How might the cost of living crisis affect the UK gambling industry?

The cost of living is rising and has been continuous since 2021. In April 2022, inflation reached the highest level on record. It is expected to peak at almost 9% by Q4 2022. Soaring energy prices have seen domestic gas prices rise by over 94% and domestic energy up by 54%. This, coupled with increased demand for consumer goods and supply chain bottlenecks, is causing enormous problems for households in the UK. In real terms, this had led to average wages falling at the fastest rate for more than two decades.

According to the Office for National Statistics (ONS), more than three-quarters of adults are worried about the cost of living, with 41% of respondents spending less on food shopping and other essentials. It’s not just energy and daily needs where consumers are reducing spending. The latest YouGov poll reveals more about how Britons are responding to the soaring prices, with the hardest-hit area entertainment, specifically subscriptions and dining out.

Entertainment spending is down, but what about gambling?

In the face of such price hikes, it’s valid to question how the cost of living crisis will affect gambling, and we already have some stats to refer to. According to the Health, Wealth and

Happiness Index by the Centre for Economics and Business Research, a quarter of gamblers have increased their gambling spending during the last year, with those under 35 three times more likely to be spending greater amounts. Of the adult population in Britain, just under a third (32%) partake in gambling, and 23% have increased their habit over the last year. However, the report details that higher-earning adults are more likely to gamble and to have increased their spending.

Conversely, players reported reduced gambling participation more recently in a March 2022 YouGov poll, which showed that of 700 active gamblers, 32% said they would spend less on gambling in the coming months. However, as the survey only recorded responses from 700 participants, it’s not large enough to be considered representative of the UK population.

When looking at the total betting and gaming receipts published by the UK government, the data reflects increased spending as the 2021-2022 year-to-date figures show an 8.4% total rise over the previous year’s figures. However, if we break this down further, the gross gambling yield (GGY) for March 2022 doesn’t show such a rosy outlook, with the total gambling yield, according to the UK Gambling Commission, down 10.4% compared with February 2022.

Online slot revenue showed strong growth with a 14.6% increase in revenue, proving it a robust market. Online slots remain the most popular form of online gambling and entertainment, with various new monthly games and strong market competition, making it less likely that this gambling area will see significant changes. Moreover, according to industry analysis, it wasn’t online casino gaming revenue that caused the GGY drop, but rather the betting industry and promotional events associated with the Cheltenham Festival (which saw a huge increase in promotional offers and suggests that the variance in figures for March could be isolated).

What can we make of this data? It’s quite the mixed picture, with some sources reporting reduced gambling participation and others showing increased spending from higher-earning players. This is not to say that gambling will not be affected by reduced player budgets, but rather that the potential reduction is not consistently visible in the data currently (perhaps due to skewered revenue figures from the pandemic creating unfair yearly comparisons or a lack of participation and spending figures according to players’ socioeconomic status). One thing is for sure, as Britons tighten their belts, entertainment is one of the first areas where spending is cut, and we are already seeing reports of different gambling behaviour.

Will the crisis increase problem gambling?

Whether gambling is on the rise or is an area players are reducing spending in response to the crisis, it’s not a far stretch to imagine that during times of economic hardship, reliance on gambling or the view of it as a form of legitimate income may increase, leading to more issues arising as a result of gambling.

According to academic research conducted in the wake of the 2008 recession, this isn’t the case. A study recorded gambling participation rates in Iceland in 2007 before the financial crash and then later in 2011. Results showed a significant increase in gambling participation, with more of the population playing lottery, bingo and scratch cards. Meanwhile, the use of electronic gaming machines, like slots, reduced slightly. In real terms, there was no statistical increase in problem gambling figures, with a 1.2% prevalence rate in 2007 and 1.1% in 2011. Furthermore, those who reported financial difficulties were more likely to participate in the lottery than those who were not.

Is the gambling industry recession-proof?

The gambling industry has long been considered to be recession-proof. However, UK inflation is currently the highest on record (since 1982) and this, mixed with the supply chain bottlenecks, and skyrocketing energy prices worsened by the war in Ukraine, has created an unprecedented set of conditions that will continue to reduce spending across many sectors, especially entertainment.

While we are already seeing some changes in player and revenue data, it’s not a conclusive picture. Over the coming months, it’ll certainly be interesting to dive deeper into the stats as they are recorded, and new revenue figures roll in. Additionally, the rise in living costs comes at a time when the UK is undergoing a legislative gambling review, which may introduce mandatory per-player budgets and affordability checks, which will affect how players gamble and spend.

This article does not necessarily reflect the opinions of the editors or management of EconoTimes