Soaring energy prices hit UK gambling sector as unprecedented cost hike threatens businesses
The UK gambling industry is feeling the effects of rising energy prices amid fears that this may be just the beginning of a global power crisis.
The UK’s Betting and Gaming Council (BGC) today (22 August) said urgent action is needed by the country’s next prime minister to protect the hospitality and leisure sector from “catastrophic” energy price hikes.Covid-19, climate change and the Russian invasion of Ukraine have all disrupted global energy markets.
Since early last year, global oil prices doubled, coal prices nearly quadrupled and European natural gas prices increased almost seven-fold, the International Monetary Fund (IMF) summarised, while the International Energy Agency warns that the worst of the global energy crisis is yet to come.
The hospitality industry is expected to be one of the biggest losers of the current situation – having already been hit hard by the coronavirus pandemic – and is likely to feel the pinch of consumers’ waning purchasing power.
BGC CEO Michael Dugher: “The cost of simply doing business is rising at an exponential rate. If urgent action isn’t taken soon, continued energy price increases could have a catastrophic impact across the hospitality and leisure sector.”
Against this backdrop, BGC CEO Michael Dugher said brick-and-mortar casinos and betting shops were being hit hard by soaring energy bills, just like the rest of the hospitality sector.
“The cost of simply doing business is rising at an exponential rate. If urgent action isn’t taken soon, continued energy price increases could have a catastrophic impact across the hospitality and leisure sector,” he said.
Britain hosts some 6,500 betting shops on hard-pressed high streets, in addition to 121 casinos supporting the hospitality and tourism sector.
Together they directly employ 44,000 people and support a further 48,000 jobs, while contributing £4bn to the UK economy and generating £2bn in taxes each year. This includes 537 independent betting shops who have over 2,700 employees.
While the UK is not the only country affected by the energy crisis, UK energy prices are now higher than in comparable economies like France and Italy, CNN points out.The UK statistics office said natural gas prices rose nearly 96% in the year to July, while electricity prices are up 54%.
Many blame the UK’s “broken energy market” for the situation, whereby the recent bankruptcy of smaller companies (that traditionally offered more competitive prices) and the country’s high dependence on gas to generate electricity created the “perfect storm”.
Businesses across the UK are now preparing for an unprecedented rise in energy costs this winter. Many deals are due to be renegotiated in September and October, and companies are facing average cost increases of 300% under new contracts being offered, according to the BGC.
“Casinos are a vital pillar of the hospitality and tourism sector in cities and towns across the UK. Just like the rest of the hospitality sector they are struggling to build back after the global pandemic and now they face a new crisis,” Dugher added.
“Meanwhile bookmakers, which play a critical role on the UK’s hard-pressed high streets, face similar challenges. In short, any business which welcomes customers into a building must grapple with this energy emergency.”
The BGC’s warning comes after Rank Group last week revealed energy costs hit £23m in the last financial year, up from £13m, with concerns they could hit £46m this year at current market prices.
Elsewhere, Entain’s CFO Rob Wood commented that the group’s half-year results showed that online gaming revenues fell, in an early sign that customers are beginning to cut their spend in the face of soaring cost pressures.
Although Entain’s retail business came in ahead of expectations, with volumes in Q2 ahead of pre-Covid levels, Wood warned it was “unlikely” that macro factors would have no impact at all on retail spend and performance.
While Evolution continued on its growth path in Q2 2022 as it delivered record quarterly revenue of €344m, CEO Martin Carlesund also said: “Our fast expansion is affected by the current cost inflation especially in categories like energy, logistics, semiconductor products and wages.”
A range of interventions has been suggested to protect businesses and bill payers from the price hikes, but no specific measures have been taken to protect the hospitality and leisure sectors.