Revealed: racing faces major funding crisis if affordability checks turn off biggest bettors

It would be difficult to name a moment in recent times when warning lights were not flashing for British racing's finances but a few more have come on in recent weeks.

Last month the BHA released figures which showed that betting turnover on British racing had fallen by 5.9 per cent in the first quarter of 2024.

That put flesh on the bones of repeated warnings from the Levy Board that, while the levy has been holding up, it has seen turnover continue to fall.

Last week came the row between Arena Racing Company (Arc) and gambling industry giant Flutter over media rights payments.

At one point that threatened to create an unprecedented situation in which Flutter's Paddy Power and Sky Bet brands were not going to offer odds on a meeting at Bath, an event averted by some presumably choicely worded correspondence from our learned friends.

That, nevertheless, was another alarming sign of British racing's unhealthy financial ecosystem.

There was further evidence of the financial threats facing the sport hidden away elsewhere recently.

Flutter and Arc row over Bath meeting last week was another alarming sign of British racing's unhealthy financial ecosystem.Credit: Alan Crowhurst (Getty Images)

It came in the form of a paper by Professors David Forrest and Ian McHale of the University of Liverpool, which was published by the Journal of Gambling Studies and entitled 'The Dependence of Online Gambling Businesses on High Spending Customers: Quantification and Implications'.

The paper was based on previous work carried out by the two academics and researchers from the National Centre for Social Research in the influential Patterns of Play report, which took data from nearly 140,000 accounts with the seven largest gambling operators in the 12 months to the end of June 2019.

According to this more recent paper, across all types of gambling, the top ten per cent of customers in terms of net spend provided 79 per cent of operator revenue, the top five per cent a little more than two-thirds and the top one per cent generated 37.4 per cent.

However, the situation for British racing was much more extreme.

Forrest and McHale said that according to their estimates, the top one per cent of horseracing bettors "comprised only some 60,000 individuals".

However, their level of mean loss – £4,199.28 – meant they generated 51.93 per cent of operator net revenue from horseracing. Qualification for membership of this top one per cent group was an amount staked of £18,585.26.

The paper discussed what regulatory constraints on turnover or loss, such as affordability checks, might mean and it came with a stark warning for British racing.

It said: "In the case of horserace betting, any limits introduced would also impinge on the sport itself to the extent that betting operators must pay a statutory levy of approximately ten per cent of their net revenue from bets on British racing.

"Receipts from this hypothecated tax are received by the Horserace Betting Levy Board, which distributes it across the sport, principally to support prize-money. This funding stream appears to be vital to maintaining the size of the fixture list."

The academics said the share of operator revenues from the top one per cent of horseracing bettors "therefore underpinned much of the sport".

They added: "Any restrictions on account deposits or losses would be likely to be at a level which, if applied effectively, would cut off a significant part of the income flowing to racing."

The paper came with stark warnings for British racing's financesCredit: Edward Whitaker (racingpost.com/photos)

The Patterns of Play report was used by the government to help estimate how much its proposals for financial risk checks would cost British racing, coming up with the figure of £14.9 million in its white paper.

However, the white paper assumed an equal reduction in gross gambling yield across all online betting and gaming products from financial risk checks, not recognising the differences in racing's customer base. The estimate is therefore almost certainly far too low.

The data for the Patterns of Play report also came from a period before affordability checks had really become a factor for British bettors.

The Gambling Commission's infamous compliance and enforcement report which called on operators to request "customers wishing to spend more than the national average" to provide information such as three months' payslips and tax returns was published in November 2020.

The troubling question then is how much that figure of 60,000 individuals mentioned by Forrest and McHale has been reduced by affordability checks and other factors.

In last month's paper the academics, speaking about gambling generally, said: "From our measures of the concentration of revenue, a rigorous interpretation of affordability checks would be expected to eliminate a high proportion of the income of the regulated industry."

Of course, British racing can have little reason to complain if the checks catch those who have been betting unaffordable amounts.

However, in their recent paper Forrest and McHale point out that many high-value customers "will prove to be ‘healthy and wealthy’ high rollers whose gambling is under control and whose high spending reflects either high income or very strong preference for gambling as a leisure good".

The paper, along with the results of the 2021 survey of attitudes towards affordability checks which emerged recently, paints a bleak picture of how bad the effects of the checks might be for British racing. They also highlight the need for racing to remember that the threat has not gone away.

Could Gamblegate make new MPs reluctant to engage with racing?

Time will tell what the long-term consequences of Gamblegate will be, but media interest in the scandal appeared to evaporate pretty quickly as polling day got closer.

The Gambling Commission and Metropolitan Police have launched investigations into the political betting scandal and now the election is over can probably expect to carry those out without quite the same level of scrutiny that had gone before.

The early stages of the saga were a rarity when it comes to gambling stories, in that bookmakers were for once not cast as the villains of the piece.

However, as media outlets searched for more angles on the story to enliven a not particularly exciting general election campaign, there were attempts to widen it out into a more general debate over gambling.

Former prime minister Rishi Sunak's election campaign was impacted by GamblegateCredit: HENRY NICHOLLS

Inevitably some of these concentrated on the dangers of gambling or looked at the links between the industry and political parties, especially Labour given the expectation the party would form the next government.

Racing and its links with politics sometimes gets dragged into the debate about gambling and although that has not happened during Gamblegate, there is the possibility there could be some unfortunate unintended consequences.

British racing will be looking to engage with the new MPs with racecourses and training establishments in their constituencies, but they might be cautious given the events of the last few weeks.

It would be a shame if the new intake was reluctant to engage with racing for fear of provoking unwelcome headlines due to the link to gambling.

Bill's Bullets

Jockey Club seeks 'low ego' candidates for new chief executive

The Jockey Club has launched its search for a new chief executive, with the first of six key strategic priorities for a successful candidate being "returning the core racing business to profitable growth".

The search is being conducted by headhunters Egon Zehnder, with candidates also being asked to have "high integrity, a low ego, a tolerance for ambiguity, and a willingness to travel and attend races in the service of the club".

Flutter's US dispute has echoes of Arc row

The media rights spat between Arena Racing Company (Arc) and bookmakers Paddy Power and Sky Bet last week was not the only contractual dispute between gambling giant Flutter Entertainment and racing.

Flutter's US arm FanDuel stopped offering betting on New York Racing Association content. In a move with echoes of the quarrel with Arc, FanDuel said: "We cannot agree to new proposed terms that are substantially inconsistent with our prior agreements."

New job for Tracey Crouch

Former sports and gambling minister Dame Tracey Crouch was one of the many MPs to step down from parliament before the election but she had already secured a new role before the polls opened.

Crouch, who is a member of the Horse Welfare Board, has joined public relations agency Hanover Communications as managing director of its sports division. The BHA is one of the many sports bodies Hanover advises.

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