Brexit sees gambling shares tumble as regulators take ‘wait and see’ approach28th June 2016 7:21 am GMT
Shares in gambling operators and suppliers worldwide have taken a beating in recent days as a result of Thursday’s EU referendum in the UK, even as regulators stress that it is “business as usual”, for now.
The fact is that no one knows for sure how this situation will play out. From the date on which the UK will finalise its divorce from the EU to what the future relationship between the two might be, all the key questions are mired in uncertainty.
The only point that most people agree on is that iGaming companies in the UK and Gibraltar will face years of uncertainty before their new relationship with the wider European market becomes clear.
Gibraltar gambling commissioner Phill Brear told Gaming Intelligence that the decision to break from the EU “opens the door to a complex and protracted exercise that all affected parties will be seeking to manage to cause least harm and identify opportunities.”
He agrees that it is too early to gauge just how this will affect Gibraltar’s gambling industry, but expects that there will be between two to five years of negotiations.
“[At] the moment it is totally unclear what the final shape of the UK’s relationship with the EU and its members will be and how different it will be,” says Brear.
“It is too early to say what the impact will be on the remote gaming industry. There is a lot of uncertainty especially because this result was not really expected.”
Malta Gaming Authority (MGA) executive chairman Joseph Cuschieri echoed that sentiment, but added that the biggest challenges lie in tax, movement of funds and people, as opposed to simple market access.
“We may yet see more re-structuring and consolidation of the industry as the new scenario unfolds,” he says. “The UK is an important gaming market and there will be winners and losers.”
Cuschieri refuses to be drawn on whether he expects to see a hike in the number of companies applying for a Malta gaming licence as a result of the referendum outcome, but says Malta’s remote gaming sector will continue to grow as long as its ‘jurisdictional package’ remains competitive and attractive.
“Our plans for the future are all geared up towards that,” he says.
The impact of the referendum result on financial markets, and the concern that it has sparked about a wider fallout within the EU leading to another global downturn, has seen gaming companies with no exposure to the UK also take a hit. This suggests that the markets believe that discretionary consumer spending could come under pressure.
Monday trading saw UK-listed Ladbrokes’ share price drop 12.80 per cent to 106.47 pence per share, while shares in William Hill fell 8.36 per cent to 253.20 pence. And this was mirrored by a host of other UK-listed companies including the likes of 32Red, GVC, Paddy Power Betfair and 888.
Meanwhile US operators and suppliers with some exposure to the European market, such as Caesars Entertainment (-6.87 per cent) and Scientific Games (-9.61 per cent), also recorded a decline in share value, as did the likes of Japan’s Sega Sammy (-5.24 per cent) and South Africa’s Sun International (-5.69 per cent) who do not face the same exposure.
Outgoing British prime minister David Cameron’s likely replacement, Alexander “Boris” Johnson, has suggested in his weekly newspaper column that the UK could remain a member of the European Economic Area, but this was quickly dismissed by scorned politicians in Germany and France. As was any suggestion of beginning informal talks with the EU before the UK invokes Article 50 of the Lisbon Treaty to begin the divorce process.
Uncertainty reigns. One of the most prominent pro-Brexit politicians, UK independence party leader Nigel Farage, remains unelected. The two leading pro-Brexit Members of Parliament, cabinet ministers Johnson and Michael Gove, both failed to turn up to a session of Parliament on Monday.
Even among politicians, uncertainty seems to be the order of the day, but Gibraltar’s Brear is confident that his licensees will weather the storm.
He says that companies have been aware of the potential for a referendum for more than three years, and expects that many have factored it into their recent planning.
“Now it is a reality,” he adds, “It becomes another challenge for them to manage.”
“It is too early to say what the impact will be on the remote gaming industry,” added Malta’s Cuschieri. “There is a lot of uncertainty especially because this result was not really expected.”
Meanwhile the UK Gambling Commission said in a one line statement on Brexit: “It is business as usual for now. We will be working through the implications with DCMS and will provide further advice and updates in e-bulletin as and when things develop.”
For its part, the Government of Gibraltar has at least shown that it has considered its options ahead of the referendum, with Chief Minister Fabian Picardo telling the territory’s gaming companies that there is a Plan B.
The Government of Gibraltar will seek to obtain guarantees from the UK that Gibraltar will be included in any future trade deals negotiated with the EU or other countries, and is also calling for unrestricted access to the UK market for Gibraltar-based businesses in areas such as insurance, financial services and gaming.
While the UK may agree to include Gibraltar in future trade discussions with third-parties, it is less certain whether it would grant Gibraltar unrestricted access to the UK market.