Reducing problem gambling would create more jobs in the UK and deliver higher tax revenues for the Treasury, new economic analysis shows today.
The Social Market Foundation studied the economic impact of the gambling industry and concluded that – despite its size and rapid growth – less money spent on gambling would deliver greater benefits for the wider UK economy.
The SMF study found that money spent on gambling supports fewer jobs and generates less tax revenue than money spent in most other sectors of the economy. If some of the money that gamblers spend on games and other gambling products was spent in, for example, retail, UK employment and tax revenues would be higher, the study concluded.
The SMF paper, Double or Nothing, questions claims that new regulation of the online gambling sector would have economic costs. In fact, policy changes that led to gamblers diverting their spending towards other activities would have net economic benefits.
The paper is published as ministers consider a new framework of regulation for a sector that has grown rapidly in recent years, fuelled by the expansion of online gaming and betting. Remote gambling now accounts for more than half the industry’s revenues.
The SMF calculates that the gambling sector is now a significant part of the UK economy. In 2019, the gross value added (GVA) of the gambling industry was £8bn, up 45% since 2010. Gambling’s share of UK economic output increased from 0.3% to 0.4%.
Around 85,000 people in Great Britain were employed in the “gambling and betting activities” industry in 2019 – 0.3% of all employment in Great Britain
The SMF also estimated that the gambling industry directly contributes about £4.3bn to the Exchequer. This amounts to about 0.6% of central government revenues.
However, the SMF found that money spent on gambling has a lower “multiplier” effect than many other activities, meaning it supports less activity elsewhere in the economy. This is because gambling has a very limited supply chain, in contrast to sectors such as retail where spending supports a range of jobs in sectors such as agriculture, manufacturing and logistics. Gambling stakes spent in other sectors would deliver bigger economic gains.
For example, the SMF estimated that £1m spent on retail would create 34 additional jobs once all effects are considered – more than twice as many jobs as would be created from £1m spent on gambling.
Gambling also has a lower “tax multiplier” than other consumer sectors such as retail and food services. £1m net spend by consumers on gambling is estimated to lead to about £500,000 of additional tax revenue. The same £1m spend on retail or food services would generate over £600,000 of additional tax revenue.
The SMF said the macroeconomic benefits of online gambling are even lower than for traditional gambling, meaning the growth in online gambling is delivering shrinking additional benefits to the UK economy.
Modelling the impact of changes in consumer behaviour, the SMF estimated that if net gambling spend declined by 10% (about £1bn) and individuals spent that money on retail instead, then GVA would be £311 million higher, overall UK employment would be 24,000 higher and the Exchequer would receive an additional £171m in tax.
Scott Corfe, Research Director at the Social Market Foundation, said:
“While gambling supports tens of thousands of jobs across the UK and contributes about £8bn per annum to economic output directly, it seems very unlikely that this economic contribution is truly additional to what would have taken place if gambling did not exist.
“With most other parts of the economy having higher economic multipliers, reductions in gambling expenditure through reduced rates of problem gambling would almost certainly be a net economic benefit as households instead spent money elsewhere. The Exchequer would gain too, as higher GVA and more jobs in turn drive up tax receipts.”
“Sensible reform of gambling regulation could reduce the societal costs of problem gambling and realise economic gains.”
“To achieve that, the Government should commission an urgent review of the social and economic costs of gambling, commencing in 2021 and concluding in line with the timeframe of the Gambling Act Review. No final decisions on legislative review should be made until the Treasury has conducted an assessment of the economic and social costs of each policy change”
Notes:
- The SMF report does not advocate banning gambling. The report says:
“The SMF’s position is not a prohibitionist or excessively paternalistic one. We do not seek to ban gambling – an activity which many individuals find enjoyable. Our concern lies with problem gambling and gambling addiction, and the key point that we want to highlight here – backed up with evidence – is that the case for tackling problem gambling is not just a moral one, but one that would be good for the economy – good for GDP, jobs and the Exchequer.”
- The Social Market Foundation’s financial supporters include Derek Webb, who was founder of the Campaign for Fairer Gambling and is an advocate of gambling reform. The SMF retains full editorial independence over this report and all of its work.
- The report, Double or nothing? Assessing the economic impact of gambling, is published today at smf.co.uk/double-or-nothing
Contact:
- For media inquiries, please contact SMF Impact Officer, Linus Pardoe – linus@smf.co.uk