Brexit uncertainty has cost the UK economy £600 million a week since 23 June 2016, according to a Goldman Sachs report. It’s pretty clear that every part of the UK economy will be impacted by Brexit, but what’s less clear is what that looks like. We’ve had a go at painting a picture of what Brexit will mean to the UK gambling industry. But does it resemble da Vinci’s Mona Lisa, or Munch’s The Scream? All will be revealed…
How is the gambling industry currently impacted by the EU?
First things first, there’s no way of answering the question of how Brexit will impact the gambling industry without addressing how it’s currently affected by it. This involves a number of different factors and below we cover two of the major ones – licensing and regulation, and single market trading.
Licensing & regulation
Without adopting a political position, one of the arguments raised by people in favour of the UK leaving the EU is that the former is held back by having to operate under the latter’s legislation. However, gambling is one industry where licensing and regulation is perhaps looser in the EU than the UK – for instance, only 13 EU member countries require a “no underage gambling” sign on gambling advertising.
Since the introduction of the Gambling (Licensing and Advertising) Act 2014, it’s said that the UK now has a harder regulatory position than the EU. This means that Brexit may have little impact from a regulatory and licensing perspective.
Single market trading
The EU began as a trading bloc, and trade remains the most significant part of the union. The key element to internal EU trade is the single market. The single market grants gambling companies tariff-free access to each member’s domestic market.
The benefit that the single market brings is simple – UK gambling companies get to trade with 438 million people, and EU gambling companies get to trade with the 66 million Brits. If the UK no longer has access to the single market then all these people will be outside of tariff-free trading. This would have a big impact on the UK gambling industry, as it could see even the UK’s best online casinos and betting companies losing a significant part of their customer base.
Even looking at only two areas that the UK gambling industry will be impacted by Brexit, we can see that it could make a big difference — or it could make very little difference. Having clarity depends on the nature of the deal that the UK gets from the EU, which we consider below.
We must assume that there will be no deal in October 2019
On 15 January 2019, MPs rejected Theresa May’s withdrawal agreement with the European Union by 230 votes – the biggest defeat faced by a UK government for a century. Since then, two further votes have been held and on each occasion, the government lost.
In light of the government’s defeats, the EU extended the UK’s exit date to 31 October 2019, by which time the UK will have a new prime minister – with that person likely to be either Boris Johnson or Jeremy Hunt.
Both Johnson and Hunt have claimed two things about Brexit:
That they can negotiate a better deal than May was able to
The UK will leave the EU on 31 October, with a deal or without one
The EU has been unequivocal in its stance to renegotiate the current withdrawal deal – without any serious and meaningful changes to the UK position, there will be no renegotiation. The EU has also stated that a change to the Tory leadership (hence the new prime minister) will not be considered to meet the conditions needed for renegotiation.
This means that there are three likely outcomes:
That there is a general election before 31 October
There is an extension to the withdrawal date
The UK will leave the EU on 31 October with no deal
For there to be a general election, Tory MPs are likely to have to vote with the opposition in a vote of no confidence against the government. While this is possible, it’s a tricky position to get through – because it could see the Conservative government being replaced by a Labour one.
The EU (with Emmanuel Macron said to be the strongest leader to adopt this stance) has stated that the withdrawal date cannot be perennially extended. Consequently, it’s unlikely that the EU will agree to extend the withdrawal date beyond 31 October 2019.
That means we must assume there will be no deal in October 2019.
What does no deal mean for gambling legislation & trading?
Earlier we said that the UK’s legislation on gambling is currently tighter than the EU’s. For this reason (along with the uncertainty of no one really having a clue how ANY industry will be impacted by Brexit), we’re saying that the legislative impact of a no deal Brexit on gambling legislation will be negligible.
We spent a long time looking at the tariffs that might become applicable to the UK gambling companies in the event of a no deal Brexit (a long time). Our conclusion is that there is a lack of real clarity on where the gambling industry fits into the EU’s tariff structure. This raises one big issue about how Brexit will impact the gambling industry – if there’s no real clarity on what tariffs are applicable, then how do we know what the impact will be?
The most sensible way of looking at the gambling industry is to say that it comes under the banner of digital services – because there are no physical goods that gambling companies trade in cross-border. This means that gambling must be looked at in the same light as companies such as Amazon, Google, and Facebook.
In recent years and months, Amazon, Google, and Facebook have been threatened by the prospect of a digital services tax – a “de facto tariff” – from the EU. However, though the EU stepped back from this tax, it’s likely to pursue it via a slightly different incarnation – given the political climate around the lack of tax being paid by Amazon, Google, and Facebook.
But trade isn’t simply about the movement of goods and services – single market membership also demands freedom of movement for people within the member states. This is one area where land-based casinos may be affected – many of the staff of land casinos are from EU countries, as these roles fall into the hospitality sector. The impact of Brexit on this aspect of gambling could be severe. If those workers from EU countries are not afforded the same rights as they currently enjoy – as with everything concerning Brexit, this is still shrouded in uncertainty.
Brexit is going to have an impact on every industry in the UK, this much is certain. But what’s also certain is that we cannot say with any certainty how big or small this impact will be. The truth is that we’re venturing into unchartered territory, because no country has ever left the EU. For now, that means the gambling industry will just have to wait and see what happens.