Ten years ago bookies looked like a safe bet. Even with the rise of online gambling, the retail side hadn’t lost its lustre. Far from it. The number of stores was rising and the Gambling Act of 2005 seemed to have detoxified the image of gambling.
Now you would get outside odds at best. The top three bookies in Britain – by market share, revenue and store numbers – are William Hill, Ladbrokes and Coral. This year Ladbrokes is closing 60 of its shops, after a 9.3% drop in operating profit. These add to 89 closures last year. Arch rival William Hill closed 109 stores last year, with further closures predicted. Coral, the nation’s third largest high street bookies, has said that closures are “inevitable”.
“There are 8,500 or 9,000 betting shops,” says Peter Craske, of the Association of British Bookmakers, who adds that these numbers are in decline.
But in some respects the decline is surprising. The demand test – which required bookies to prove there was a “need” if they wished to open a new premises – was scrapped with the 2005 Gambling Act. This allowed bookies to move or open new shops, without having to consider proximity to another store or competitor. “That should have had a very positive effect,” says Craske.
But then the recession kicked in. While the high streets suffered as a whole, the bookies did comparatively well. And now there were vacancies on the better slots. The bookies, traditionally banished to the side streets, were able to move in.
This didn’t mean a boom in numbers, however. Quite the opposite. “For the most part they weren’t opening a new store, but a relocated one,” says Craske. In many cases two or more outlying stores were closed because a more centrally located store had been opened. “Now almost all of our member shops operate in commercial centres,” says Craske, “in the best slots.”
And those shops are being closed.
Retail is the largest William Hill division, generating 57% of group net revenue in 2014 and employing around 12,500 people in the UK. William Hill is also the UK’s number one in terms of the number of shops, with some 2,360 of the 9,000 or so bookies licensed by the Gambling Commission.
Nobody at William Hill was keen to talk to EG, but Graham Sharpe, the bookie’s media relations director, did send over the following statement: “We remain committed to betting shops and expect them to continue to be an integral part of the nation’s high streets for many years.”
Which is all well and good, but does not answer the question, “Are you going to be closing more shops?”
Chris Robson, director of property at Ladbrokes, was more forthcoming. But he gave a similar reply: “Our business is still overwhelmingly a retail business.”
The recent turmoil at Ladbrokes would seem to give a more realistic, and honest opinion of where the industry is heading. In February Ladbrokes’ outgoing chief executive, Richard Glynn, said: “It’s highly likely there will be more store closures going through into 2016,” he said, with the candour reserved for those on their way out. “There’s no doubt about it.”
Glynn blamed the extra burdens placed on the business by the government. “The additional tax and regulatory headwinds have pushed more shops into the bracket that needs examining,” he said.
To blame the government for these closures may seem surprising. After all, in 2013, the coalition relaxed the planning laws, lifting change-of-use restrictions and, in theory, allowing any premises to become a bookmaker.
The uproar over this move was considerable. Not that it actually happened, but scare stories that gambling dens would soon be popping up all over the place, next to schools, in residential streets, even in former churches, made the rounds.
However, that relaxation was overturned by the government, just before the last election. Now, as well as a licence from the Gaming Commission, you need planning permission to turn a bank into a bookies. “It is another barrier to entry,” says Craske. “Another cost.”
In a further blow, the government last year also imposed a 20% tax on gambling machines. This year, as a footnote in the pre-election Budget, that went up to 25%.
“That has led to shops closing, certainly,” says Craske. “Probably a couple of hundred. And without doubt a few shops that had been planned to open were prevented from opening.”
But what has hit the industry hard is that it was not consulted on the hike, or even warned about it in advance. “The first we heard about that was when it was announced in the Budget,” says Craske. “There is no real way to plan for that.”
The ABB, on behalf of its members, has since written to the prime minister, asking for certainty. “Let’s put it this way,” says Craske. “We think we have certainty now, but we just don’t know!”
