Racing hit by shock £15m fall in levy income
British racing’s finances have been dealt a huge blow with the news that income from the levy – the sport’s central funding system – has fallen unexpectedly by around £15 million in the latest financial year, the Racing Post understands.
The news could mean that Levy Board expenditure on areas such as prize-money will face cuts later this year. That bombshell comes against the background of the sport facing falling income from media rights caused by betting shop closures due to the government’s crackdown on FOBTs. The effect of that change has been estimated at between £40m and £60m a year.
Bookmakers pay a percentage of their gross profits on bets on British horseracing to the levy, which the government reformed in 2017 to extend to operators based overseas who had previously not contributed.
Having fallen below £50m, the newly reformed levy brought in £95m in its first year, higher even than the forecasts of £85m. However, it is understood that in the 2018-19 financial year that figure has fallen to around £80m.
It is believed the main impact came towards the end of the levy year, which runs from April 1 to March 31, with a high percentage of winning favourites.
Bookmaker promotions around the Cheltenham Festival and results on the track will also have had a major effect on the yield, but the sport’s leadership will be concerned that this is a structural change rather than a one-off event.
This week Sky Bet’s parent company The Stars Group said the bookmaker’s revenues had been hit by unfavourable results at the festival, with betting net-win margin at a record low of five per cent in the first quarter of the year compared to an average of around nine per cent.
Punters enjoyed a golden period during the meeting, from Altior winning Wednesday’s Queen Mother Champion Chase to Paisley Park’s success in the Stayers’ Hurdle on Thursday, with favourites landing seven of the eight races. The well-backed Frodon was the only non-favourite to oblige in that run.
The equine flu crisis, which shut down racing for six days in February, will also have had an impact.
In March it was announced that prize-money for 2019 was to be boosted by a one-off injection of £6.5m from the Levy Board to fill the hole expected to be left in racecourse coffers by falling media rights income this year.
The extra financial support was mainly to be targeted at the middle to lower tiers of British racing and came after some courses, most notably those under the Arena Racing Company (Arc) umbrella, had signalled their intention to cut prize-money in 2019 in response to the threat of falling income, a move which in Arc’s case led to trainer and owner boycotts.
It remains to be seen whether that extra support will be threatened by this latest news.
When the government reformed the levy it said it would consider extending the system to bets placed on foreign racing, a move which could bring in a further £15m to £20m. However, ministers have said they would need to see racing make self-help efforts and also evidence of hardship before that change was made.
Many in the sport would also like to move towards a levy model based more on turnover to mitigate against bookmakers using the sport as a loss leader.