Ernst & Young UK Insight
Grant Humphrey and Adrian Cheow, Assistant Directors of the Transaction Support Team at Ernst & Young
(EY), ask whether there is a correlation between UK betting and gaming revenue and the performance of the
UK economy.
Recession proof is a common phrase
options are limited. However, we can see from
partial dependency on real estate and regulatory
used to describe the betting and gaming
the chart in Figure 3 that this growing revenue
factors impinged on the translation of revenue
industry. As we exit the UK’s longest and
does not translate into a growth in the market
growth into stock market performance.
deepest post-war recession, we decided to
examine this theory to see if there is any truth
in its application to gaming.
We compared the underlying performance of
the publicly listed betting and gaming companies
from a revenue perspective against selected
“Looking at the empirical data, there may be
some truth behind the hypothesis that the betting
and gaming industry is recession proof.”
economic data. This considers the UK revenue
from the ten largest listed UK betting and gaming
capitalisation of these publicly listed betting
Conclusion
companies by market capitalisation from 2006
and gaming companies. Whilst the general
Therefore, looking at the empirical data, there
to 2012, which forms EY’s Betting and Gaming
movements have a high degree of correlation
may be some truth behind the hypothesis that
Index. Figure 1 is a chart of the selected listed
with other companies both in the FTSE100 and
the betting and gaming industry is recession
companies’ UK revenue plotted against UK Real
the wider hospitality and leisure sector, even in
proof. The trends shown by the growth in
GDP and UK consumer spending.
the recessionary period, the overall betting and
bet ting and gaming and National Lottery
We see in Figure 1 that revenue growth
gaming index performed less strongly than these
revenue during the recession demonstrate that
was impacted at the height of the recession in
comparative indices. External factors such as the
adults invested into betting and gaming despite
FY08/FY09, but that revenue has recovered at
a faster pace than the general economy and
150
hence showed a comparatively high resilience
based on publicly listed companies, and is
partially distorted by revenue from smaller
acquisitions, the overall growth in revenues
represents a good barometer of consumer
spending on betting and gaming. Difficult
Figure 1
140
Index (Base = FY06)
to the recession. Whilst this analysis is purely
130
120
110
100
90
80
70
60
retail conditions and pressure on disposable
50
income have created challenges for the industry,
FY06
particularly in the more traditional bricks-and-
FY07
FY08
FY09
FY10
UK Betting and gaming company revenue
mortar subsectors. However, innovation in the
FY11
FY12
UK Real GDP
UK Household final consumption expenditure
betting and gaming sector through the online
gambling market, which opened the industry to
consumers other than traditional punters, has
helped to drive this growth.
7,500
Revenue from National Lottery tickets has also
6,500
soared during the recession with a compound
FY08 - FY13
6,000
£m
annual growth rate in sales of 7.0 percent per
annum from FY08 to FY13 (see Figure 2). As well
Figure 2
7,000
5,500
5,000
as representing the innovation in new product
4,500
offerings, revenue growth is also attributed to
4,000
adults turning to the lottery during the recession,
as it gives them hope when other financial
90
iGB Affiliate FEBRUARY/MARCH 2014
FY06
FY07
FY08
FY09
FY10
National Lottery Sales
FY11
FY12
FY13