Bookmakers lose recession-proof edge

By Matthew Scuffham - Analysis

LONDON (Reuters) - Bookmakers may be less recession-proof than in the past because new ways of gambling such as online poker and computerised gaming machines attract fewer habitual punters than old-fashioned horse and greyhound racing.

The industry has altered dramatically since the recession of the early 1990s and it has yet to be seen whether the new revenue streams prove as resilient or if the growing proportion of middle income punters continue to gamble when household budgets are stretched and discretionary spending is limited.

Although horse racing and greyhound betting are still important in terms of revenues, factors such as the emergence of online gaming, betting on a broader range of sports (particularly football), and the proportion of profits derived from machines, have fundamentally changed the businesses.

During the last recession, analysts say there was no material decline in UK betting revenue. Although profits did fall across the industry, this was due mainly to increasing costs as wages and rents rose with higher rates of inflation.

This time around, the UK economy has been hit by a global economic slowdown that started over a year ago with mortgage problems in the United States.

The Confederation of British Industry (CBI) said last month Britain is heading for a shallow recession in the second half of this year and next year's economic growth will be the weakest since 1992.

But executives at Ladbrokes and William Hill, the sector's two biggest companies, have emphasised the resilience of the industry.

The two companies say they have yet to see signs of a downturn and maintain that, as a low-ticket activity with average bets of less than 10 pounds, gambling could be seen by most customers as an affordable indulgence.