Do People Gamble More or Less in a Recession?
The United Kingdom, potentially like several other countries around the world, seems to be heading for a recession. The Bank of England has predicted that it will happen in 2022, increasing interest rates to their highest in 27 years as a way of tackling rising inflation. Slow economic growth and record inflation combining together have undoubtedly led to perhaps the worst cost of living crisis experienced in a generation. Is the economy in such a bad state that a recession is about to hit, though?
Quite possibly. This represents a problematic scenario for the United Kingdom, because both consumers and businesses are more likely to be spending less cash, and this also means that the government is unlikely to be able to generate as much income from taxes. But this is something that has been coming for a while now, thanks to the economy growing by just 0.4% in the first quarter of the year. What does this mean for the gambling industry, though?
Do people tend to gamble more or less when a recession is taking place? Well, the research suggests that economic recession does affect gambling participation, although not problematic gambling. We’re going to take a closer look at this question and figure out what effects a recession has on the gambling world.
Research Says…
There have been various studies into the impact of an economic recession on the gambling scene, and there is little doubt that it would affect its general growth. Research definitely suggests that people may spend less at casinos during these recessions. That being said, looking back several years to when Iceland went through a recession in the late 2000s, gambling activity increased in general. That is, luck-based gambling increased. Skill-based gambling, such as poker and sports betting, did not, though. This gives the idea that people who partake in luck-based gambling may react to a recession in a different way to those who enjoy skill-based gambling.
At the same time of that recession in 2008, Italy’s economy was severely affected by it. Known as The Great Recession, Italy may have suffered economically from it, but the gambling sector actually continued to grow while most other areas seemed to be on the decline. How did the researchers manage to gather this information during a recession?
Data from the Italian regulatory body for gambling (AAMS) saw researchers collecting information on eight types of gambling. These were labelled as either luck-based or skill-based, and the amount of money spent on these types of gambling options was measured between the months of January 2009 to October 2012.
At the same time, researchers utilised economic data from the Italian National Institute of Statistics. This included the consumer confidence index, displaying the attitudes and expectations that people have towards the business climate. Higher confidence levels obviously mean that people expect economic growth and are therefore more likely to spend more money on good and services.
The male unemployment rate was also considered, as when this is higher, worse economic conditions are usually being experienced. Therefore, the economic conditions of a country can be garnered from such. Again, the months of January 2009 to October 2012 were looked at for this.
The Results!
The research suggested that a higher consumer confidence index was linked to higher spending when it comes to skill-based gambling. In that case, when people had higher expectations from the country economy, they were more likely to spend money on skill-based gambling opportunities.
That being said, there was no link discovered between male unemployment and the amount of spending taking place on skill-based gambling. The amount of money spent on skill-based gambling increased in the noted timeframe overall, but that could be due to an increase in skill-based gambling in July of 2011. It was at that point that Italy legalised many online skill-based gambling options.
A steady increase in luck-based gambling was experienced in the aforementioned timeframe. And as with skill-based gambling, the consumer confidence index was positively linked with luck-based gambling. People generally spent more on luck-based gambling when the expectations for the economy were higher. However, it was also discovered that as the male unemployment levels increased, so too did the spend on this type of gambling. On the whole, it was determined that luck-based gambling activity increased when there was a downturn in economic conditions.
This suggests that people who have more of a fascination with luck-based gambling turn to it as a potential source of income during a recession. Of course, gambling cannot be looked at in this way because there are absolutely no guarantees that you can secure income from any type of gambling activity. Gambling retailers and even regulatory bodies could use this research and reinforce that fact when a recession hits, as this is when people may feel much more desperate for money and losing it through gambling is not the way to go.
Naturally, it’s only normal to consider that people have much less money when an economic recession is being experienced. High inflation and rising interest rates will have that effect and outcome on people’s finances. And while the research noted here has focused on Italy’s gambling scene and economy, the fact remains true for countries in general, including the United Kingdom.
Some Believed The Edge Was Lost Over Recessions
In October of 2008, Reuters published its own take on the effects of a recession on the gambling industry of the United Kingdom. It suggested that bookmakers may be a lot less recession-proof than they had been in the past because of the new ways of gambling, such as via the internet, that attract fewer habitual players when compared with the traditional horse and greyhound racing options.
