Gambling Seems to be the One Resilient Industry
Over a year ago, when the UK was deciding whether they wanted to leave or stay in the EU, amidst the conundrums which political and economic experts were facing, analysts were throwing in the odd glib joke that the only industry benefitting from the Brexit situation was the gambling one. They were, of course, referring to the bets on the outcome of the referendum since the “favourite” in this race lost and the bookies cleaned up. Leaving aside the fact that they could have won even more, had they done their predictions more precisely, what eluded the discussions of the bigger picture were the ramifications for the gambling industry after 52% of the Brits voted for leaving the EU.
The UK Has One of the Best Regulated Markets
Although gambling plays a major role in the British economy alongside retail, services, and banking, the effect of Brexit on the industry was hardly discussed, much less in the detailed way that other sectors were. Weird, considering Europe is the world’s hub for regulated online gambling, and much of that is centred in the UK. With all the talks about border control and regulations, some serious and particular concerns were beginning to take shape. One such was the predicted economic upheaval that could influence the gambling industry due to lowered consumer spending. Some concern was expressed that the UK betting shops that may suffer, should the country descend into recession and higher unemployment rates.
Still, experts were confident that the online gambling industry would be one of the most resilient ones, as much of it has servers based outside the UK and caters to global regulated markets. The lack of serious concern regarding the betting industry could also be attributed to the fact that in terms of regulating the gambling market, the UK already “left” Europe in a manner of speaking when it started regulating gambling services at the point of consumption with the Gambling (Licensing and Advertising) Act 2014. Prior to that, online operators that wanted to offer gambling services and advertise on the UK market but had their equipment outside the UK didn’t need to acquire a UKGC licence. With this change to the gambling legislation, however, they had to be licensed by the UK Gambling Commission or some of its whitelisted jurisdictions, such as the Isle of Man, Alderney, Malta and Gibraltar. Which leads to the most serious consequence that Brexit might have on online gambling.
Balancing on a Rock – the Gibraltar Situation
The one thing more than any other that raises concern is who will lay claim on Gibraltar. The small rock off the coast of Spain is a hub of investment, most notably for online gambling, and has been the subject of disputes between the UK and Spain for years. At a 2002 sovereignty referendum, 98.48% of Gibraltar voters were against joint Spanish and British rule and it remained a British overseas territory. Now, this can be a huge problem, especially in a hard Brexit scenario. 95% of Gibraltar voters were against an exit from the EU but given their status as “one with the UK,” they will have to leave the EU as well which can be a huge blow to the economy of the small jurisdiction.
A clause in a draft document of negotiating guidelines sent by the European Council president Donald Tusk allows Spain “to exclude Gibraltar from any UK-EU transitional single market access arrangement or future trade deal if it is not satisfied with the status of the territory.” This could be really bad news for the population of the small rock since it is reliant on free movement within the EU in order to ensure that the 3000 plus jobs in the online betting industry are filled, especially with 60% of staff – around 1,800 employees – commuting from Spain to their workplaces. Their fate, and that of the industry depend to a large degree on whether Madrid opts post-Brexit to hinder cross-border traffic, as it has occasionally done in the past. So really it all depends on how hard Spain is going to be on the border control.
A Possible Shift in Markets
The gambling industry in Gibraltar not only creates employment, it also accounts for 25% of the GDP and 40% of the tax revenue as it’s home to more than 30 international companies. The territory has been inviting to these companies with its favourable taxation on gambling operations – any fixed odds operations are taxed at just 1% of turnover, as well as access to the European Union’s single market of around 500 million people. However, taxes have already been raised as it was ruled in 2015 that they be taxed as Britain is taxed, which forced companies to hand over more tax than ever before. The ruling also meant that operators had to acquire a UK gambling license in order to reach their UK customers.
These, plus a possible limitation of free movement and impositions of tariffs post-Brexit could urge some of the companies to relocate. So far, no gambling company has explicitly stated an intention of leaving Gibraltar and some of the biggest names in the industry like Ladbrokes and Coral have said that they’re monitoring the Brexit negotiations and have no plans as of yet to relocate their businesses. So, it’s all still pretty much in the air and any development of the situation will depend on the UK – EU negotiations. However, 888 stated in their financial report that they’re reconsidering “the appropriateness of remaining registered, licensed and operational in Gibraltar in these circumstances.”
William Hill have also set up a Brexit Working Group that assesses Brexit’s possible financial, operational and regulatory consequences and has to make sure that “suitable arrangements are in place should there be disruption to the Gibraltar (border) crossing or the availability of any services offered through Gibraltar.” In case these companies leave Gibraltar due to unfavourable Brexit consequences, Malta will more than gladly welcome them, being another hub of online gambling, which makes up 11% of the nation’s GDP and sustains 8,000 jobs. 888 already pointed out that the small Mediterranean island is “an alternative ‘dot com’ licensing jurisdiction” if the company relocates due to a hard Brexit. The trouble that such shift could create for the players is the fact that the Malta Gaming Authority is not on the UK Gambling Commission’s whitelist. A bigger concern for players would be scenario where other countries decide to leave the EU following the example of the UK.
Possible Further Defragmentation
If France, Germany, Holland, or other countries exit the EU, this would have a truly detrimental effect on the regulated online gambling market. Despite the lack of strict gambling regulations in the EU, it still exercises control over member states to regulate gambling within their borders and create a safe betting industry. Without this pressure, former EU-members are faced with a very real danger of regressing to state-monopolised systems, rejecting foreign operators. The only sector that could benefit from this is the online gambling black market, and the biggest loser – the average customer who would have no consumer protections.
But don’t yet go into panic – this a stretch and not likely to happen any time soon, if at all, so the main focus for everyone involved in the betting and gambling and betting industry now is how negotiations go, as Brexit does hold the cards to Gibraltar’s future and consequentially – the UK online gambling market.