London: Tommorow's Las Vegas (published in The Assumption – Univ. of Warwick's economic journal)
The Las Vegas Invasion
By: Kasit Rochanakorn (K.Rochanakorn@warwick.ac.uk)
A look at the future political and economic implications of the government’s Gambling Bill
The global gambling industry, from the sands of Las Vegas to the shores of Macao, is a ₤600 billion economic sector. The UK market for betting and gaming alone is currently valued at ₤30 billion, making it the largest in Europe – an economic fact not truly recognised or embraced by the British public. Furthermore, the UK’s gambling industry is rapidly expanding and investment is heavily driven by the imminent prospect of deregulation and the inevitable arrival of off-shore players such as MGM Mirage and Las Vegas Sands with very deep pockets.
In 2000 the British government established an independent review body, chaired by former chief Treasury advisor Sir Alan Budd, to examine the gambling industry in the UK and the laws, dating as far back as the 1960s, which govern the operation of the industry. One year later, a report which included a total of 176 recommendations was published in July 2001. The report was also accompanied by the general appeal of the industry and, as such, the prospect of a deregulated gambling industry acting as a vehicle for new tax revenues and regional developments. The allure of the gambling sector was further strengthened by the confidence of both banks and investors in the growth of the sector. This latter point was especially highlighted by two private equity-backed acquisitions of betting businesses in 1999, both of which were realizes and concluded in late 2002, which sparked massive interests in the UK gambling industry. Cinven and CVC Partners acquired the well-known high street betting franchise William Hill from Nomura for ₤825 million and Ladbrokes sold Coral Eurobet to Morgan Grenfell Private Equity (MGPE) for ₤390 million.
The excitement generated by the evidence that the industry was rapidly expanding was coupled by both the imminent changed in regulation, the simple economics of the sector, namely, its ability to generate rapid short-term revenues on investments. This latter point can be easily observed through the model that the American gambling industry has provided for the world to follow. Simply, the annual revenue of a US destination casino can easily exceed ₤100 million. When this figure is compared with the construction costs of just ₤6 million and the initial ₤28 million fit-out, the lure for developers and investors becomes very apparent.
The government’s Gambling Bill, which has been slowly making its way through the legislative labyrinth and passed its third reading in the House of Commons in early 2005, aims to modernise and consolidate the currently stagnant, outdated and diverse legislation governing the various forms of gambling within the UK. The Gambling Bill has social responsibility at its core but is, at the same time, prepared to treat gambling as a mainstream leisure product and remove the former moralist tone of the law.
Deregulation, to the joy of casino developers and investors, will include: abolition of the membership rule which currently requires punters to join a casino 24 hours before they are allowed to even place a bet, casinos with be allowed to offer any legal form of gambling (including betting, bingo and linked gaming machines with unlimited prizes) as well as live entertainment and alcoholic drinks on the gaming floor. The government has also planned to remove the current legal requirement that bookmakers, casinos and bingo operators must demonstrate a local demand for their activities. Advertising restrictions could also be relaxed and online gambling (a recent and ever growing trend), via the internet or interactive TV, could be licensed for the very first time. The establishment of a single regulatory body for the industry, the Gambling Commission, has also been proposed. Lastly, and arguably the most important, the Gambling Bill will signal the dawn of new Las Vegas style regional casinos.
Already, before the Gambling Bill has even yet to reach the final step of the legislative process, developers and casino operators have already embarked on plans to transform the regional capitals of Britain – from London, Birmingham and Manchester to Liverpool, Newcastle and Sheffield – into internationally renowned centres of leisure and gambling pleasure. In short: mini ‘Las Vegases’.
Sheffield, a city with a population of 500,000 earning an average of ₤400 a week, already managed to attract proposals for three major casinos by the year end of 2004. MGM Mirage, Las Vegas Sands and Sun International have all launched proposals for future casinos at Sheffield United’s ground, British Land’s MeadowHall scheme and Don Valley Stadium respectively.
Manchester will witness a massive ₤260 million development adjacent to Manchester stadium. The project will boast 1,250 slot machines and 50 gaming tables in conjunction with a 2,750 seat sports arena and ice rink, a hotel, office space and 500 flats over a marina, and more.
The Gambling Bill, with its wide-reaching proposals and forward thinking, will inevitably be realised. After 35 years of waiting, the question is no longer if but when – whether the bill will become law by the upcoming election or by the next parliamentary session is still up to speculation. Whether in the name of regional regeneration, industrial growth or simple tax revenues, the bill will have major political, societal and economic implication – for better or worst will be the question with only the future holding the answer. Nonetheless, the bill will introduce a brand new world of leisure and gambling to the traditionally wet countryside of Britain and bring joy to those who, for years, have only dreamt of driving to their own Vegas style casino rather than make the 5200 miles journey to the Las Vegas Strip.