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The global economic downturn, together with factors such as high inflation and low wage growth, is affecting consumer spending in the UK, where the cost of living crisis is consistently in the headlines.
Food and energy costs continue to be a major concern for households, with Statista reporting that, in January 2023, 92% of UK households reported a cost of living increase compared to a year earlier.
Given this position, most people have less disposable income to spend on non-essential activities. It would seem that this fact would have a negative impact on the UK casino industry. But is this actually the case? We are going to take a closer look at this question, in addition to examining what past economic downturns show us about the impact on the casino industry in the UK, and how the industry is protecting itself against potential negative impacts.
How big is the impact of the economic crisis on the casino industry in the UK?
The gross gambling yield (GGY) for both the casino industry overall and the remote betting and online casino sector has fallen recently. From April 2021 to March 2022, the GGY for the casino industry was £14.1 billion. This was a 0.8% fall on pre-pandemic figures for April 2019 to March 2020. Although the GGY for remote betting and online casinos increased by 12.4% compared to pre-pandemic levels, it decreased by 6.2% when compared with the GGY for April 2020 to March 2021.
However, big names in the sector, like Paddy Power, Betfair, and William Hill, stated that their reduced revenues were not the result of the cost of living crisis. Instead, the lower revenue levels are related to measures taken to address problem gambling. These measures include, limiting slot machine stakes to £10 and setting mandatory deposit limits for customers under 25. In addition, casinos licensed in the UK are with GAMSTOP, which allows players to self-exclude from all casinos at once. People who prefer to play at casinos not on GAMSTOP sign up for accounts at offshore casinos, which potentially reduces the profits of UK casino operators.
Given this information, it seems that there are other factors, away from the economic downturn, that are impacting the UK casino industry. The sector appears to be less affected than others in the country, where, according to the Office for National Statistics (ONS), 70% of businesses reported concern for their operations for October 2022. The accommodation and food service activities sector reported the highest level of concern at 90%.
What does history tell us about the effect of the UK economy on the casino industry?
When you look at what happened in the UK casino industry during previous economic downturns, it appears to reflect what is happening now, in that the industry is recession-proof. For example, in the direct aftermath of the 2008 financial crisis, top bookmakers and casino providers Ladbrokes achieved profits that were 20% higher in 2010 than in 2009.
In fact, all the top providers in the UK recorded excellent profits in 2010. Much of the reason for these profits was attributed to the success of online and mobile casino and sports betting offerings.
How the casino industry is adapting to the economic climate to guard against potential effects
Despite the apparent resilience of the UK casino industry in the face of the economic downturn, casino operators still take action to ensure their offerings are best placed to avoid any difficulties. These measures include:
Reducing minimum deposit amounts so that people are more able to play the games.
Decreasing the amount of money they spend on advertising in order to preserve their finances.
Creating websites that allow people to play on a range of devices so that people who have a smartphone but are unable to afford a laptop or PC can still play.
This last measure makes sense at any time, given that 84% of UK adults own a smartphone. Having a website that is accessible across devices attracts a wider customer base.
Looking at the available data, it’s apparent that the UK casino industry is not as heavily impacted by economic downturns as other industries, such as accommodation and food services. Even during the cost of living crisis, casinos can still create good profits. Operators also introduce measures to mitigate any potential negative impacts that might happen.