Economic Impact of British Racing 2009 Contents

Foreword 2

Executive summary 4

Introduction 8

Section 1: Overall economic impact Overall economic impact 10 Racing’s cash flow 12

Section 2: Economic factors Employment 14 Capital investment 16 Racing’s tax contribution 18

Section 3: Racing’s participants and customers Racecourses 21 Attendances and racegoers 24 Owners 27 Trainers 30 Breeders 32 Betting 34 Broadcasting 37

Section 4: International comparisons International comparisons 38

Section 5: Sporting, leisure and rural context Rural context 40 Local aspects 43 Racing’s position within the sports market in Britain 44 Leisure comparisons 46

Report preparation, methodology 48 and limitations

Glossary 49

Feature articles Ffos Las 17 Haydock Park 23 Lambourn and the North Wessex Downs 31 Point-to-Point 41

This Report has been written in general terms and therefore cannot be relied upon to cover specific situations; application of the principles set out will depend upon the particular circumstances involved and we recommend that you obtain professional advice before acting or refraining from action on any of the contents of this publication. Deloitte LLP would be pleased to advise readers on how to apply the principles set out in this publication to their specific circumstances. Deloitte LLP accepts no duty of care or liability for any loss occasioned to any person acting or refraining from actions as a result of any material in this Report. Further details covering the scope and limitations of our report, its use and our legal responsibilities are set out on page 48.

© Deloitte LLP. All rights reserved.

Graphic Design: www.heliographic.co.uk Photography: Dan Abraham; www.racingfotos.com · Trevor Jones; Trevor Jones Thoroughbred Photography britishhorseracing.com ECONOMIC IMPACT OF BRITISH RACING 5.7m £3.4bn Attendance at 1,423 fixtures Total direct and indirect expenditure of British Racing 18,600 FTE employees of the core British Racing industry Perth

Musselburgh Hamilton Park Kelso Ayr 15,349 Newcastle Average number of horses in Hexham training during the year £450m+ Carlisle Sedgefield Net expenditure of Catterick Redcar owners on training fees Cartmel Middleham Thirsk and horse purchases. Ripon Malton Wetherby Beverley £325m York Pontefract Tax contributed by British Racing Aintree Doncaster Haydock Park Market Rasen Chester Southwell Bangor-on-Dee Nottingham £5.5bn+ Uttoxeter Gross win generated by British Great Yarmouth Wolverhampton Leicester betting operators from British Fakenham Racing in the last five years Ludlow Warwick Huntingdon Towcester Worcester Stratford-on-Avon Newmarket Hereford Ffos Las Cheltenham Great Leighs Chepstow Lambourn Windsor Newbury Kempton Park Bath Folkestone Ascot Epsom Downs Wincanton Sandown Park Lingfield Park 100,000+ Plumpton Taunton Goodwood Brighton Direct, indirect and associated Salisbury Fontwell employment of British Racing Exeter £1.05bn Newton Abbot Direct expenditure of £706m core British Racing Five year capital expenditure of British Racing Racecourses Training centres Note: All figures refer to 2008, unless otherwise stated

1 Foreword

The tax revenue from Racing amounts to Understandably, the recession is having an some £1.5 billion over the last five years, effect on British Racing. The first half of with capital investment of over £700m in 2009 has seen indications that there are the same period. We have seen a areas that need close attention. These compound annual growth rate of 6.3%, include declines in the numbers of horses in a rate in excess of UK economic growth. training and owners, certain racecourse revenues under strain, and the bloodstock This report has again focused on the market facing a challenging period. It is national metrics, but also emphasises the likely that things will get worse before they local impact of our sport: the benefits of get better. It is therefore essential that all the Nic Coward – Chief Executive, Ffos Las racecourse are being enjoyed by a constituents of British Racing work closely British Horseracing Authority new rural racing community in West Wales, together to find innovative ways of while a course such as Haydock Park in the mitigating the recession’s impact on the One of the British Horseracing Authority’s urban North West is a significant contributor sport. These developments also highlight many roles is to measure and thereby to its very different region. the need for joined-up planning and demonstrate the sport’s importance to as implementation right across the sport. wide an audience as possible. The report also touches on trends that are not so favourable. The challenge to hold our My thanks go to all of those that have A key measure is the contribution we make place in a highly competitive environment is contributed to this study, and to the project to the British economy: the hard facts that brought more sharply into focus by the team behind it for their diligence. I hope you lie behind a sport unrivalled in reputation current recession. will find it useful and informative, and, most around the world, with a rich heritage, importantly, proof of both the importance of iconic events and year round entertainment One factor that emerges clearly throughout British Racing, and the need for constant for many millions. these pages is the role of racehorse owners vigilance to ensure that it stays that way. as the biggest investors in the sport. Their Racing is part of the country’s social fabric, expenditure on training fees and related and makes an enormous contribution to a spend is largely going directly into the rural wide variety of communities. economy. When you look at comparisons with other countries, those with a system This report seeks to quantify that impact, based on pool betting, this expenditure is and to draw some conclusions for the future. also operating as a cross-subsidy, measured in the tens of millions of pounds, The last Economic Impact report, published to the owners of the commercial in summer 2006, has proved an invaluable businesses that operate around the sport. tool in making Racing’s case. It showed for the first time in a decade just how much the This report shows that we have diverse sport generates for the economy. However, revenue streams and significantly less things change, and the pace of change is reliance on betting income than other particularly fast in some of the dynamic nations, but this does not alter our sectors of the economy in which we continuing view that our return from betting operate – leisure, betting, the media and operators has failed to reflect our true value. luxury markets. More than this though, it is vital that we get this relationship between Racing and The findings of this report are striking. Racing Betting right, so the sport can properly plan remains, by a clear margin, the country’s for the future. Britain remains the leading second biggest sport after the modern stage for the thoroughbred racehorse. commercial and social phenomenon that is football, with core industry expenditure now These figures show apparent strength, and exceeding £1 billion per annum and a total there are a great many enduring success economic impact of £3.4 billion. stories behind the statistics.

2 ECONOMIC IMPACT OF BRITISH RACING

Our Report describes a sport that has seen However, a key challenge will be for Racing the benefits of its substantial investment in to find ways of increasing the profile of the improving facilities for racegoers, next tier of fixtures – a challenge the participants and horses. In particular extensive rebranding of Racing project run racecourses’ investment of over £550m in by Racing Enterprises will take up. five years has been a key factor in their strong revenue growth. Other sectors such Many of the metrics we discuss in the as trainers and breeders have also invested Report for 2008 are likely to experience and Britain now has some of the very best declines in 2009, but we are confident that equine facilities in the world. the sport has the ability to bounce back Dan Jones – Partner in Charge, once economic conditions improve. It will be Sports Business Group at Deloitte The Report illustrates both the scale and important that Racing does so in a way that diversity of employment in British Racing. In it becomes stronger, notably by finding ways We were delighted when the British total there are over 100,000 jobs that are of attracting and engaging new participants Horseracing Authority asked us to directly in, indirectly supported by or whether they are racegoers, new racehorse update the results of our 2005 Economic associated with, British Racing. Many of owners or commercial partners. Impact of British Racing Report. Our these are located in rural areas. Report focuses on the period up to and Away from the hard facts, our consultations including 2008, but we also comment on This Report clearly illustrates the wide have found the sport to be more unified, and 2009 developments where appropriate. variety of British Racing – from the hugely one increasingly able to speak with one public popular grass roots racing that is Point-to- voice. The continuation of this attitude will Even before our 2005 report, the Sports Point, to the hosting of many of the world’s be critical as the challenges brought about Business Group at Deloitte had sought top races and festivals. by the recession and wider social, economic whenever possible to tell Racing’s story – and technological changes are faced. namely being the nation’s biggest sport Our work in the Sports Business Group at after the dominant sport that is football. Deloitte has exposed us to the During the course of our research we have Furthermore we have tried to communicate consequences of the global economic consulted with individuals from over 20 Racing’s unique combination of “pure” downturn on many sports. While sport is organisations drawn from every sector of the sport, the close inter-relationship with the certainly not immune from its effects we industry. We would like to thank everyone betting industry, deep links into the rural have seen an encouraging resilience across involved for their time, information, economy and the wider leisure offering that many sports. An intrinsic advantage sport responsiveness and, most of all, their influence the decision to go racing. This has, and which Racing has more than most, candour. Our consultations were conducted Report provides a fuller narrative behind the is the passion and commitment of its core in a spirit of openness and involved no little headlines of that story. followers and participants. The decision not debate – the perfect conditions for those of to renew a season ticket/membership or us who love to talk racing! sports channel subscription, or to withdraw from racehorse ownership is not taken We hope you enjoy reading the report and lightly. There are of course areas of particular that it proves a valuable tool. vulnerability, with pressure on corporate hospitality and sponsorship apparent in Racing, as it is in all other sports.

