It is fair to say that when sports gambling was legalised in the the U.K., it proved pretty popular.
Betting shops were first legalised in the U.K. in 1961, along with casinos and bingo halls. Prior to this bets could only be placed at racetracks, or via illegal bookmakers. And the change in the law created a boon for commercial real estate.
Within six months of being legalised there were more than 10,000 up and running, and in the early 1960s they were opening at a rate of 100 per week. Flickr A London betting shop At their peak in the 1970s it is estimated there were more than 16,000 betting shops across the U.K. In spite of the magnetic effect of online gambling drawing punters away from gambling in person, there are still more than 9,000 today, according to the Local Data Company. They are a huge part of the U.K. retail real estate landscape.
But as of last week they are the latest part of that landscape to come under threat. New regulations limiting the maximum amount that can be staked on fixed-odds betting terminals will severely hit bookmakers’ profits, and thousands of shops could close, leaving further voids on already struggling high streets. To counterbalance this, U.K. firms are looking to take advantage of another piece of regulation elsewhere and expand to a much bigger market — the U.S.
At their best and in their heyday, U.K. betting shops were part of the social fabric of British life and a gathering point for the community like the traditional English pub. At their worst they have been accused of destroying high streets and preying on the poor and vulnerable, as the recent government crackdown on the sector highlights.
The popularity of U.K. betting shops was in spite of regulation designed to ensure they were pretty unpleasant places to visit. Windows had to be blacked out with no signage allowed to indicate what was going on inside, for fear of being too enticing. Inside, no seating was permitted and neither were televisions or radios. You had to put your bet on and leave straight away, with loitering legally prohibited. “The House of Commons was so intent on making betting shops as sad as possible, in order not to deprave the young, that they ended up more like undertakers’ premises,” Rab Butler, the politician who passed the legislation legalising betting shops, wrote in his memoir.
That started to change in 1986, when brighter interiors and televisions were allowed for the first time, along with the revolutionary concept of seating. But they are still considered unwelcoming and somewhat seedy places. When Irvine Welsh and Danny Boyle wanted a location for the most disgusting toilet in Scotland in their film "Trainspotting," they chose a betting shop.
In the early 1990s and the early 2000s there was something of a space race, Fox said. “I wouldn’t say they were overpaying, but if you had two bookmakers competing for the same store then you could charge a competitive rent.” But that proliferation onto high streets and neighbourhood retail schemes led to a backlash.
They became a marker of social decline for an area, with the perception that they swooped in after other more respectable retailers had moved out or gone out of business. Retail broker Harper Dennis Hobbs uses the number of betting shops as a metric for ranking the worst retail areas in the U.K., and it was national news when it emerged that a single street in a less-affluent area of London had more than a dozen betting shops within a small area.
Gamblers can now stake a maximum of £2 every 20 seconds, compared to a previous maximum of £100 every 20 seconds. William Hill, the largest bookmaker in the U.K., said the change meant that around 900 of its stores would instantly become unprofitable, putting “a proportion” of them at risk of closure.
Overall, Matthew Hopkinson of DataIntel estimated that around 3,000 of the U.K.’s 9,000 betting shops could become unprofitable and face closure once leases expire. Fox said stores in secondary and tertiary locations might be more resilient, given many of them would be paying rents of £30K or less. But those stores on prime high streets at higher rents would be at risk. Stores are unlikely to just be closed, Fox said, but leases will not be renewed when they come to an end. In many cases that could be sooner rather than later given that much of the expansion of bookmakers’ footprints occurred around 15 to 20 years ago.
That is bad news for U.K. landlords, but bookmakers might not be distraught as a result of another regulatory decision: two days before the U.K. government decision, the U.S. Supreme Court passed a decision that essentially gave individual U.S. states the option of legalising sports gambling. It is worth noting that shares in the large listed U.K. bookmakers rose more on news of the Supreme Court decision than they fell on news that their U.K. profits would be hit by new legislation. A new frontier has opened up.
Estimates put the size of the illegal gambling sector in the U.S. at between $80B and $380B, and a retail presence is one way of accessing that massive prize. Whether sports gambling becomes part of the U.S. retail landscape will depend on the legislation enacted by individual states. So far 32 states have laid the foundations for legalising gambling within five years, and 14 of those could be ready to go within two years.
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