Thursday, October 7, 2010

On the brink

On the brink

By Stephen Dwyer

All is not well in Scotland.

As Pope Benedict touched down yesterday in Edinburgh aboard his plane, “Shepherd 1″ one wonders how many Scottish prayers have been offered up to bring horse racing there back from the point of no return. Currently in Scotland, the entire horse racing industry is in the grip of a financial crisis.

There are five racetracks in Scotland; Ayr, Hamilton, Kelso, Perth and Musselburgh. The most prestigious of these, Ayr, features the Scottish Grand National and the Ayr Gold Cup meeting which commences tomorrow and was first run in 1804. Scotland has not lost a racecourse since 1977 when Lanark closed its gates but the possibility of one of the existing five closing is now a real possibility.

Worth £220 million to the economy, Scottish racing has, ironically, never been more popular. With an average growth of 4% attendance, 310,000 race goers attended meets last year. The primary reason that it is struggling to survive is due to the current levy system. In order to avoid paying tax, many betting firms are continuing the trend of moving offshore. It’s a simple system, by holding court offshore, the bookies avoid paying their mandatory 10 per cent share of their gross profits to the Government. This money is funnelled directly back into the sport, but less and less is now in the pot.

William Hill recently moved more of its operations to Gibraltar, a move which has contributed to a £40 million shortfall in levy tax over the past 24 months. Even the sport’s ruling body, The British Horseracing Association has stated on record that they project future losses of £15m unless reforms are brought in. If these reforms do not come into play, hundreds of jobs will be lost in Scotland and courses will close and that is a certainty.

This week, Scotland’s First Minister Alex Salmond, (who lists horseracing as his favourite pastime) led a delegation of racecourse owners, trainers and industry representatives from the Scottish racing industry to Westminster. This was in an effort to gather support from Ministers and modernise the Levy system and help curb the growing financial crises within the industry.

The argument that offshore bookmakers must continue to contribute is a very strong one. They continue to profit from the sport, thus they must not bite the hand that feeds it. The knock-on effect from this issue in Scotland is resounded in many countries worldwide. The time has come for a precedent to be set to ensure a sustainable arrangement between those who profit most from racing and those who rely on it for their livelihood.

Betting Exchanges also pay only a small percentage of tax, this may have to increase in the interests of the sport. In 2009, Betfair’s total revenue grew by 27% to £303m. This is a three-fold growth since 2005. Also last year, Betfair signed one of the biggest sponsorship deals in the history of horse racing by entering into a five-year partnership with Ascot Racecourse. They contributed just under £8m to the horse racing levy over the past year (of which nearly 20% was voluntary) but the sentiment is that this is not enough.

The solution is not a simple one, if the levy rises, bookmakers will probably pass the extra cost on to their customers and thus the cost of a bet will rise. The large bookmakers are quick to suggest alternative arrangements such as “proper commercial relationships” but the industry needs revenue, not suggestion, and it needs it now.

Alex Salmond and his Scottish delegation carry the hopes of an entire industry on their back as they travel back from Westminster to the border towns, HRI and the Irish horse racing industry will be watching this crisis closely in the hope it does not happen on these shores because if it does, it’s going to be a big storm.

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