One impact of the recession is that we have seen a “flight to quality” with consumers increasing focusing on the country’s, and respective sports’, top events – although this is arguably just an extension of a trend which was already well underway. Racing has the advantage that is has a number of such events, with attendances at the top Alan Switzer – Director, festivals in 2009 generally holding up well. Sports Business Group at Deloitte

3 Executive summary

This report examines the economic impact Economic impact The impact of the core industry can be of British Racing. Key participants in Racing British Racing generated an estimated summarised as follows: are owners, racecourses, trainers, £3.39 billion in direct, indirect and induced breeders, jockeys, stable staff, racing expenditure in 2008 (up from £2.86 billion in • Racecourses generated expenditure of organisations, media and racing consumers 2005). In addition Racing’s estimated £361m by racegoers, corporate such as racegoers, punters and sponsors. £106m of capital expenditure generated customers and sponsors. further secondary expenditure of £211m, In addition to assessing its own economic resulting in a cumulative impact of £317m. • £99m was generated from horseracing’s impact this report positions British Racing in The breakdown of this expenditure is punters by the statutory 10% Levy the context of the British sports, betting, shown in Figure B below. applied to the profits of British betting leisure and rural economies. operators, and betting exchanges – paid Figure B: Summary of economic impact to the Levy Board. The report considers primarily the period up of British Racing – 2008 and 2005 to 2008 but given the challenging economic • Over £100m was generated from media climate that developed in late 2008, also 2005 2008 channels – primarily broadcasting through discusses, where appropriate, £m £m terrestrial services, Racing’s two developments in 2009 to date. dedicated horseracing TV channels and Core industry expenditure picture sales to Licensed Betting Offices. Figure A sets out several key measures of Racecourses 262 361 British Racing. Each is discussed below Media 88 104 • Owners incurred direct gross expenditure and in the body of the report. Levy 103 99 of £367m whilst receiving income of £92m Owners 200 275 through prize money and sponsorship. Figure A: Key measures of Racing – 2008 Breeding 217 207 This resulted in net expenditure of £275m (excluding horse purchases). Total economic impact of £3.39bn Total core 870 1,046 British Racing • The expenditure of the breeding industry, Off-course racing 180 222 primarily the 300 full time stud farms, was Core British Racing industry £1.05bn expenditure estimated as being £207m. expenditure Secondary expenditure The Racing industry’s core expenditure British Racing’s capital £106m Business to business 851 1,002 (excluding capital expenditure) has expenditure Consumer 955 1,123 increased by £176m since 2005, and Total secondary 1,806 2,125 represents a Compound Annual Growth British Racing’s tax contribution £325m Rate of 6.3%. Growth has primarily been Total Economic Impact 2,856 3,393 driven by higher owner contributions due to Core industry employment (FTE) 18,600 of British Racing 1 increased volumes of horses and cost inflation, and racecourses and media British betting industry’s gross £1.05bn Capital expenditure 565 317 companies successfully growing revenues. win on British Racing Overall Economic Impact of 3,421 3,710 Average no. of horses in training 15,349 British Racing inc capex Employment Figure C shows employee numbers in the Number of owners 9,539 Note 1: Excluding capital expenditure. core industry, betting industry and secondary Source: Deloitte analysis. areas created as a result of Racing activity, Total racecourse attendances 5.7m including those directly related to Racing and The core within construction reflecting the very Expenditure comprises £1,046m by the significant level of capital expenditure. Source: Deloitte analysis. ‘core’ Racing industry, £222m off-course expenditure by racegoers, and £2,125m of The 18,600 full time equivalent (FTE) jobs secondary expenditure as the initial created by the core industry are made up of expenditure of the core industry filters over 14,000 full time, 8,000 part time and through the economy. 2,500 FTEs from raceday activities. 4 ECONOMIC IMPACT OF BRITISH RACING

Figure C: Direct, indirect and associated Figure D: Racing industry capital Figure E: Total tax contribution employment of British Racing expenditure – five years to 2008 by type – 2008

Total Total Total 100,100 £40m £706m £325m 6% £50m £59m 18,600 7% 18% 26,000 £60m 700 8% £0.5m 2,800 1% £42m £155m 13% 48%

£68m 52,000 £556m 21% 79%

Core industry Betting Racecourses Trainers Breeders Others Gross profit on betting National insurance Directly related horseracing employment VAT PAYE Corporation tax Note: Capital expenditure by other bodies includes spending by Construction Secondary employment Weatherbys, Racetech and Tattersalls. Source: Deloitte analysis.

Note: Secondary employment is calculated by dividing total Source: Deloitte analysis. secondary expenditure generated within the economy as a result of racing activity by the national average productivity (revenue) per employee. with an estimated £155m payable by British Capital expenditure betting operators on gross win in 2008 Source: Deloitte analysis. Racing’s capital expenditure is estimated at (over £800m in the last five years). £706m over the five years to 2008. After The largest proportion of employees are football, this is the highest expenditure by Other major tax contributors are the involved in the production and training of any sport in Britain. racecourses and racecourse caterers, who racehorses, with over 9,500 full-time and contribute significantly to the total VAT around 7,400 part-time employees involved Racecourse expenditure on facilities payment of £42m and pay employment in this activity, predominantly in rural areas. accounted for around 80% of total taxes of £30m. Racecourses and their direct service expenditure during this period. The providers, notably caterers, are the next expenditure was primarily directed at The employment tax contribution made by the largest employers. improving racegoer, participant and equine breeding and training sectors, whilst relatively facilities at existing racecourses. In addition, modest per employee, is still significant in Further activity within the economy as a two new racecourses – Great Leighs and aggregate at an estimated £68m. result of the Racing industry sustains Ffos Las – opened in 2008 and 2009. another 29,500 jobs, of which 2,800 are in Britain boasts some of the best activities directly related to the racing racecourses in the world to match the Racecourses industry such as vets and farriers. quality of its racing. Revenues for the 60 racecourses open in 2008 totalled £456m. There are an estimated 52,000 FTE jobs in The other major spenders on facilities within the onshore betting industry, the large the industry are trainers and breeders, with Overall revenues for racecourses are a majority in Licensed Betting Offices estimated combined expenditure of £110m combination of central distributions from the (“LBOs”) in Britain. Employment levels have over the period. Levy Board and internally generated revenues increased markedly since 2005 owing to an from raceday admissions, media rights, increased number of LBOs and longer LBO sponsorship, and other commercial activities. opening hours. The considerable proportion Taxation of gross win provided by Racing indicates British Racing business contributed at least Betting revenues received by racecourses, that a significant proportion of these jobs £325m in tax in 2008 and over £1.5 billion either directly (through on-course betting are supported by the sport. in the last five years. and SIS and Turf TV media payments) or indirectly (through the Levy), totalled Betting on Racing’s provides the largest approximately £150m. proportion of tax generated for Government,

