horseracing prize money facing cuts as levy drops 17mby Joker 17.05.2019 0 comments
British horseracing stakeholders have had to urgently initiate a plan of action following the recent Horserace Betting Levy Board’s (HBLB) announcement that estimated Levy income for the year ended 31st March 2019 will be some £78m, a fall of £17m from last year.
News of the fall in yield were presented to racing’s HBLB representatives, Andy Clifton from the Racecourse Association (RCA), Julian Richmond-Watson from The Horsemen’s Group and Nick Rust from the British Horseracing Authority (BHA).
The yield was initially projected to reach £89m following the third quarter of 2018/19. However end of year submissions from bookmakers have confirmed that contributions have fallen considerably short of this figure.
Informal reports provided to the HBLB have highlighted that February and March of this year have proven to be substantially less profitable than in 2018. The HBLB explained: “On the assumption that £78m is the final yield, the Board will have incurred a budget deficit on expenditure of some £5m in 2018/19, causing the Board’s reserves to stand at around £40m, the Board having expected them to be at around £50m.”
Leaders in the horseracing industry have since confirmed that the next steps are to set out a new framework in response to HBLB’s proposal for reducing expenditure by £5million in 2019.
Since the majority of the Board’s expenditure goes towards prize money, it is highly likely that most of the cuts will impact this area.
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. Racecourses, The Horsemen’s Group and the BHA have pledged to work through any implications together. Discussions have already begun about how to minimise the impact over the next year.
“We welcome HBLB’s announcement that it is reviewing how it works with bookmakers. We look forward to seeing their proposals for improving the accuracy of forecasts and growing racing’s income stream in line with growth in betting on racing. We want to understand better from betting operators and HBLB whether any systemic issues are emerging that need to be addressed.
“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.
“The government and Parliament have been very supportive of British racing making important and welcome changes to the Levy in 2017. Like us, they have been waiting to see how these reforms would bed in and what the impact would be on racing’s income. We will discuss this with ministers and officials at the next opportunity.”
Levy Board Chairman Paul Lee added: “Bookmaker profits in the fourth quarter, particularly in February and March, were reported to be very substantially down on estimates. 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. However, the scale of the fall in income means that there is a strong probability of having to make further adjustments to expenditure during the Levy year in addition to the £5m reduction before the end of 2019.
“The variation in yield from £95m to £78m in the first two years of the extended Levy makes forecasting 2019/20 income more difficult and will create a challenge in setting a full-year expenditure budget for calendar year 2020 before the end of calendar year 2019.
“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.”