Bookies fall at the first

They used to be racing certainties but now the Lottery is in their way, writes Patrick Tooher
Click to follow
The Independent Online
T he bookies used to be as familiar to the working man as his home and the local pub. Stony silence would greet the stranger who dared enter his lair, a dingy, smoke-filled room littered with discarded betting slips. Many a marriage foundered on the rocks of a "sure thing", and many a youth was mis-spent in the futile pursuit of a "dead cert".

Yet for all its drawbacks, the betting office was also a house of dreams. Down-at-heel punters looked forward to the day when landing the jackpot would release them from grinding poverty - if not forever, then at least until their next wage packet. With the launch of the National Lottery last November, all that has changed.

A new escape route has opened up, enticing punters with unimaginable riches. Betting on horses suddenly offers no more than loose change. The consequences for the industry are dire. If recent gambling trends continue, thousands of betting shops will close and a feature of many British high streets will be lost forever.

Last week was the worst for the betting industry in living memory. It was as if Red Rum had romped home in the Grand National, Desert Orchid trotted up in the Gold Cup and Nijinsky landed the Derby - all on the same day at the same meeting. By the weekend the bookies were in disarray, unable to agree on tactics for fighting off the newcomer, and unable to give odds on when their decline will end.

The betting shop is another world, one still largely inhabited by older, often pot-bellied men in short-sleeved synthetic shirts with two-inch Biro stubs tucked behind their ears. Thousands endure - even enjoy - the challenge of defying the odds and beating the bookie. These punters form the backbone of a pounds 6bn British betting industry that has developed since off-course betting was legalised in 1961.

They sustain 9,300 betting shops nationwide, employing about 50,000 people. They also help keep a rich elite of racing owners and managers in the lavish lifestyle to which they have long been accustomed.

Not for nothing is racing in this country still dubbed "the sport of kings", or more accurately nowadays "the sport of sheikhs". The biggest winner, though, over the past 30 years was the middle-man - the betting industry itself. And none gained more than Ladbroke, Britain's biggest betting chain, which effectively used racing as a cash cow, milking profits to build up a sprawling leisure empire ranging from luxury hotels to DIY centres.

But the huge success of the pound-a-go National Lottery means the bookies' winning streak has come to an end. The combination of a weekly on-line draw and "instant-win" scratch cards now takes pounds 100m a week from the leisure spending pool, just shy of the amount the bookies take. Bookies cannot swim against this tide.

Despite appearances to the contrary, the betting industry works to very tight margins. Some 80 per cent of money wagered goes straight back to the punter in winnings. Of the remaining 20 per cent, 7.75 per cent is paid in betting duty to the Government. After deducting a small percentage for the Levy (to maintain racecourses and fund veterinary facilities) and other items, only 11 per cent is left for the bookie to pay overheads and earn profits. Net margins are about 2.5 per cent.

William Hill, Britain's second biggest bookmaker, recently found that nine out of 10 regulars were spending between pounds 3 and pounds 4 a week on Lottery tickets and scratch cards - similar to the amount staked on average per bet. But the bookmaker also reported a 9 per cent drop in the number of bets placed in the first 17 weeks of this year, while turn- over was down by 4.5 per cent.

Last Sunday, Ladbroke failed to open 50 of its betting shops - the first time all its 1,900 shops had not thrown their doors open since racing on the Sabbath was introduced earlier this year. Ladbroke blamed a lack of interest among customers, despite domestic fixtures at Ayr and Yarmouth and the staging of the Irish Oaks, one of the biggest races of the year, at the Curragh.

A day later, rumours began circulating of an apocalyptic report on the future of the betting industry.

On Wednesday, National Lottery organiser Camelot confirmed plans to sell tickets in pubs. Trials will start in just over 70 sites from the end of this month. Most of the big pub owners, such as Allied Domecq, Whitbread and Bass, are taking part in the scheme. Then Ladbroke announced on Thursday it was laying off 200 of its nearly 14,000 staff as a direct consequence of the impact of the National Lottery. Finally, on Friday, Hill said nearly half its pounds 400,000-a-year racing sponsorship was under threat. Again, the Lottery was to blame.