5 EXECUTIVE SUMMARY

Figure F: Racecourse revenues Given the large and varied inventory available There was an average of 15,349 horses in to sponsors there is scope for racecourses training in 2008, up 16% from 2002 (up 5% 2005 2008 to increase their existing £20m sponsorship from 2005). £m £m revenue by broadening the sponsorship base including tapping into those economic The majority (c.80% in 2008) of owners are Controllable revenue sectors – such as telecoms, alcoholic involved in ownership of 1-2 horses. Admissions 98 120 beverages and the financial sector – that are However, at the other end of the spectrum Catering (raceday) 80 100 active in the sports sponsorship market. the number of owners with a string of 21 or On-course betting 11 9 more has increased from 64 in 2006 to 92 Media 42 57 in April 2009. Many of these owners are Sponsorship 16 20 Attendances overseas nationals and by this route inject Other commercial 51 61 British Racing has a diverse and busy fixture substantial funds into British Racing and the list, with 5.7m people attending meetings British economy. Total controllable 298 367 staged across all but three days during 2008 (an average of 4,029 per fixture). In total owners (including Point-to-Point Levy distributions 89 89 owners) are estimated to have incurred • Attendances have dipped marginally since costs of £367m for horses in training – the Total revenue 387 456 their 6m high in 2004. However, while mid majority from training fees of £253m but week attendances have declined, more with additional costs arising from vets and Note: See page 21 for details of preparation. people than ever in the modern era attend farriers, transport, race entry and BHA Source: BHA; Racecourse financial statements and BHA returns; weekend (including Friday) fixtures. registration fees, jockey costs and Deloitte estimates. insurance. Owners receive around 80% of • Racing is increasingly combining total prize money, equating to £85m in However, racecourses still generated over entertainment with the core racing product. 2008 and generated £7m of sponsorship, £300m from non betting activities in 2008, an Over 250,000 people attended fixtures resulting in a net cost of £275m. increase of around £50m (20%) since 2005. with a significant music element in 2008, and Ladies days are extremely popular at Once the £182m breeders’ expenditure is The £120m in admission revenue equates both a national and more local level. added owners injected more than £450m to an average £25 (including VAT) paid by into Racing in 2008. A large proportion of the c.5.7m racegoers. This average masks • The top ten race meetings in 2008 this expenditure goes into the rural economy. a broad range of prices from higher priced attracted 1.1m attendees and provided iconic fixtures and corporate tickets, to free four of the top ten best attended sporting entrance at Towcester and for all children events in Britain. Trainers under the age of 16 to the vast majority of There were 592 licensed trainers in Britain meetings at all racecourses. with a further 126 permit holders and 276 Owners trainers of hunter chasers. The sheer scale of catering operations at Racehorse owners are the single biggest racecourses is illustrated by the partnership contributors to the funding of British Racing Trainers’ revenue exceeded £250m in 2008. between Jockey Club Racecourses and the through both their purchase of horses from The economic impact of this revenue is Compass Group announced in March breeders and ongoing training and racing subsumed in the owners’ expenditure 2009, which is projected to generate expenditure paid to trainers and jockeys and above as this is an internal transfer of value £500m in revenue over the next ten years. supporting industries such as vets, farriers within the industry. and horse transport companies. The 60 racecourses’ aggregate revenue was Trainers’ largest expenditure is the wages more than £90m greater than the next In 2008 there were a near record 9,539 and salaries of c.5,600 full time and c.2,400 largest sport, after football, in Britain – Rugby owners, of which 6,994 engaged in some part time employees (including the self Union. Racing has, like all other major sports, sort of shared ownership arrangements to employed and the trainers themselves) of been unable to keep pace with football’s reduce costs including partnerships and £130-140m. stellar growth rates but growth rates of racing clubs. Around 40,000 individuals are racecourses’ controllable revenue are similar estimated to have an involvement in horse or higher than most of its other sporting rivals. ownership in some way.

6 ECONOMIC IMPACT OF BRITISH RACING

Breeders Nonetheless since 2003/04 the British Racing’s rural and local impact The British breeding industry is a major betting industry’s gross win from British Racing is a major employer in the rural global player, producing the sixth highest Racing has been over £1 billion each year, economy. Given the decline in many other number of thoroughbred foals each year. and reached a record high of £1.2 billion in sectors of agriculture, Racing’s importance There are around 300 full time stud farms in 2007/08. However, this fell back to to the rural community has increased and Britain, and in excess of another 4,000 part £1 billion in 2008/09 owing, in part, to this trend is likely to continue. time breeders. reduced ‘high roller’ profits and the movement offshore of several former While a national industry, Racing is Given the combination of a lack of country British based sports betting internet and particularly engrained in the fabric of some specific vendor data for breeder public telephone operators. regions of Britain, and is central to the sales, private sales and the importance of economy in major and historic training home bred racehorses, the economic The Betting industry has therefore regions such as Newmarket, Lambourn and impact of the breeding sector has been generated over £5.5 billion in gross win Malton. The depth and spread of the estimated by building up breeders’ from British Racing over the last five years grassroots of Racing are illustrated by over expenditure rather than using sales values. to 2008/09, of which £513m was paid to 600,000 people attending the 200 plus Racing via the Levy. Point-to-Point fixtures each year and 3,800 Total expenditure of £207m was estimated registered horses involved. in 2008 including auctioneer fees, with the wage cost of the estimated 4,000 full time Broadcasting Racing can also have a major impact on and 5,000 part time employees the largest British horseracing benefits from extensive more urban areas, illustrated by York cost (£113m). broadcast coverage, through both terrestrial racecourse accounting for 8% of all visitors services – BBC and Channel 4 – and two to York in a year and busy raceday/non- In terms of sales values, between 2002 and dedicated racing channels, At The Races raceday courses, such as Haydock Park 2007 the annual aggregate value of public and Racing UK, which between them attracting visitors to the areas all year round. sales in Britain increased by over 80% from broadcast live every race staged in Britain. £164m to a record £302m driven by a Racing therefore has the most broadcast combination of higher volumes and average time of any sport in Britain. International standing price. These increases reflected the global British Racing is highly regarded across the boom in bloodstock markets. However, the The Grand National is consistently placed in international racing market. global economic downturn has resulted in the top 10 most viewed sports events in bloodstock values falling markedly. In 2008 any given year, often attracting more than The quality of British Racing is illustrated by British public sales declined to £212m 10m viewers and substantial audience the fact that British Racing provided around and further falls have occurred in the first shares (67% in 2008). 16% of the world’s top ranked Flat half of 2009. thoroughbred racehorses and staged seven The two dedicated racing channels of the world’s top twelve rated Flat races operate different business models, over 2006-08. Betting both of which were profitable in While British Racing remains the 2008, enabling them to pass Britain, along with Ireland, is the dominant single biggest sports betting product substantial revenues on to their global force in Jump racing. of British betting operators, and the respective racecourse partners. reason many people visit betting Britain operates a different Racing funding shops, its relative share of gross The reputation and quality of model from many other countries, notably it win has declined from 45% in British Racing is is much less reliant on betting. Around 1% of the year to 31 March 2004 demonstrated by its global betting turnover of British Racing is paid back (2003/04) to less than 30% broadcasting reach. Both to the sport, a significantly lower percentage in 2008/09 as bookmakers At The Races and than in other major racing nations. have diversified their Racing UK product are product offering, notably broadcast to over 20 through Fixed Odds countries, with new Betting Terminals and countries being added football betting. each year.