Comparing the scene in 2008 to the recession that occurred in the early 90s, it commented that it was yet to understand if those newer revenue streams would prove to be as resilient to recessions as previously. Without a doubt, the possibility of betting on a wider range of sports, being able to access masses of games online and the proportion of profits derived from machines, had all had their own impact on the business.
During that last recession in the 90s, analysts did suggest that there had been no dramatic decline in betting revenue within the UK. Even though profits generally did fall across the industry, this was actually due to the increasing costs as wages and rents rose with higher inflation. In 2008, the economy was hit by the global economic slowdown which began in the United States of America with mortgage issues.
Yet despite the fact that the economic growth of 2009 was predicted to be the weakest since 1992, the executives at companies such as William Hill and Ladbrokes said that the industry was highly resilient to such problems. Neither business said that they had seen a downturn in gambling participation, and considering they were the country’s two biggest bookies at the time, that was something of a statement. They even went as far as to say that gambling could be seen as a sort of affordable indulgence, thanks to average wagers of less than £10.
Still, back in 2008-2009 the online industry was growing at an ever increasing rate. That growth continues today but not quite at the same pace, therefore, it is possible that any new recession could hit gambling companies harder thanks to the fact there are less new products to help buck the trend.
Sports Betting Works Wonders
In 2011, it was proven that the gambling industry had indeed beaten the economic recession of a couple of years earlier. Reports stated that the industry continued to flourish during the period, while many other businesses had fallen to its impact. According to experts of online gaming, the successful gambling data business H2 Gambling Capital noted a 12.5% growth from the previous year when it came to the global gambling industry.
Companies including the aforementioned Ladbrokes and William Hill, as well as Paddy Power, all recorded excellent profits for 2010, while growth from 2009 went far beyond the preliminary projections from H2 released in March and April of 2010.
The Global Betting & Gaming Consultants (GBGC) company suggested that a combination of innovation, new technology and regulation had helped the sports betting sector to weather the recession from 2008. And it said that this had been achieved even in a better way than the other gambling sectors. Naturally, the sports betting sector is always able to rely on a regular timetable of high-profile sporting events, and they will doubtless always capture the interest of gamblers.
In 2008, the inaugural Indian Premier League T20 cricket tournament began, and that went on to establish itself as a prominent option for bettors. Not only that, but 2010 saw the World Cup take place in South Africa, which combined with the standard timetable of football from around the world, as well as tennis tournaments, the NFL season and so on.
It was also at that point that live betting had been introduced in a much more prominent way. This new technology and way of engaging in sports betting, as well as the mobile betting scene continuing to increase in popularity, doubtless contributed to the success rates of the sports betting scene during the 2008 recession. And because countries like France and the aforementioned Italy had also introduced new regulations at this time, the gambling industries in those countries were also able to successfully navigate the recession.
Casino Sector Not Quite as Successful
Despite an overall success rate when it comes to the gambling industry in the UK during the recession, the casino gaming sector didn’t fare quite as well as the sports betting scene. Governments tend to see casinos as easy pickings during recessions, pretty much believing them to be recession-proof as well. This is why they will sometimes proceed with raising taxes on these particular sectors. Yet in actuality, research suggests that casinos are one of the hardest hit within the industry whenever a recession occurs.
Looking at French casino revenues in 2009, the figure fell by 6.9%, while French GDP only fell by 2.7%. In the same vein, in Spain casino revenues fell by 14% but GDP declined by just 3.7% in comparison. And in 2010, GDP rose in Nevada, but while this had gone up by 2.9%, casino revenues had fallen by 4.5%.
If you look at the United Kingdom, the Office for National Statistics’ Consumer Trends Report displays how the recession affected the general household expenditure when it came to games of chance. During the harshest part of the recession in 2009, that expenditure had fallen by 10% or more in every quarter of the year when compared with the same timeframe in 2008.
At the time, Warwick Bartlett, spokesman for GBGC said that no sector of the gambling industry is actually immune from the effects of a global recession. That being said, research has suggested, he said, “that some are better able to mitigate its effects than others through new technology, innovation, and benefitting from new regulation”.
Time well tell how the industry will navigate this in 2022 if a recession does indeed hit. Post-pandemic Britain is currently on course to underperform every other major leading economy next year, which is likely to continue causing a problem for the Governor of the Bank of England as well as the person who is finally elected in as the new Prime Minister. Consumer confidence is already at levels below those experienced in the 1970s. Can the gambling industry make it through another recession considering it has just had to suffer through the effects of COVID-19 lockdowns?
