Illegal gambling hurts the UK's economy, claims billions annually

Recognized as the country in Europe with the biggest gambling market, the United Kingdom offers a range of retail and online casino and betting options. While millions of people enjoy legal gambling responsibly every month, the market faces different challenges.

Gambling regulatory reform to bring changes in the UK

Currently, the gambling sector in the UK is going through significant regulatory changes. Those come after the government completed a review of the Gambling Act, resulting in the release of a White Paper, proposing an industry-wide gambling reform.

Ultimately, the efforts of the lawmakers seek to combat gambling harm, prevent financial crimes and ensure gamblers enjoy the activity responsibly. The industry-wide changes include the implementation of different policies.

The list includes changes to online slot games such as stake limits per spin, as well as enhanced protection for customers between the age of 18 and 24 years old. One of the most discussed changes revolves around spending checks. The affordability checks seek to ensure gamblers are not spending more than they can afford to. At the same time, such checks seek to combat financial crimes.

But what is the size of the gambling sector in the country? Data from the Betting and Gaming Council (BGC), the single industry body representing the UK gaming and betting industry, estimates that its members contribute a whopping £7.1bn to the economy.

Additionally, BGC members support more than 110,000 jobs in the gaming and betting industry and generate £4.2bn in tax. The sheer size of the gambling sector in the country doesn't mean that it isn't facing any challenges. One such challenge is the illegal gambling sector, where, according to the BGC, billions of pounds are spent every year.

An estimated 1.5m Brits spend £4.3bn via illegal gambling operators

Earlier this month, the BGC uncovered shocking results regarding a new study that probed into the illegal gambling sector. The study was commissioned by the Council and published by Frontier Economics, a leading consultant group.

It sounded the alarm about the solid presence of illegal gambling among UK customers with nearly one in five gamblers within the 18- to 24-year-old group using the services of unlicensed, unregulated online operators. Such services were offered online and via secure online messaging apps, delivering unsafe gambling to an age group that has a higher potential of developing gambling addiction.

The newly released research estimated that up to £4.3bn is wagered via unregulated, black market operators every year. Concerningly, some 1.5m British adults use the services of such operators annually.

Separate data from the BGC said that approximately 22.5m Brits enjoy gambling services every month. A comparison between the two figures shows that the number of people using unlicensed and black market gambling operators is insignificant.

Yet, this doesn't mean that anything good can come out of the unregulated gambling sector. On the contrary, those 1.5m people using the services of the black market put their money and personal information at risk.

The black market creates conditions for gambling harm

Licensed gambling operators in the UK are regulated by the Gambling Commission (GC). Due to this, they are required to ensure compliance with the country's established regulations and license conditions.

Any customer who wants to check if they are using the services of a licensed gambling operator can do so by visiting the GC's official website and accessing a list of businesses, licensed to provide their services. At the time of writing, there are 2,734 such companies, offering lottery, casino, bingo, betting and other gambling services.

In contrast to the licensed sector, unregulated operators do not meet the stringent standards of the legal sector. Not unexpectedly, such providers also do not pay any taxes.

Just as concerning is the fact that black market gambling companies do not comply with the responsible gambling requirements in the UK. This makes them extremely dangerous as they can enable customers to spend more than what they can afford and lure them with better promotions or odds.

In many cases, black market gambling operators also target vulnerable customers or gamblers who have self-excluded. This predatory behavior is beneficial for such companies that can advertise their services and prey on vulnerable individuals. In turn, such actions result in more people developing problem gambling and experiencing harm.

Problem gambling impacts 1.65m children

Focusing on gambling-related harm, data from the NHS Health Survey in England claimed that approximately 0.4% of the adult population in the country is impacted by problem gambling. With that in mind, an adult's problem gambling can have a significant impact on the lives of families across the country.

Data released in August from GambleAware, the leading charity providing support and advice to people affected by problem gambling, uncovered that approximately 1.65m children under the age of 18 are growing up in a household where an adult is affected by problem gambling. This data was based on a YouGov survey, which focused on the impact of problem gambling on children.

Per the study: "Children exposed to gambling were also found to be four times more likely to go on to experience problem gambling themselves compared to those who had never been affected by someone else’s gambling." Although the study by the BGC and GambleAware are not related, it is plausible that some of the gambling addicts are using the services of unlicensed, black market operators.

The UK Treasury loses more than £300m annually to the illegal gambling vertical

Looking once again at the billions lost to the illegal gambling sector, the BGC provided a breakdown of the total. Per this data, an estimated £2.7bn are the losses to illegal online gambling websites. Such include a range of different online casino games, including slots, poker and even horse racing.

On the other hand, another £1.6bn is wagered by Brits in-person via different illegal gambling venues across the country. Although the sum bet via land-based illegal establishments is lower, such dens are equally as dangerous as they offer no protection for the consumers and can be related to further criminal activities, including loansharking, drug distribution or violent crimes such as assaults.

Considering the estimated sum wagered via illegal online and retail gambling operators, the Treasury is at a loss of approximately £335m annually. According to the BGC, those losses translate to the salaries of up to 1,500 teachers or the payment required for up to 1,700 nurses annually.

Finding the right balance is the key to the effectiveness of regulations

For years, anti-gambling groups supported tough restrictions for the sector. Yet, as some European markets have proven, draconian measures may not have the desired outcome, and this is precisely the case for countries such as Portugal and Norway.

For example, by strengthening its gambling regulations, Norway saw an uptick in the black market. As a result, more than 66% of all money wagered is with illegal, unregulated operators. Another example is Portugal where the share of money that flows to unlicensed operators is estimated at 31%.

In that line of thought, the UK government must find the right balance between unintrusive restrictions and checks that help combat problem gambling and harm, while not creating unnecessary obstacles to gamblers who enjoy the activity responsibly. Besides striking the right balance, the BGC supports the idea of implementing stable taxation as a way to reduce the share of the black market.

While proactive measures, effective collaboration between lawmakers, regulators and gambling operators is one way to achieve this, the government can also dedicate further efforts to combat problem gambling and harm. Such can include additional education programs that teach young adults about the dangers of casino gambling and sports betting.

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