7 Introduction

Background The report focuses on the period up to and • The data included in this report has been As the sport’s governing and regulatory including 2008 but, where appropriate, gathered through a combination of: body the British Horseracing Authority individual sections comment on (“BHA”) commissioned the Sports Business developments in 2009, particularly those - extensive consultations with Racing’s Group at Deloitte to perform an assessment influenced by the recession. stakeholders – over 20 consultations of the contribution of the British Racing and were conducted; Breeding industries (“British Racing” or Where meaningful the report also “Racing”) to the British economy. comments on key movements over time, - data supplied directly by Racing’s particularly since the 2006 report, as well as stakeholders; This report combines analysis of the more the 2008 position. traditional measures of the activity levels, - results of the 2008 Racehorse Owners and ultimately the health, of British Racing – Association survey in relation to the such as racecourse attendances, horses in Methodology training costs of racehorse owners; and training, number of owners, prize money Page 48 sets out in detail the methodology, and bloodstock auction values – with key assumptions and parameters of the study. - additional primary research and economic metrics including total The following points are particularly important: analysis performed by Deloitte. expenditure, employment, capital investment and the tax contribution of the sport. • The study measures the economic activity • The internal flows between Racing’s stimulated directly by the expenditure of participants are relatively complicated, and This report updates the analysis included in participants in British Racing (e.g. arguably are of much less relevance to the 2006 Economic Impact of British breeders, owners, racecourses, trainers those outside of Racing. Hence, wherever Racing report (which covered the period and others), and racing consumers possible this study simplifies matters to up to 2005) which the British (racegoers, bettors etc), which focus on the flows into and out of Racing. Horseracing Board, the BHA’s then flows through the predecessor, commissioned economy to create activity in • The study focuses on 2008 wherever Deloitte to prepare, and other non-related possible – as adjusted, where which has been an industries. appropriate, for “exceptional” factors invaluable tool for the during the year, such as the abandonment Racing Industry. The of York’s Ebor meeting in August. intervening period has initially seen Figure 1 illustrates the separate record figures in components when determining the many parts of the economic impact of an industry. Industry, but with some declines in • Core industry – primarily including 2008 – in part due expenditure by, or generated from, to the worsening Racing’s consumers, racecourses, economic climate owners, trainers and breeders but also in Britain and incorporating organisations such as the globally. BHA, HBLB, At The Races, Racing UK, Weatherbys, Tattersalls, etc.

• Other direct impacts – mainly off-course raceday expenditure by racegoers on such goods and services as food and transport.

8 ECONOMIC IMPACT OF BRITISH RACING

Figure 1: Components of Economic Impact

Indirect Impacts

Other Direct Impacts

Core Industry

Raceday

Multipliers

Source: Deloitte analysis.

• Indirect and induced impacts – Report structure Racing is unique in the quantifies the ‘ripple effect’ as the direct This report is structured into five key expenditure by the core industry sections as described below: British economy in its subsequently flows through the economy combination of “pure” via further Business to Business • Section 1: Assesses the overall economic expenditure (e.g. business spending on impact of Racing via the aggregate level sport, the wider leisure suppliers) and consumer expenditure of expenditure by its participants, industry, a close (e.g. recipients spending wages consumers and indirect impacts. elsewhere in the economy). relationship with the rural • Section 2: Discusses Racing’s aggregate • Betting industry – the impact of the levels of employment, taxation and capital economy and strong betting industry is primarily addressed via investment. links with the betting the statutory levy on British betting operators’ gross profits and betting • Section 3: Considers the individual industry. exchanges’ commission on British impact of Racing’s key sectors and horseracing as paid to the Horserace examines the appeal of Racing for its Betting Levy Board (‘Levy’), and customers as demonstrated by levels of A number of ‘Feature articles’ have been subsequently distributed amongst attendances and broadcast coverage. included in appropriate Sections which Racing’s participants, primarily owners, examine in more detail particular aspects of through prize money. • Section 4: Examines British Racing’s Racing, including illustrating the important standing within the global racing industry, role Racing plays in local economies. This report also sets out the total amount including its reputation for high quality of gross win of the British betting industry and varied racing. from betting on British Racing as this is expenditure of racing bettors. It also • Section 5: Racing is unique in the British considers the direct taxation generated economy in its combination of “pure” from betting on horseracing and the total sport, the wider leisure industry, a close employment levels in the betting industry. relationship with the rural economy and strong links with the betting industry. This section sets Racing in this context by making appropriate comparisons with rural/other industries, other sports and leisure activities.

9 Overall economic impact

Industry size Figure 2: Expenditure of Racing’s participants British Racing’s economic impact has been estimated based on the direct expenditure Participant Industry cash inflow (equivalent to assumed expenditure) of its participants and the associated expenditure of racing consumers. In Racecourses The expenditure generated by Britain’s 61 (60 open in 2008) racecourses and 117 Point-to-Point courses from the expenditure of racing consumers – namely the determining the economic impact of any expenditure of: industry it is normal to eliminate any double • Racegoers counting of expenditure in order to derive - Raceday admission, membership fees, racecards, etc. the net injection of expenditure created by - Catering spend (actual spend of racegoers) - Corporate attendees the industry. This is particularly important for • Sponsors and advertisers the Racing industry given the often complex, • On-course betting – commission paid by Tote and on-course bookmakers fees and two-way, flow of funds between the • Non raceday attendees – conferences, banquets, on site hotels, etc. participants of the industry – one All racecourse cash flows are exclusive of VAT, except for catering and admission participant’s expenditure is often another income, which include VAT. participant’s income. The definition of Media The expenditure of broadcasters and viewers on British Racing via: expenditure will vary between participants • Broadcasters – payments from terrestrial channels and bookmakers (SIS and Turf TV) and consumers but essentially it refers to • Racing UK and At The Races – through subscriptions (for Racing UK), overseas sales of picture rights, betting commission, etc. new cash injected into the Racing industry by each ‘level’ of the industry. The amounts received by racecourses in media money (£57m) is less as Racing UK and At The Races distribute revenue after deducting their costs. An estimate of non circulation Racing Press revenue is also included in this total. Figure 2 opposite sets out details of each participant’s expenditure in order to estimate Owners Owners’ expenditure on racehorses takes two main forms: • Ongoing operating expenditure on keeping and training horses – training fees the overall economic impact of British Racing. (including trainer fees, vet costs, transport etc), jockey costs, entry fees etc • Capital cost of buying racehorses Owners’ expenditure on buying horses is incorporated via breeders’ expenditure. Core Industry • Racing consumers (racegoers, broadcast In aggregate, owners recoup a proportion of their ongoing expenditure on horses from prize money. A large proportion of prize money being paid by the Levy and viewers, sponsors and on-course bettors, therefore is internal to the industry. It is therefore necessary to deduct prize money etc.) injected almost £500m into the core from owners’ gross expenditure to get their net investment into British Racing. Racing industry, primarily through race- The training and keep costs of c.3,750 Point-to-Point horses are also included. courses but also broadcasting channels. Breeders There are an estimated 300 full stud farms and c.4,400 other breeders in Britain generating revenue primarily from the sale of horses (via public or private sales). • The gross win of the British betting industry from betting on British Given the lack of country specific vendor data for breeder sales, and the importance horseracing (i.e. the amount lost by of home bred racehorses, the economic impact of the breeding sector has been estimated based on breeders’ expenditure. bettors) was over £1 billion in 2008. A 10% (as the standard rate) statutory levy Additionally, over £25m was paid to public auctioneers in commission. on this gross win is paid to Racing. The Off-course Over £1 billion of gross win (the amount lost by bettors) was generated from betting remaining c.£900m plus includes betting on British racing by the betting industry. The statutory Levy is applied to betting c.£155m gross profits tax with the operators’ gross profits on British horseracing – generally 10% – and generated £99m in 2008 which was paid to Racing. Only the Levy element of gross win has balance being betting operators’ profits. been included within the core Racing industry figures. Off-course The on-course expenditure of racegoers is captured within racecourse revenue. • Owners incurred direct gross expenditure expenditure of £367m but received £92m back in In addition, the c.5.7m annual racegoers incur additional expenditure costs on travelling prize money and sponsorship, resulting in to the racecourse, accommodation, food and drink outside the racecourse and other a net expenditure of £275m. However if local spending. This expenditure has been directly generated by the decision to go racing hence, while not part of the core industry, is still generated by Racing. the expenditure of breeders – £182m – is assumed to be ultimately incurred by Off-course expenditure also includes estimated total Racing Press expenditure of £34m (arising from reader purchases). owners, via the purchase of horses, gross owners expenditure was c.£550m, with a Source: Deloitte analysis. net expenditure of £457m.

