Gambling could well prove resistant to any coming recession, but not to inflation, an economist has said.
Looking at UK data that goes back to 1957, spending on gambling has been surprisingly resilient, with recessions in 1991 and 2007 having no visible effect on betting and gambling duty, said economist Bill Robinson.
“Gambling is something people like to go on doing in hard times, rich and poor,” he said.
He quickly added that by “rich and poor”, he meant those in the top three income deciles as well as the bottom three.
“You are in a very resilient industry, but one which will feature big pressure on wages,” he said.
He predicted, however, that the gambling industry would see diminished profit rather than losses if inflation gets worse.
The COVID-19 pandemic depressed gambling overall and shifted much of it online, but that was due to lockdowns and cancellation of sporting events, the economist said.
Robinson was speaking at the KPMG Gibraltar eSummit last week.
Today a special advisor to KPMG, he was formerly an advisor to the chancellor of the exchequer under Norman Lamont while John Major was Prime Minister.
Robinson is confident UK inflation will continue and will likely lead to a recession, probably next year.
The rise in public borrowing during the lockdowns was the biggest since 1939-1940 and the rise in wage inflation so far is the sharpest since 1976, the economist said.
But despite soaring energy prices hurting consumers worldwide, Robinson said he did not believe there would be a re-run of the 1970s, when inflation hit double figures.
At a different KPMG conference, a gambling analyst had an alternate view on gambling economics.
Global gambling growth has lagged overall economic growth since 2008, a fact that has been partly masked by gains in online gambling, said Paul Leyland of Regulus Partners.
He was speaking at the Malta eGaming Summit in May.
During COVID-19 lockdowns, there was “extraordinary” growth in online gambling in both mature and emerging markets, Leyland said.
Now growth in most markets will probably be much harder, as consumers adjust to changing economic conditions, he said.
But for long-term stability, the industry might hope that the coming years are “really tough”, Leyland said.
“If in the next two or three years, gambling demonstrates that it is extremely economically resilient, we’re all in trouble because if people are prioritising gambling over clothing, food and children, then policymakers are going to react to that pretty aggressively,” he told the audience.
“We need gamblers to spend less money when times are tough to demonstrate that we are in the entertainment industry and we’re not rinsing people,” he told the audience. “So hopefully the next two to three years will be really tough, as that will demonstrate that we are a responsible and sustainable industry.”
The online gambling industry has received a lot more negative media attention in recent years, even though it has vastly improved regulatory compliance and gambling safety, because big fines have drawn attention, Leyland said.
What Leyland claims is a gap between perception and reality has put pressure on politicians to update regulatory and tax regimes, he said.
So despite widespread improvements, the industry could find it faces “higher tobacco-style sin taxes, greater advertising restrictions and stake limits”, he said.
Unless the industry develops a narrative, such as “‘look we’re in the entertainment industry, we pay our way, we are interested in the well-being of our customers in general and not simply focused on the harm of the few or of rinsing the few, then the additional revenue and the additional exposure that COVID has created for the sector will be an enormous problem, because it’s forced governments to think about online gambling and they will do something”, Leyland said.