Bookies feel the chill – 50 years after coming in from the cold

Betting shops became legal in 1961, but now the industry is feeling threatened. Mark Leftly reports

Today marks the 50th anniversary of the legalisation of betting shops.

They have come a long way in that time: from smoky, chalkboard-lined, back-alley dens to clean, Sky Sports-broadcasting high-street landmarks.

Britain's oldest bookie, 78-year-old George Carrigill, started out seven years before the industry was legalised and now boasts six shops in and around Dewsbury in West Yorkshire. He says: "Although betting went legal in '61, many people still disapproved. I had to black out my windows and couldn't even have chairs in the shop.

"But nowadays it's completely normal to have a flutter – it's like going to the pub for a couple of pints. My shops are bright, fun places to visit, and we've got more and more women coming in."

And the industry is now a significant part of the UK economy: there are 8,823 shops, employing around 40,000 people – with a further 60,000 in the supply chain, such as shopfitters and fruit-machine providers – and they generate around £3bn a year.

Carrigill's point that betting shops are now mainstream is backed up by the annual British Gambling Prevalence Survey, which recently showed that 56 per cent of people gambled in 2010. This didn't include those who play the National Lottery.

Betting shops might have come a long way, but they are facing their most tumultuous period since they were illegal. As disposable income has fallen post-credit crunch, so there has been far less money that punters can risk on the nags, dogs, football or on the litany of obscure bets from moon landings to the end of the world.

In the past year there have been 110 shop closures, equating to about 550 jobs. This might not sound like a huge number, but with falling revenues and increasingly intolerable regulatory burdens, matters are almost certain to get worse. The popularity of online gambling also hurts.

Already this year, Scotbet, Scotland's biggest independent bookmaker, has been put up for sale, having struggled in recent years.

As Dirk Vennix, the chief executive at the Association of British Bookmakers, puts it: "This has been a pretty tough time, the recession has been hurting. The Grand National and Cheltenham are one-off days [generating big business]. We're pretty concerned."

Here are three of the industry's biggest concerns.

1. The horse-racing levy

As part of the deal to relegalise betting shops after a near 108-year absence, the industry agreed to support horse racing through an annual levy. This is a tax on bookies' profits that helps with veterinary services, prize money and breeding initiatives.

Annual negotiations are, in fact, yearly rows. If the two industries – horse racing and betting – cannot agree the levy, the Government acts as ultimate arbiter.

However, Jeremy Hunt, the Secretary of State for Culture, Olympics, Media and Sport, became so fed up with the latest round of bickering that he's decided to take the matter out of government hands in future years. What this "straightforward commercial negotiation" will be in future is not clear, though there is a consultation pending.

On deciding to increase the tax from 10 to 10.75 per cent last month, Hunt didn't bother with an attempt to be diplomatic: "It is really disappointing that two important industries have been unable to come to a sensible commercial agreement."

This amounts to between £73.7m and £80.8m. The horse-racing industry made a play for up to £150m, while betting shops felt that the current rate, amounting to around £65m, should have been the ceiling.

Vennix says the industry already coughs up around £700m in taxes every year, which is roughly the same as its profit. "I challenge you to find another industry with that kind of ratio," he fumes.

So, even the smallest levy hike harms the industry, particularly the small and medium-sized operators. And there is now debate as to whether the levy is actually relevant 50 years after its introduction. For example, horse racing now has television revenue, and betting shops effectively subsidise racecourses when they sponsor events and individual races.

This is one row that looks certain to get nastier as more and more shops fail and redundancies escalate.

2. The Gambling Commission

Set up under the Gambling Act 2005, the ideas behind the commission seem eminently sensible: a regular audit to ensure crime is kept out of shops, that there is fairness for the punter and that youths under 18 don't go fluttering away their pocket money.

However, the industry is frustrated at the intrusion of the commission's regular visits to shops. Pubs, for example, have to play by broadly the same rules and they don't have to worry about regular visits.

Will Roseff, who is chairman of the Bookmakers' Committee and who has been a bookie for three decades, says: "An enlightened government would get rid of the Gambling Commission. The fact is, if you've got a law you obey it. If you mess about with the punters and don't treat them properly they will go elsewhere. The commission treats problems that do not, and never did, exist."

The real problem here is the costs that are associated with the commission and its efforts. To get an operating licence there is a fee related to the number of shops that a bookie owns. William Hill owned 2,377 shops as at 28 December last year. The licence for a chain of more than 200 shops costs £40,032. So, William Hill pays £16.84 per shop for the commission's services.

A chain of four shops has to pay £977 a year, equating to £244.25 per unit. The smaller guys, with the far weaker balance sheets, in effect, have to pay far more than their larger peers.

"There is a problem for smaller betting shops," explains Roseff. "Costs keep going up and they are charged more per shop."

3. Red tape

Aside from the commission, there is a plethora of bureaucracy that is weighing down betting shops. Not only do chains need a licence from the commission, but they have to apply for a premise licence from local authorities. They also require personal management permits. For a smaller operator with few resources, this results in losses of time and money.

"Regulation is something that we are seriously worried about," says the ABB's Vennix, explaining that the situation is further complicated by gaming machine duty.

At present, betting shops, as well as pubs and casinos, effectively pay tax on their fruities twice, in the form of VAT and amusement machine licence duty.

However, the Government is seeking to simplify the system and introduce an amalgamated machine games duty. This will certainly help with the accounts, but the industry is wary over exactly what the structure of this new tax will be. A consultation is due later this month and the Treasury will look to finalise its plans as part of next year's Finance Bill. Implementation should follow in 2013.

As things stand, the existing duty is moving up in line with retail price inflation, while VAT rose from 17.5 to 20 per cent this year. These are extra price pressures on an industry that, 50 years after its reintroduction to civilised society, can ill afford.

Whacky wagers: Slips for five crazy bets

*Londoner Matthew Dumbrell bet that the world would end before 2000 at odds of 1,000,000 to 1.

*David Threlfall bet £10 that a human would set foot on the moon by 1970. William Hill paid out £100,000, though Threlfall later died after crashing the sports car he bought with the winnings.

*In 1993, Judy Higby tried to place a bet that the Grand National would not be run that year, claiming a premonition that the race would be called off. The bookie refused, saying this wasn't possible. The race was cancelled after a number of false starts.

*In 1989, a Welshman placed a £30 accumulator on a number of unrelated events happening before 2000: Cliff Richard being knighted, U2 remaining together, EastEnders still running on BBC, Neighbours still on air in Britain, and Home and Away still being an active TV show. He won £194,000.

*Francine Hodges bet £50 at 25-1 that she would lose six stone in six months, but actually put on weight. The mother-of-five from Southend later went under the knife to lose weight, appearing on ITV's Supersize Surgery documentary.