10 ECONOMIC IMPACT OF BRITISH RACING SECTION 1

• In total Racing’s consumers, owners and Figure 3: The flows into Racing from its participants and consumers – 2008 and 2005 bettors spent c.£2.2 billion on Racing in 2008 (£2 billion – 2005). Total Racing consumers Owners Off-course expenditure (Racegoers, corporates, viewers) (including expenditure on bettors on Racing trainers and jockeys) • The expenditure of the core Racing £2.2 billion Gross win (£2.0 billion) £1,050m industry was £1,046m in 2008, a £176m Off-course Racecourses Media Direct owners Breeding (£1,088m) expenditure £361m £104m Gross £367m (£289m) expenditure (20%) increase from 2005. £222m (£262m) (£88m) Net £275m (£200m) £207m £99m levy (£180m) (£217m) to Racing (£103m) • It is important to note that whilst trainers,

jockeys and stable staff are not shown Core British Racing £1,046m (£870m) separately in Figure 3, this is merely a Capital expenditure function of the expenditure method used Racing £106m (£189m) to assess the economic impact – as not Secondary expenditure B2B £1,002m (£851m) Secondary expenditure only do they play a vital role in the Consumer £1,123m (£955m) B2B £115m (£205m) industry, and are certainly within the core, Note: Figures in brackets Total £2,125m (£1,806m) represent the equivalent Consumer £96m (£171m) but they also provide an economic expenditure in 2005 which Total £211m (£376m) have been reclassified Total direct and stimulated impact on the economy in their own right. where appropriate. expenditure Total £317m (£565m) Their expenditure is effectively included £3,393m (£2,856m) Source: Deloitte analysis. within that of owners.

separately. The initial capital expenditure is Gross Value Added Secondary expenditure estimated to generate a further secondary Total expenditure generated by the industry The core industry expenditure of £1,046m, expenditure of £211m, resulting in total is relevant in assessing the contribution augmented by £222m of off-course expenditure of £317m in 2008. made to the British economy. However, expenditure, generates a further using expenditure alone does not £2.12 billion of expenditure in the economy acknowledge the fact that no value is added as the initial expenditure filters through the Total expenditure by the sourcing of physical inputs alone. It is economy. Business to Business Excluding the impact of capital expenditure, what the industry does with those inputs expenditure made up £1 billion of this total, British Racing therefore generated that contributes to the economy, rather than with the balance of £1.12 billion generated £3.39 billion in direct, indirect and induced simply purchasing the inputs. by consumer expenditure. expenditure in 2008 (an increase from £2.86 billion in 2005). Including capital In simple terms, expenditure can be This means that for every £1 spent in the expenditure increases the total expenditure adjusted to exclude intermediate demand core industry and on off-site expenditure, an to over £3.7 billion. so that only the real or gross value added additional £1.68 is generated in secondary by stakeholders is included in the analysis. expenditure by linkages in the economy. The individual movements between 2005 An alternative measure of industry and 2008 are discussed in the respective contribution – and the one which can be sections but it is instructive to note that the most readily compared to national indicators Capital expenditure Compound Annual Growth Rate of core such as Gross Domestic Product (GDP) – is It is usual practice to exclude capital British Racing expenditure of 6.3% was given by Gross Value Added (GVA). expenditure when assessing the economic primarily due to higher racehorse owners’ impact of industries at a particular point in and racegoers’ expenditure. To obtain this estimate it is necessary to time. However, since 2000 Racing has adjust expenditure to isolate the value engaged in a programme of ongoing annual added in terms of operating profit and investment, which although expected to wages paid, based on data from the Office decline in the next few years, will still be for National Statistics. sizeable. Racing’s contribution to the construction industry is important given the On this basis, the GVA associated with the impact of the downturn. The impact on the £3.71 billion in direct capital and secondary British economy of the £106m capital expenditure is found to be approximately expenditure in 2008 is therefore shown £1.73 billion (£474m from the core industry).

11 Racing’s cash flow

The assessment of the economic impact of Figure 4: Racing’s key cash flows Racing as set out on pages 10 to 11 Racing cash flows in Racing cash flows out focused purely on the flows into Racing, but it is also instructive to examine the outflows Raceday £141m British Racing Prize Money £106m Total Industry Total from the industry. Figure 4 sets out inflows inflows outflows Catering £129m Wages £266m and outflows for participants and Racing £1,130m Racecourses £1,138m (take home) organisations set out in the centre of the Media £84m BHA chart – all other core Racing participants HBLB Capital expenditure £88m Jockey Club have been excluded owing to unavailability Other £107m Racetech Commercial Caterers £70m of robust inflow and outflow information. Weatherbys Several high level assumptions have been Tattersalls Gross Owners’ £347m Owners Other operating £324m required (see notes to Figure 4), hence the operating spend Trainers expenses cashflow should be regarded as illustrative Breeders Owners’ £182m Jockeys Horse costs £100m only. Nonetheless it provides a valuable horse purchases insight into Racing’s cashflows. Repayment £15m Levy Receipts £99m to financiers

Net movement Inflows Financiers £38m (£8m) Interest £20m

• Raceday – consists of racecourse Interest £4m Dividends £5m admission receipts from the 5.7m Basis of preparation: Taxation £144m racegoers (excluding Point-to-Point) and 1. Movements in working capital have been assumed to be cash neutral. on-course betting (commission only). 2. The impact of capital credits taken by racecourses has been assumed to be cash neutral. Levy Board loans are also excluded from the analysis as these loans are assumed to have been made from cash already in the industry, or the £99m Levy receipts for 2008. 3. All flows exclude VAT except raceday admissions and catering, with the implicit assumption • Catering – after admissions, catering is that all other participants can reclaim VAT. the highest area of expenditure for Source: Deloitte analysis. racegoers. The £129m represents the VAT inclusive spend on the racecourse, however racecourses typically outsource • Media income comprises broadcaster • Excluding horse purchases, racehorse their catering operations and are paid a plus BAGS/SIS and Turf TV payments to owners spent a gross £347m on Racing commission by the caterers (hence the racecourses, and revenue generated by in 2008. £70m shown separately as an outflow). Racing UK and At The Races (which will be higher than that passed on to the • As explained in more detail in the racecourses). Breeders section, the expenditure of the breeders has been used as a proxy for • Other commercial income of £107m is owners’ expenditure on purchasing primarily generated by the racecourses horses hence in the cash flow model the (£80m including sponsorship and non- inflow is shown with separate raceday activities) but is augmented by components of expenditure in the revenue from other Racing bodies. appropriate categories.

• Total 2008 levy receipts of £99m have been estimated by pro-rating the fiscal years 2007/08 (i.e. to March 2008) receipts of £115m and 2008/09 receipts of £93m and hence will not correspond to either fiscal year. The prize money element of levy expenditure is based on actual amounts paid, with other payments, primarily integrity payments, based on a pro-rata calculation in line with the receipts methodology above.

12 ECONOMIC IMPACT OF BRITISH RACING SECTION 1

The primary aim of many parts of the industry is not a financial return on investment hence cash inflows are generally reinvested in horseracing for the good of the sport.

• External financiers injected £38m in 2008. The majority is due to the funding of Jockey Club Racecourses’ capital expenditure, but the total also includes estimates for Great Leighs and Ffos Las funding.

