UK horseracing Levy set to plummet £17m
The Horseracing Betting Levy Board (HBLB) has warned that the Levy for the UK industry in 2018-19 is set to fall short of expectations by some distance, with forecasts placing the sum paid to the industry down by £17m (€9.4m/$21.7m) from the previous year.
The Levy for the 12 months to March 31, 2019 has been estimated by the HBLB at £78m, down from £98m in 2017-18 – the first year of the Levy – and lower than the £89m forecast by the HBLB after the third quarter.
According to the HBLB, end-of-year submissions from bookmakers showed both February and March of 2019 were “substantially less profitable than in 2018”, and the organisation has had to shift its expectations as a result.
Should the Levy eventually total £78m, the HBLB would have incurred a budget deficit on expenditure of some £5m in 2018-19. The HBLB’s reserves would also be lower than expected – down from £50m to around £40m.
As a result, the HBLB would be required to adjust its budget for 2019. This currently stands at £99m, but plans would have to be formulated to reduce this by £5m.
“Bookmaker profits in the fourth quarter, particularly in February and March, were reported to be very substantially down on estimates,” HBLB chair, Paul Lee, said. “This has led to a material undershooting of Levy income against forecast, even taking into account that yield was not expected to reach the £95m of 2017-18.
“This is only the second year of the extended Levy and the inherent uncertainty was recognised by the Board in 2017, which led to its policy of increasing reserves significantly over the past two years. The purpose of having these reserves is to be able to shield Racing against substantial fluctuation.”
Lee noted that the variation in yield in the first two years of the extended Levy makes forecasting 2019-20 income more difficult, while the HBLB will also face challenges when setting its budget for the 2020 calendar year.
“The Board will look to put in place additional reporting arrangements with major bookmakers, who are already helpfully providing significant data to the Board on a voluntary basis,” he said.
The UK horseracing industry has moved quickly to address the news, with the Racecourse Association, The Horsemen’s Group and the British Horseracing Authority meeting earlier this week to discuss their plans.
At the meeting, it was agreed that the three organisations will support the HBLB proposal to cut expenditure in 2019. As most of the HBLB’s spending is on prize money, it is likely that this area will be hit most by the move, and talks are now underway as to how to best implement the changes.
A spokesman for racing’s tripartite leadership said: “We were shocked to see the big drop in Levy yield for 2018/19, which was significantly below the previous forecast at the end of March. We share the disappointment that our sport will feel having produced some highly competitive and compelling racing over the past year.
“The bulk of the Levy income is distributed as prize money. At a time when there is already significant debate in the industry around levels of prize money, we appreciate that any potential reduction will cause further concern.
“The recent positive reporting from the betting sector on the growing attraction of betting on our sport makes clear that the issue isn’t the popularity of racing as a betting product, but rather its potential profitability. As the Levy is based on those betting profits, that is clearly concerning for all in racing.”