Ladbrokes’ former chief, Glynn, was adamant that the firm’s recent poor performance was due to this attack by the government. The shareholders disagreed, however, and blamed him. Ladbrokes had fallen behind its chief rival, William Hill, because of years of underinvestment in the online operation, and that was where the shareholders now wanted the business to focus. It is not by accident that Glynn’s replacement as chief executive is none other than Jim Mullen, Ladbrokes’ former online head.
City sources see Mullen as a new broom. A month after Glynn was replaced by Mullen, Ladbrokes’ chairman, Peter Erskine, also stood down. And Mullen has made a point of distancing himself from Glynn and his record. Before the general election, Glynn signed a letter to the Daily Telegraph in support of the Conservative party. Mullen promptly issued a response, saying that it was Ladbrokes’ place to take bets on the outcome, not to attempt to influence it.
Mullen has stated that the retail arm remains the heart and soul of the business, but the City believes he has plans to “refocus”. Ladbrokes’ property director Chris Robson told EG: “Jim is updating the City at the end of June on his strategy for the business, so will detail his plans for retail at that time.”
It believed that those plans will include more closures. A lot more. After all, Ladbrokes had previously underestimated the number of stores it would close. In 2014 it predicted between 40 to 50. By the end of the year 89 had closed their doors. The 60 already announced are expected to be the tip of the iceberg.
Robson argues that this is simply a normal part of the business. “We continually review our retail estate,” he told EG. “What is clear is that after a period of growth, up to and including 2013, we are now concentrating on consolidating the existing estate.”
And for Robson, like Glynn, the reasons for this are clear: the shops are no longer viable. “This is partly the result of cost increases, primarily media rights, and tax rises, with gambling machine tax at 25%.”
What the scale of the consolidation will be will depend on the scale of the effect of these changes. “These impacts, together with regulatory changes such as the new arrangements that limit staking to £50 unless via a registered account, will take time to feed through.”
What is happening to the likes of Ladbrokes and William Hill is another facet of what is happening across the high street. Traditional retail is giving way to online, physical stores are closing and operators are taking a hard look at their property portfolios (see below).
Robson, as director of property, is perhaps the man one would expect to be most keen on the high street operations, and most bullish about their future. But even he isn’t about to deny in what direction the industry is heading.
“We are focused on maintaining retail as a profitable and steady source of income,” he says. “But online is where there are real growth opportunities.”
From dens of ill-repute to entertainment boutiques
For retail to survive, it has to provide a better experience. Betting shops are no exception. “Our members all have their own online versions,” says Peter Craske of the ABB. “But the shops have been trading for 50 years. They adapt.”
For years they were constrained by regulation – forced into back alleys, compelled to be de facto places of ill-repute. In recent years that has changed. But the stigma persists.
Despite a recent CBRE report, stating that betting shops were a major driver of footfall for high streets, some councils still object to their presence. Newham, in east London, for instance, recently lost a court challenge to limit the number of gambling premises in its domain, stating that 83 stores were too many.
The Association of British Bookmakers is attempting to address this by setting up partnerships with councils and doing more to tackle problem gambling.
Bookies themselves are doing more to move away from the seedy image that has haunted them.
Ladbrokes is experimenting with new formats. On the Strand in London it has created, with design agency FITCH, concept stores that owe more to Disney and Victoria’s Secret than anything else. The windows are large and active. Inside, the decor resembles the break-out area of a trendy tech firm. There are big screens and seats straight out of a sports stadium or track enclosure. In the racing area, where diehards would once have gathered in smoky silence, there is grass on the floor (and walls) and the aroma of fresh turf.
When the concept was launched last year, FITCH design director Nathan Watts said that it “shifted Ladbrokes’ shop proposition from transactional to experiential”. But, crucially, most of the play and most of the bets are taken via touch screens, “to fit the behaviours of the multi-channel bettor”.
If Ladbrokes was to roll this concept out across the portfolio, it would show a real commitment to the bricks and mortar. But that seems unlikely.
“The Strand is a concept,” says Ciaran O’Brien, Ladbrokes spokesman and ABB director. “Elements will be included in shop refurbs, but there will be no roll out as such.”