• Taxation comprises the VAT element of The Levy Board plays an important role in Outflows raceday admissions and catering and this respect by the provision of zero • Prize money – c.80% of the £106m prize employment taxes for included entities, interest loans for capital development – money was received by owners. The see page 18 for a fuller discussion of £43m of loan finance was in place as at balance is distributed widely within the Racing’s tax contribution. March 2009. sport, with £14m going to trainers (including £6m for their stable staff) and • The capital expenditure of £88m primarily • Dividends of £5m were paid in 2008, £8m to jockeys. This prize money is consists of the racecourses’ spend but consisting of £2m paid by Arena Leisure considered a valuable additional revenue also includes an estimated amount to plc (the only racecourse dividend), with source to Racing participants. cover trainers’ and other Racing bodies’ the remaining £3m by Tattersalls and 2008 expenditure – see page 16 for Weatherbys. Net interest and dividends in • Total wages, including employers’ further discussion of Racing capital total represented less than 3% of National Insurance and estimated expenditure. operating cash inflows of the industry. trainers’ profits, of £371m were paid to approximately 17,000 employees (FTEs). • Integrity costs – included within and Of this an estimated £266m was taken across a number of the outflows is a total Overall home by the employees after £105m of of £25m for the provision of integrity The total inflows of £1,130m compared PAYE and National Insurance was services to Racing. Maintaining the high with outflows of £1,138m resulted in an deducted. standards of integrity of British Racing – decrease in cash of £8m. The primary aim both in reality and in the racing of many parts of the industry is not a • Horse costs consist of veterinary, feed, consumers’ perceptions – is financial return on investment (hence the transport, farriers’ costs and others acknowledged by all in Racing as being low dividends seen) and cash inflows are incurred by trainers and breeders. critical to its continued prosperity. generally reinvested in horseracing for the good of the sport. • Other operating expenses include • Interest paid of £20m (mainly from racecourse raceday expenditure and racecourses) is relatively low given the As an example, in recent years operating operating expenses (£168m), trainers’ size of the industry, although it has profits generated by racecourses have been costs (c.£90m) and various Racing increased markedly from the £5m in 2005 used to help fund their extensive capital organisation overheads. primarily as racecourses have increased expenditure, in conjunction with external borrowings to fund capital expenditure. and Levy finance.

13 Employment

The extensive and complex nature of 700 jobs in the construction industry are • The core British Racing industry employs Racing means it supports significant levels currently supported by the significant level 14,100 individuals on a full-time basis. of employment in a range of economic of capital investment by British Racing. When part-time and raceday staff are sectors – from racehorse production to included, approximately 18,600 FTE jobs staging c.1,500 racedays to facilitating There is an intrinsic link between the Racing are generated. betting on racing. and betting industries, with an estimated 52,000 FTE betting operator jobs largely in • The largest proportion of employees are Figure 5: Direct, indirect and associated Licensed Betting Offices (“LBOs”) (2005 – involved in the production and training of employment of British Racing 42,000). Whilst LBOs handle activity related racehorses, with over 9,500 full-time and to other sports and betting activities in around 7,400 part-time employees Total 100,100 addition to horseracing, a significant involved in this activity. proportion of betting is on horseracing. 18,600 26,000 • Whilst racehorse owners are an integral

700 The growth in betting industry employment participant within the horseracing 2,800 has been driven by more LBOs opening industry, with over 9,500 registered and LBOs’ permitted opening hours being owners in Great Britain, it is assumed that significantly extended from 2007, they do not directly employ material particularly between September and March. numbers of people within the horseracing

52,000 The fixture list has expanded to meet the industry, who are not already captured in betting industry’s demands for evening other categories. racing in this period. Core industry Betting • There were 592 licensed trainers in Britain Directly related horseracing employment Figure 6 gives a breakdown of the total in 2008 and a further 402 permit holders Construction Secondary employment employees within the core British or trainers of hunter chasers. Trainers Racing industry. employ a wide range of support staff Note: Secondary employment is calculated by dividing total secondary expenditure generated within the economy as a result of racing activity by the national average productivity (revenue) per employee. Figure 6: Employees within the core horseracing industry in Britain

Source: Deloitte analysis. Employment Group FT PT Raceday Total (FTE) (FTE) The core Racing industry sustains over 18,600 FTE jobs. Core industry Trainers (including stable staff) 5,572 2,400 6,772 employment levels have remained broadly Breeders (Studs) 4,000 5,000 4,500 in line with 2005 levels once changes in Racecourses 1,833 850 2,683 estimation methods are taken into account Integrity and Governance 371 371 (see note to Figure 6). Weatherbys 306 306 Jockeys 527 527 The further economic activity generated On-course bookmakers 420 420 through Racing’s combined expenditure Tote (pool betting) 94 300 394 creates additional employment of Bloodstock auctioneers and agents 215 215 approximately 28,800 (excluding betting Media 533 533 industry and construction jobs). Caterers 700 600 900 1,900

Of this additional employment, around Total 14,131 8,000 2,470 18,621 2,800 individuals are employed in activities directly related to the horseracing industry Note: Breeders’ employment, as estimated by Thoroughbred Breeders Association, assumes 4,000 full time employees and 5,000 part such as vets, farriers, and horse time employees who spend on average a tenth of their time on breeding, hence 500 FTEs and 4,500 FTEs in total. This differs from the 2005 estimate of 3,000 full time, and 6,000 part time employees who were treated as being half FTE hence 6,000 FTEs. Trainer transportation. A further estimated 26,000 employment levels now include the trainers. are employed indirectly in non related Source: Breeders survey; British Racing Statistics 2008; Deloitte analysis. industries, as Racing’s expenditure flows through the economy. In addition around

14 ECONOMIC IMPACT OF BRITISH RACING SECTION 2

totalling around 5,600 full-time (including the trainers) and 2,400 part-time staff, ranging from stable grooms to blacksmiths and drivers.

• Of the 427 full-time jockeys, 121 have professional licences for Flat racing and 99 for Jump racing. The remainder have either apprentice or conditional licences. Jockeys are amongst the hardest working sports competitors in Britain, and for much lower financial rewards than in many sports. A further 100 valets, agents and others have been estimated to directly support the jockeys.

• Whilst racecourses employ over 1,800 full-time staff, numerous additional staff are employed on a raceday including to staff catering operations and by the Tote to assist in delivering on-course betting facilities. Raceday employees equate to 2,500 FTEs with many thousand individuals employed at the 60 racecourses in any given year and in excess of 5,000 people working on The largest proportion of course at the largest meetings. employees are involved • Racecourses have moderately increased in the production and their full-time staff since 2005 for a variety of reasons, including some racecourses training of racehorses, taking in house previously outsourced with over 9,500 full-time activities, notably catering, and increased non raceday activities. However, several and around 7,400 courses have reduced staff levels in 2008, influenced by the worsening part-time employees economic conditions. involved in this activity.

• Over 300 full-time staff are employed in the critical role of safeguarding Racing’s integrity primarily by the BHA but also by Racetech, SIS and directly at some racecourses. The sport’s central administrative body, Weatherbys, under contract to the BHA, employs another 300 people across its diverse operations.

• As Section 5 shows, Racing, after football, employs the most people of any sport in Britain.

15 Capital investment

Investment in facilities is vital to enabling the Figure 7: Racing industry capital Figure 8: Capital expenditure by British growth and sustainability of any sport. expenditure – five years to 2008 racecourses – five years to 2008

Total £m Total capital expenditure by British Racing £40m £706m 200 was £706m over the five year period to £50m 6% 7% 2008 – the highest level of investment of 154 165 £60m 8% 100 any sport in Britain, after football. 93 70 74 Racecourses’ expenditure represented the 0 2004 2005 2006 2007 2008 majority of the spending as would be expected for the principal shop window of Source: Company/group financial statements; Deloitte analysis. British Racing. However, trainers, breeders £556m and other Racing bodies all made sizeable 79% investments. Great Leighs and Ffos Las racecourses – Racecourses Trainers Breeders Others opened in May 2008 and June 2009 In total racecourses are estimated to have respectively – were the first new Note: Capital expenditure by other bodies includes spending by invested £556m over the five year period Weatherbys, Racetech and Tattersalls. racecourses to open since 1927. Great between 2004 to 2008, 79% of total capital Leighs received widespread praise for the Source: Deloitte analysis. expenditure by Racing. quality of its all weather racing surface. Financial difficulties forced it to cease racing The majority of expenditure by racecourses Whilst the redevelopment of Ascot has in January 2009. Ffos Las is discussed in has been on racegoer facilities, such as the accounted for c.40% of this total more detail on the next page. development of grandstands and other investment over the last five years, other public facilities. The racecourses have also significant expenditure on existing Continued investment in Britain’s invested significantly in facilities (including racecourses includes the comprehensive racecourses will lead to further long term tracks, stables, etc.) for both horses and redevelopment of Doncaster, Aintree’s new benefits. Projects are already ongoing or Racing employees. grandstand, the Duchess’s Stand at planned at Catterick, Chester, Doncaster Epsom, and Cheltenham’s Centaur facility. (second phase) Fontwell, Lingfield, Newbury, As shown in Figure 8, total expenditure on Ayr, Newbury, Newmarket and York Pontefract and Windsor amongst others. racegoer facilities reached a peak in 2006 amongst others have also undertaken major when £165m was invested by racecourses, capital projects over the last five years. with an annual investment of at least £70m since 2004. British Racing now boasts some of the best racecourses in the world in terms of services provided to racegoers and racing participants matching the quality of the horseracing on show.

