A stampede to offshore tax havens by British bookmakers, exploiting increasingly popular telephone betting and a lucrative infant Internet market, is threatening to wipe out many of Britain's 9,000 off-course betting shops and end millions of pounds of backing for the horse-racing industry.
The dash offshore, led by bookmaking entrepreneur Victor Chandler in May, is just the first stage of the upheaval, but the government has no plans to respond by cutting betting tax.
Several bookmakers also plan to launch interactive TV betting, offering armchair punters the chance to spice up their viewing of soccer and other sports with wagers at the touch of their remote controls.
By relocating offshore, bookies allow punters to escape the nine percent duty levied on all bets placed in Britain.
Britain's biggest bookmaker Ladbroke has massively expanded its call centre in the Mediterranean tax haven Gibraltar.
This offshore service was previously only available to international clients but Chandler's ground-breaking move and competition from Ireland, after betting duty was halved to five percent, have raised the stakes.
Ladbroke also plans an on-line soccer betting service from November, using a wealth of statistics to attract British armchair punters to a market forecast to be worth $3 billion in Europe by 2004.
William Hill has threatened to move offshore unless Britain cuts betting duty to three percent and Coral, the UK's other leading chain, already plans to follow suit.
For punters, the attractions are obvious. Dialling Chandler's free-phone number, they pay a charge of just three percent on bets.
Telephone betting accounts for 10 percent of the six billion pounds ($9.53 billion) staked in Britain annually, but analysts say the offshore revolution will significantly boost that sum.
"This is bound to have an impact on betting shops," said Barry Faulkner of trade body the Betting Office Licensees Association (BOLA). "The only question is how much."
BOLA's best case scenario, assuming just 50 percent of telephone betting and 10 percent of betting-shop turnover is siphoned off by bookies overseas, would see 450 betting shops close, with the loss of 3,000 jobs.
Bookmakers dispute these figures, arguing Internet services target a new market and that telephone betting is not a threat.
"Research shows people go to betting shops for predominantly social reasons," said Peter George, chief executive of Ladbroke's owners Hilton group , pointing to the enduring strength of Ladbroke's 1,900 shops.
Betting shops have evolved considerably since first licensed almost 40 years ago. Strict laws initially enforced a grim environment behind darkened windows and banned publicity "enticements" to lure punters off the street.
The launch of the UK's national lottery in 1994, on which more than 90 million pounds is staked weekly, forced turf accountants - as bookmakers were once affectionately titled - to spruce up their gloomy smoke-filled interiors.
But the colourful decor and on-site refreshments which many shops have introduced may not be enough to draw punters away from paying lower commission elsewhere.
Gibraltar-based Victor Chandler International attracted 5,500 new accounts in its first two months, prompting a 70 million pound takeover by leisure group ENIC .
Britain's state-owned bookmaker the Tote is feeling the competition and its booming telephone business, which accounted for 23 percent of last year's 497 million pounds total turnover, has been hardest hit.
"Since Victor Chandler went offshore our big clients, betting 500 pounds or more, have stopped betting," chief executive John Heaton said.
Analysts say the offshore threat will significantly reduce the Tote's value, hitting a planned government sale.
But losses from falling tax revenues will be greater. Conservative estimates forecast an instant loss of 40 million pounds from 1998's total tax take of 479 million.
Horse racing, on which 70 percent of UK bets are staked, fears it will also become a victim.
Of the nine percent deducted from bets, almost a third is fed into racing via a levy. Though Victor Chandler donates half its three percent deduction to sponsor racing, Ladbroke has no similar plans.
"Even if business is going to be increasingly offshore, they need to recognise their reliance on the UK horse racing industry as that will still be their primary source of income," Rodney Brack of racing's Levy Board said.
The industry is fighting back, though. Owners of Britain's 59 racecourses plan to by-pass bookies by launching their own tax-free betting website. It will take five percent deductions and plough money back into racing through higher prize money and greater investment capital.
Betting is regulated by laws designed in the 1960s but many in the industry believe the current revolution makes those laws look out of date and in desperate need of reform.
Bookies dispute the level of betting duty and a ban on promoting offshore services within the UK. They argue a cut in duty would boost tax revenues through higher turnover.
But with official figures showing a two percent increase in general betting duty this year, the impetus for change is low.
"We are looking at things very carefully," a Customs and Excise spokeswoman said. "But it seems the majority of betting is still done in the traditional way." ($1=.6296 Pound).
Reuters
