So Manchester gets the casino crown. Will it become the next Las Vegas? Or is this just an interesting way of regenerating a city, much of which is doing pretty well, but which also has parts that still bear the scars of deindustrialisation?
The fuss last week as to where Britain's new supercasino should be located has drawn attention from the much more important matter of its likely impact on the regional economy. Manchester is an interesting choice, partly because it is an interesting city but also because it has been a classic example of accidental regeneration. No one could have planned for its city centre to be blown up by the IRA, but as things have turned out, that attack provided the opportunity for a rebuilding programme that has been extremely successful. Out to the east, though, things are different. The Manchester City stadium is gorgeous but a lot of wasteland lies around it. I suppose you could ask: will the casino do for eastern Manchester what the IRA did for the centre?
Some perspective. I have been looking at the size of the gambling industry worldwide to try to judge how big this might be. There are a couple of benchmarks and the first is the growth trend of the sector. The most comprehensive figures, unsurprisingly, come from the US and the chart on the left shows what has been happening to gross revenues from casinos on the one hand and total gaming on the other. As you can see, casinos account for somewhat less than half the total but they have been holding steady and apparently seem set to gain market share in what is, of course, a booming industry. Given that the industry has a lot of restrictions in the US (as indeed it does elsewhere) on where casinos can be located, this is a pretty strong picture. No problem on the demand side.
If you then look globally, a slightly different emphasis emerges, as the right-hand chart suggests. The largest casino location in the world is no longer Las Vegas as it looks as though Macao went past it last year. And casinos are dwarfed by the UK lottery, which is the largest in the world. Now I know we are comparing apples and pears here because the difference between popping into a shop and putting something on a lottery, and flying to a city to spend hours at the tables or on the slot machines is huge. Technically, too, going in for a lottery is not gambling in the sense that our lottery is regulated differently.
The picture is further complicated by the growth of online casinos. You might think that crouching over a screen is not quite as much fun as going into a physical casino, but in terms of total revenues it seems that online casinos now rival Macao and Las Vegas in size. The figures have to be taken with caution because they exclude the US, as American citizens are not allowed to gamble online. (Some argue that this is designed to protect US gambling cities rather than US gamblers.)
You might be surprised that Monaco is not on the chart. That merely shows how small top-end casinos are in relation to the total market. The entire GDP of Monaco is less than $2bn (£1bn), so while the tables of Monte Carlo provide a decent revenue for the principality, gambling there is tiny in global terms.
That leads to the question: will Manchester be Monaco or Macau? We are talking of a 10-year run-in period, for it will take some time for the new supercasino to bed down, however well promoted. But I think this could turn out to be very big.
It cannot be Monaco, for this has to be a mass-market operation. And it won't be Macau because Manchester has a large, existing economy independent of the entertainment business. There is also the question of scale: the two cities, technically, have similar populations, with Macau at 450,000 and Manchester at 440,000, but Manchester is the core of a larger metropolitan area of over 2.2 million people.
Nevertheless, the idea that Manchester could become an entertainment hub, driven in fair part by its casino, seems to me a very real possibility. A lot of what's needed in an entertainment hub is there already: great football and great clubs for a start. Potentially, the whole city will reinvent itself, rather like Barcelona, another industrial town built during the 19th century on textile exports, has re-invented itself over the past couple of decades.
The main reason for this is that the UK propensity to gamble is clearly quite strong, though I have just found some statistics that suggest the average time spent by French and Swedish people online for gambling and sweepstakes is much higher than among Britons. Demand, not just from the North-west but from the whole of the country, should be sufficient to sustain a pretty big business.
So how should the rest of the country feel about this? The first step to get over is the acceptance of gambling as a form of entertainment. It is a difficult one because the old Puritan values apply, but the Government accepts the principle that if people want to so something, it is not the job of the nanny state to stop them, provided they do not hurt others. (Different rules apply to hunting.)
More difficult still will be coping with success if, as argued above, that seems the likely outcome. Some re-balancing of the economy away from the South and towards the North would be welcomed by many people. But the greater the success, the greater the pressure for additional super-casinos elsewhere. Gambling in America is very constrained: it is restricted to particular locations. Gambling in China is in a similar position: it is confined to Macau rather than being allowed to develop in Hong Kong, where the Jockey Club has a monopoly.
So do you contain an activity that might create social problems by keeping it segregated from the economy as a whole? Maybe the best parallel comes from Australia, where cities such as Sydney, Melbourne and Adelaide have grafted casinos on to an existing commercial base. As far as I know (and I have only been to the Melbourne and Adelaide casinos), these are reasonable commercial successes and any social problems have been contained. But they have not transformed the local economies - they are all right but nothing on the Las Vegas scale. So the trick for Manchester will be to demonstrate that it can do something really stunning. It might just do it.
If the Chancellor plays loose, the rate-setters will pounce again
It is almost unthinkable, isn't it, that the Bank of England will raise interest rates again next week? After all, the last vote was by the narrowest of margins, so it would require a further sharp shift of evidence for the Bank to shock people again.
But because just about every City economist was caught out last month, a distinct twitchiness now characterises their comments.
The big picture is one of still-mounting inflationary pressures, with wage negotiators focusing on the 4.4 per cent retail price index rather than the 3.0 per cent consumer price index. Such is the trust gap with the Government that people incline towards the worse of the two numbers when thinking about inflation.
It seems almost inevitable that the RPI will move up a fair bit further in the coming months, driven in part by higher housing costs, themselves a function of interest rates. Meanwhile, the Bank will have the January inflation figures when it meets this week and the possibility remains that the CPI will have nudged over the 3.0 per cent mark - at which point it has to write a letter of explanation to the Chancellor. The financial markets expect at least one more rise in rates this year, and maybe two, so it would be quite tricky to craft a letter that acknowledged the possibility of these further increases.
Ideally, the Bank would like to make people behave as though rates were going up, without actually putting them up. In other words, you get consumers and homebuyers to show restraint without forcing them to do so.
For some time, my own view has been that the peak in rates may well be higher than people expect, and I still think that is the only prudent way to operate. The data over the past month, however, seems to signal that the most recent rise may be starting to have some effect. It is too early to get much feel for what higher rates are doing to the housing market but anecdotal evidence suggests that buyers may be becoming a little more cautious. It is too early, too, to know anything about retail sales, but again, the consumer surveys show that people sampled after the last rise in rates are more circumspect about big purchases. Companies, on the other hand, seem to have taken the increase in their stride, probably because underlying demand is still strong.
There is a further element in the equation: fiscal policy. We are now only around six weeks from the Budget, though the Treasury still has to announce a date. My guess is that the Bank will wait for that and see if the Chancellor makes a significant tightening of fiscal policy; if not, then we get another rise in rates in the late spring.
In short, the key to interest rates may be in the hands of Gordon Brown, not Bank Governor Mervyn King.Reuse content