16 ECONOMIC IMPACT OF BRITISH RACING SECTION 2

Many of the recent racecourse developments (including those at Epsom Ffos Las and Cheltenham) have combined enhanced raceday infrastructure with flexible non- raceday facilities, assisting racecourses in developing 365 day a year businesses to support their core racing activities. Ffos Las became the first new British turf racecourse to open for over 80 years Racecourse investment in the last five years when it staged its first fixture on 18 June has been funded by a combination of 2009, attracting a 10,000 sell out crowd. external finance, internally generated resources, and support from the Levy Ffos Las was built on the 600 acre Board. Despite the current difficult market brownfield site of what was once Europe’s for fundraising, if money can be found largest open cast coal mine, in South racecourses have the opportunity to take Wales near Llanelli and Carmarthen. The advantage of the reduced construction racecourse cost £21m and was financed costs which have arisen from the economic by a joint venture between Pembrey downturn. Racecourse and the Walters Group Racing in every month of the year. August engineering company through a will be the racecourse’s busiest month, Trainers and the providers of training combination of enabling residential/ including a three day Flat festival in 2010. facilities have also invested significant commercial development, owner Its location is expected to make it amounts, estimated at £60m over the contribution, and a £4m interest free loan particularly attractive to Irish trainers and period, equating to 8% of total capital from the Levy Board. The operation of the racegoers, as well as popular holiday expenditure. This includes the gallops at racecourse is managed by Northern attraction in the summer months. Newmarket and Lambourn, which are Racing Ltd. owned by Jockey Club Estates. The Ffos Las is also planning on building Newmarket gallops are amongst the best in The quality of the track and facilities at the comprehensive non raceday activities the world and benefit from a continuous racecourse have received widespread covering both conferences and programme of investment. The Lambourn praise from within the Racing industry and entertainment. It can stage large outdoor gallops were purchased by Jockey Club the wider South Wales community. The 12 and indoor events, such as concerts and Estates in 2006 and have since been furlong track – built to a specification that exhibitions. To maximise its success as a upgraded substantially, helping to maintain meets the BHA’s ideal track configuration non raceday venue it must draw on the the area’s standing as a key training centre – can be viewed from a 2,700 capacity region’s tourist population. The (see page 31 for Lambourn feature article). grandstand containing eight hospitality racecourse’s owners also intend to hold a boxes and a 150 seater restaurant. There new Celtic Festival around St David’s Day. Financial information on the capital is also 120-horse block stable and an expenditure by breeders in Britain over the Equestrian Centre. The current capacity is The new racecourse has already aided the five years to 2008 is limited; however based capable of being increased to 15,000 as local economy, as many local people were on that available we have conservatively demand is demonstrated and fixtures employed in its construction. Now open, estimated it at £50m (note this differs from the added. 60 local staff members are employed on £20m p.a. discussed in the Breeders section race days and the visitors it will attract to as this will include maintenance expenditure). The turf track will stage nine fixtures in the region will provide a significant boost The majority is likely to have been made by 2009, but there is a much expanded to tourist expenditure. the largest stud farms, including Darley, programme of 28 Flat and Jump fixtures Cheveley Park Stud, Juddmonte Farms and in 2010, the racecourse having acquired The land requirements, capital cost and Highclere Stud. Nonetheless, it is probable through the annual BHA fixture bidding competitive nature of Racing means that total investment is significantly higher process a further 12 fixtures in addition to opening new racecourses is an infrequent than this estimate. the 16 it is granted by the BHA by virtue event. However, Ffos Las has proved that of its status as a new racecourse. Ffos by effective planning, assembling a Las’s management has focussed on qualified team and ensuring an developing a racing calendar that includes appropriate funding mix, it is possible.

17 Racing’s tax contribution

British Racing generated at least £325m in Figure 9: Total tax contribution Figure 10: Total tax contribution tax in 2008, £170m of this from sources by type – 2008 by contributor – 2008 other than tax on betting operators’ gross Total Total win on the sport. Over the five years to £325m £325m £38m 2008, it is estimated that Racing has £59m 12% contributed approximately £1.5 billion in tax 18% £31m receipts to Government. Racing’s tax £0.5m 9% £4m payments have increased steadily since 1% 1% £42m £155m £155m 48% £30m 48% 2005 as the industry has grown. 13% 9%

Betting represents the largest source of tax £68m £67m paid to Government from Racing activity, 21% 21% with an estimated £155m payable by bookmakers on their gross win from betting on British Racing in 2008 (and over £800m Gross profit on betting National insurance Bookmakers Racecourses Breeders in the last five years). VAT PAYE Corporation tax Bodies Trainers Owners Note: Racecourses includes employment taxes in relation to Source: Deloitte analysis. racecourse and catering employees and VAT on admission and Racing’s core 18,600 FTE employees catering revenues. generated total employee taxes of £127m Source: Deloitte analysis. in 2008 (employee and employers’ NIC Over the five years to and PAYE). 2008, it is estimated that For breeders and trainers the figures Racing’s VAT contribution has been Racing has generated represent the PAYE and NI on staff wages. estimated primarily on racecourses’ The rates are relatively modest owing to the admissions and catering revenue, as it is approximately £1.5 billion relatively low wages in the industry, and a these sources of income on which the in tax receipts to large number of part-time employees. ultimate payer, the racegoer, is unable to claim back the VAT. Government. In 2008 an estimated 83% of horses in training were covered by a sponsorship In addition to the 15% tax on gross win on The limited corporation tax contribution by agreement, thus allowing their owners to British Racing the gross win of over racecourses is partly a result of their register for VAT under the VAT Scheme for £1 billion will generate further tax in terms of significant investment in capital facilities and Racehorse Owners. This in turn allows corporation tax on bookmakers’ profits. the use of capital credits from the Levy those owners to reclaim the VAT on their Tax is also payable in the form of PAYE/NI Board to help fund these developments. As racing related expenses. The BHA on LBO staff. These additional contributions noted in the Capital Expenditure section, it commissioned report, the Economic Impact have not been included in the above total is estimated that Racing has invested over of the VAT scheme for racehorse owners, but may be in the order of £250m in £706m over the five year period to 2008. estimates that the scheme saves the PAYE/NI alone. Once the development of capital projects is industry £20m in VAT per annum. In today’s completed, higher revenue and profits are challenging economy, such a scheme is UK betting taxes are currently diminishing expected to be generated, which will lead more valuable than ever. Removal of the as several major sporting betting operations to higher future taxation bills. scheme would substantially increase have relocated their telephone and internet owners’ costs bringing a risk of much operations offshore, notably to Gibraltar, to Racecourses’ estimated £67m tax reduced ownership levels with a knock on avoid the 15% tax on gross win and 10% contribution comprised £38m in VAT effect through the industry and likely lower levy paid to Racing on gross win on British (charged on admissions and catering) and tax revenues. horseracing. £29m employment taxes, from the estimated 1,800 full time employees and additional raceday staff as well as the employees of the racecourses’ catering operations, which are typically outsourced.