But the worst may be yet to come.

Camelot is keen on launching a mid-week lottery draw, though no firm plans have been drawn up. In the meantime, Camelot is firmly on course to increase the number of on-line ticket outlets from the current 23,000 to 39,000 by the end of next year.

The biggest bombshell will come on Friday, when the Henley Centre, an independent forecasting institute, publishes a long-awaited report commissioned by the Bookmakers' Committee into the impact of the Lottery and scratch cards on the off-course betting industry.

Such was the impact of a leaked draft version of the report that the Horserace Betting Levy Board had to rewrite a press release sent out this week to accompany the its annual report.

In the report's introduction, Sir John Sparrow, Levy Board chairman, said: "Unless Sunday racing and the improved evening fixture list in 1995 have a markedly favourable impact, prospects for any growth in 1995/96 off-course leviable betting turnover, and levy yield, are not encouraging."

But Rodney Brack, chief executive of the Levy Board, was more pessimistic in Monday's press release. "Detailed analysis of the betting market concludes that as a result of the Lottery and scratch cards any growth in turnover will be lost, and a reduction is now likely."

The reason for Mr Brack's gloom soon became clear. He and other Levy Board members had seen the preliminary findings from Henley, details of which were only finalised on Thursday.

Henley predicts a 1.5 per cent drop in betting turnover this year. Without the Lottery, Henley says, off-course betting turnover would have grown by 6.2 per cent in 1995 as a result of retail price inflation, a recovering economy and benefits from deregulation - including revamped betting shops and the introduction of Sunday racing. The total loss to the Lottery, therefore, is approaching 8 per cent.

The reports also concludes that:

q The National Lottery will cause a 30 per cent decline in betting industry profitability.

q At least 2,000 betting offices will close with the loss of 6,500 jobs.

q The horse racing betting levy will suffer a pounds 6m shortfall.

q The Government will lose pounds 53m in total revenue from betting duty, VAT and other taxes.

Armed with the report, the racing and betting industry will lobby the Chancellor to lower betting tax to 6 per cent in the next Budget. To stimulate flagging turnover, it also wants to see gaming machines installed in bookies' shops and for bets to be taken on the outcome of the Lottery itself, as happens in Ireland.

But unlike the numerous charities also affected by the Lottery, pious pleas from the racing industry are unlikely to get a sympathetic hearing. The Govern- ment can point to extensive de-regulation already, including longer opening hours and the introduction of glass fronts allowing the public to peer into for bookies' offices for the first time.

Ladbroke, for example, is about a third of the way into a three-year, pounds 75m programme to refurbish its 1,200 betting shops with such amenities as carpets, refreshments and toilets.

Some of these measures have proved counter-productive, however. More racing - on Sunday and in the evening - has meant smaller fields, deterring gamblers from having a flutter because of the fewer betting options on offer. Longer opening hours have merely added to staff and other overhead costs.

Then there is the awareness problem. "Nobody knows when Sunday racing is happening," admits Ladbroke's Stephen Devany. "It doesn't take place every week. I don't even know if there is a Sunday meeting this week."

In the absence of further legislative moves, some bookies have opened up a second front. Last week, William Hill launch- ed a poster campaign in its 1,700 shops to highlight the real odds of winning the Lottery. But Ladbroke said Hill's initiative aas counter-productive as it only draws attention to the Lottery.

Bookmakers freely admit they underestimated the impact of the Lottery, especially of scratch cards. But such bleatings sound disingenuous in the light of numerous warnings the industry should have heeded earlier. In February, a month before scratch cards were launched, author and gambling guru David Spanier spelt out the threat. "If the experience of other countries is anything to go by," he wrote in the Independent, "scratch cards are likely to be big business. Bigger perhaps than the Lottery itself."

Research from the US clearly showed that in many states, including New York, Texas and Massachusetts, scratch cards are bigger business than the on-line lottery. Four months since their launch, scratch cards are taking 40 per cent of total Lottery turnover. To some extent then, the bookies have only themselves to blame for their present plight.

The Lottery's success has clearly rendered obsolete a long-established maxim, handed down from father to son: "The bookie always wins." For a change, few punters are complaining.

Comments