal, with such titles (which regularly cross the boundaries of pop culture and draw influences from film, TV and music) accounting for some 70% of online casino games and the vast proportion of money generated.

We’ll touch a little more on slots later in this piece, but there’s no doubt that this vertical has played a key role in iGaming expansion of late. Other factors include more sophisticated smartphone development and increased rates of mobile Internet penetration, which have made the iGaming market more accessible to casual players nationwide.

But how does the UK market compare to its rivals? Well, an annual yield of $12.5 billion is higher than North America, which generated $11 billion in total through 2022 amid a further expansion of the remote betting niche. This is despite the US having a five-times larger population, although we’d expect North America to reverse this particular trend over time.

Next comes Australia, which grossed a total of $6.5 billion through iGaming niches through 2022. This is almost half the sum generated by online gambling in the UK, with the UK able to maintain this dominance through its advanced regulatory framework and the tech stack that exists on these shores.

Then come the UK’s European neighbours Italy and France, who generated an impressive $4.5 billion and $3.8 billion respectively. These two continental powerhouses are home to the second and third biggest iGaming marketplaces in 2023, but they still trail way behind the influential UK space.

Why is the Government Cracking Down on iGaming?

Given this relentless and impressive rate of growth, the question that remains is why the government would look to crack down on online gambling and potentially restricts the tax contributions that it makes to the UK Treasury.

There are several answers to this question, while it should be noted that the UK has form in this respect. In April 2019, it finally brought in a £2 betting cap for fixed-odds betting terminals (FOBTs), slashing this from £100 and decimating bookmaker revenues by around 56%. This also created a tax shortfall for the government, which it corrected by hiking the Remote Gaming Duty payable by online brands from 15% to 21%.

In terms of its exact reasoning for reform, gambling-related societal harms are often cited as being key. While the rates of problem gambling haven’t increased exponentially or in line with increased player registrations, betting is thought to have caused a direct cost of $198 million to the UK coffers and Public Health England.

Much of this is caused by online betting and wagering, while a further estimated loss of $173 million is associated with other gambling-related impacts on education, finances and employment. Then there’s the impact of gambling on crime, which is arguably even more devastating and influential in the minds of key government officials.

Of course, it’s hard to accurately estimate such impacts given that most costs associated with crime are intangible. However, reports suggest that the total cost of gambling-related harm could peak above $1.58 billion per year, with this less than one-seventh of the industry’s cumulative revenues.

Because of these figures, the government has been able to make a compelling case for iGaming reform in the UK. This will also lead to some difficult decisions being taken in the coming months, especially given the need to protect vulnerable players and communities while also maintaining economic prosperity.

How Impactful Will the White Paper Be?

There’s also method to the madness when targeting slots, which remain the dominant gambling niche online. What’s more, the British public spent £2.2 billion on online slots as recently as 2019, while this number has continued to increase incrementally year-on-year.

When you consider that some online slots currently allow you to wager as much as £500 spin, it should also come as no surprise that this vertical is associated with the highest average losses per

player in the industry. So, capping stakes would represent a logical starting point for any reform, with the only real question being the extent of such limits.

Some responsible gambling lobbyists are asking that the maximum slots bet be capped at just £2, similar to the limits imposed to FOBT gaming. This would reduce online gambling revenues dramatically, forcing operators to subsequently reduce payouts and potentially make slots considerably less appealing.

The good news is that this wouldn’t necessarily impact profitability, at least in the short-term. However, it would be one of several measures and proposals that would change the UK’s iGaming market dramatically, while undoubtedly putting its status as the most generative in the world a risk.