UK Facing 18% Inflation, Could Lead to Reduced Gambling Spend
Posted on: August 23, 2022, 10:24h.
Last updated on: August 23, 2022, 12:09h.
The gambling industry in the UK is facing a crunch that could lead to a significant slump in revenue. Even though the country plans on curtailing what consumers can spend on gambling, rising inflation could make the controls irrelevant.
At some point, perhaps in October, the UK government will release its white paper on gambling reform. Strict limits on how much gamblers can spend and what they can afford to spend are likely to cause the industry to contract.
Add to that a new report that shows an unprecedented level of inflation, and the UK is creating a recipe for disaster. Financial giant Citi expects inflation to hit 18% by next January. This will be the highest it has been in the past 40 years.
UK Cost of Living Soaring
Citi, saying that inflation is “entering the stratosphere,” cited a number of reasons that led to its conclusion. One of the biggest is the energy price cap, the regulated maximum UK consumers pay for gas and electricity.
That cap is currently £1,971 (US$2,335). However, it’s continuing to rise. Citi expects it to go to £4,567 (US$5,414) in January and then £5,816 (US$6,896) in April.
The British government might be trying to do something about it. The Labour Party recently stated that, should it continue in power, it would freeze the price cap. However, the Conservative Party’s Liz Truss overwhelmingly leads to take over for Prime Minister Boris Johnson in polls of voters.
Even if the government intervenes, it isn’t likely to be able to offer a solution to greatly suppress the inflation. This will spell bad news for gambling operators.
Several months ago, YouGov conducted a survey of gamblers. Then, well before the current spike, 18% of them indicated that they would take a break from gambling completely because of the rise in the cost of living.
In addition, another 32% said they were going to cut back on how much money they spent gambling. As a whole, over half indicated that they would reduce the amount of time they dedicated to gaming and sports betting.
Some 11% acknowledged that the rise in the cost of living impacted them greatly, and that they were struggling to make ends meet. Another 43% said it had “somewhat” impacted their way of life.
All Sectors Hit By Inflation
Inflation is far outpacing wage growth in the UK. The country’s central bank, the Bank of England, expects inflation to be around 2%. However, it’s now above 10%, according to the UK Office for National Statistics (ONS). Making things worse, despite its intentions, the Bank of England recognizes that 13% inflation is knocking on the door.
The snowball effect of rising inflation means no industry is safe. British Airways is canceling around 10,000 flights through the end of the year, ostensibly to help ease pressure at Heathrow Airport. The major hub has been dealing with strikes this summer that have led to reductions in its serviceability.
However, the reduction will also take its toll on revenue, which will impact its workforce. The strikes are likely to miss their target, as airlines, like all other industries, are dealing with the impact of inflation. As such, there’s less money to go around.
Other unions are set to strike as well, which will only exacerbate the situation. For example, postal workers with the Communication Workers Union have announced they plan to launch a strike. Even the legal industry, looking for more funding for the justice system, has threatened to strike.
Approximately 1,900 members of Unite union workers at Felixstowe, the UK’s biggest container port, walked out this weekend. They plan on sitting out for eight days, which could cause disruptions in supply lines until Christmas. In addition, it could lead to higher prices.
This past May, according to the ONS, the price of goods leaving factories was 15.7% higher than a year ago. This is impacting small- and medium-size enterprises, and more trouble lies ahead.
With each industry segment suffering, consumers will have to make tough choices. Discretionary spending will shrink, which means frills, including gambling, will take a hit.
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