18 ECONOMIC IMPACT OF BRITISH RACING SECTION 2

19 20 ECONOMIC IMPACT OF BRITISH RACING SECTION 3 Racecourses

Overview Figure 11: Racecourse revenues The 18% increase in racecourse revenues Britain’s 60 licensed racecourses operate a since 2005 has been primarily driven by variety of racing activities and business Controllable revenue 2005 2008 higher raceday spending on admissions models ranging from: £m £m and catering. The emergence of competition for LBO media rights has also • Exclusively Jump or Flat racecourses to Admissions 1 98 120 increased media revenues. All revenue mixed use which enables year round racing; Raceday catering 80 100 sources, other than on-course betting, saw (gross spend) some growth. Media monies are generally • The five racecourses with all weather tracks On-course betting 11 9 high profit revenues owing to limited which allow them to stage a high volume Media 42 57 incremental direct costs. of fixtures (sometimes over 100) compared Sponsorship 16 20 to turf only racecourses which stage on Other commercial 51 61 58% of controllable racecourse revenues average 20 days racing a year; and were generated by the combined results of Total controllable 298 367 Jockey Club Racecourses, Arena Leisure • Racecourses with a dominant and Northern Racing (from 30 racecourses). raceday/meeting such as Epsom and Levy distributions 89 89 The remaining 30 racecourses open in 2008 Aintree to those with a more even spread. generated c.£150m – an average of c.£5m Total revenue 387 456 each – but with wide variation between the Jockey Club Racecourses, Northern Racing large independents such as Ascot and York and Arena Leisure between them own Note 1: Additional disclosure in 2008 racecourses returns has and smaller, often rural, racecourses. resulted in more revenue lines being classified within Admissions and/or operate 30 racecourses with the revenue than in 2005 when they would have been included in Other commercial. A reclassification of £10m has been made remaining 30 owned independently – largely from Other commercial to Admissions for 2005. by private companies but some through Revenue differs from that disclosed in racecourses’ statutory Admission revenues race clubs or local trusts. Commercial profit accounts owing to a variety of factors, including the grossing up The 60 racecourses generated £120m in of catering revenues, the adjustment of differing accounting maximisation in the true sense is often not policies in respect of Levy distributions, treatment of capital admission revenue in 2008. This represents the main objective of racecourse owners as credits and sponsorship monies etc. an increase of £22m from 2005 despite a many are established so that dividends Source: Racecourse financial statements and BHA returns; 3% fall in attendances over the same period BHA; Deloitte estimates. cannot be paid to their owners and instead profits are reinvested into the sport. The significant investment undertaken by those owned by Arena Leisure and Newbury racecourses – over £550m in the last five years Racecourse revenues are a combination of have moved to ‘in house’ catering operations. – has helped racecourses to segment their centrally generated Levy Board distributions offerings such that they can provide high and individual racecourses’ (or groups of As catering commission received by quality hospitality packages as well as very racecourses’) revenue streams. Levy racecourses who have entered into competitively priced general admission tickets. distributions are outside the direct control of outsourcing agreements does not reflect the racecourses, being dependent on the the real spend of racegoers, grossed up The diverse nature of racing across level of British betting operators’ gross win catering spend has been estimated. racecourses and fixtures mean that there is on British horseracing and the Levy Board’s a very broad range of amounts paid – distribution policies. Levy distributions are Racecourse total revenue (adjusted for ranging from free entrance at Towcester to discussed on page 34 but for completeness catering) was £456m in 2008, an increase of the premium pricing for iconic fixtures. In are included in Figure 11. £69m since 2005. Racecourses generated aggregate the average admission revenue c.£150m from direct (on-course and the per attendee in 2008 was £21 from the The remaining revenues are controllable by majority of media income) and indirect 5.7m racegoers (up from £17 in 2005). After the racecourses, and have been split into (Levy Board distributions) betting sources adding VAT this equates to an average the six categories set out in Figure 11; each highlighting the symbiotic relationship expenditure of £25 per racegoer per raceday. one is considered separately below. between Racing and the betting industry. However, this mean average is boosted by hospitality revenues and ‘crown jewel’ fixtures The majority of racecourses outsource their Nonetheless, betting activities comprise meaning the majority of racegoers will have catering operations in return for commission less than one third of the total revenue paid substantially less than £25. Furthermore, based on the percentage of revenue and/or generated by racecourses, with non betting children under the age of 16 gain free profits. However, some racecourses, notably activities generating over £300m. admission to the vast majority of fixtures,

21 RACECOURSES

allowing families to enjoy days out at very improvements are required. Working closely sort of sponsorship – ranging from blue competitive prices compared to other with the caterers as key racecourse chip firms for the major races (such as John sporting events or leisure pastimes. stakeholders is central to building on this Smiths and Vodafone for the Grand impressive recent performance. National and Derby respectively) to much smaller local businesses sponsoring their Catering races at their local racecourse, often part of The sheer scale of catering operations at Media a corporate hospitality package. racecourses is illustrated by the partnership Media revenue of £57m in 2008 represents between Jockey Club Racecourses and the a £15m increase from 2005. Media revenue The betting industry continues to provide Compass Group announced in March is generated from the following sources: the largest contribution to sponsorship, 2009, which is projected to generate supporting around 31% of all sponsored £500m in revenue over the next ten years. • Broadcast rights fees paid by the terrestrial races. Major industry organisations such as channels, but limited to a very small Weatherbys, Tattersalls and the European Total gross on-course catering spending of number of the iconic fixtures. Indeed Breeders fund are also major sponsors. £100m, represents an average of c.£21 Racing actually contributes to the cost of While such “internal” sponsorship is (including VAT) on food and drink per the c.80 days a year Channel 4 coverage, important, there is a need for Racing to attendee. This will vary considerably from rather than receiving rights fees; broaden its sponsorship base including the corporate attendee at Royal Ascot to tapping into those economic sectors – such more “day to day” race meetings. • Payments to the 30 Open At The Races as telecoms, alcoholic beverages and the (“ATR”) racecourses by ATR and 30 financial sector – that are active in the Gross catering spend is estimated to have Racing UK racecourses; and sports sponsorship market. increased by around a quarter since 2005 through a combination of food and drink • Payments by SIS and Turf TV for the Investec’s sponsorship of the 2009 Derby inflation but also by offering the racegoer a supply of racecourse pictures to licensed illustrates that there is an appetite of such better quality, accessible and diverse betting offices. sectors, and the importance of the catering product – although further racecourses and sponsors working • The introduction of Turf TV, a joint venture together in partnership to maximise the established in 2007 between 31 value of the sponsorship to both parties. racecourses and Alphameric plc, to the LBO market has increased competition and increased the level of revenue to On-course betting racecourses. Previously SIS was the sole The £9m betting revenue in Figure 11 provider of pictures to LBOs. represents the commission payable to racecourses from on-course tote operations and bookmaker shops plus bookmaker Sponsorship badges. The actual amount staked, and left Racecourses generated an estimated £20m behind (i.e. lost) by racegoers, is in race and/or meeting sponsorship, the substantially greater but, as this does not go vast majority of which is paid out by to racecourses, it is not shown in revenue. racecourses in prize money. Of the 9,500 races staged in 2008, 70% carried some The on-course betting revenue retained by racecourses has reduced since 2005 due to the combination of a fall in attendances and a fall in spend per attendee in 2008 as racegoers reacted to the economic downturn with reduced secondary spend.

22 ECONOMIC IMPACT OF BRITISH RACING SECTION 3

Racegoers also bet with on-course rails and Tattersalls bookmakers, but no accurate Haydock Park figures for these amounts are available.

Other commercial Other commercial revenue contains a The impact a racecourse can make on the diverse range of revenue streams including local economy is illustrated by Haydock raceday activities such as racecards and Park, a popular urban course located in advertising as well as the increasingly Newton-le- Willows in the borough of St important non raceday activities. These Helens in the North West of England. In a other activities represent an average of £1m typical year it attracts around 200,000 per racecourse and make a very significant visitors to Flat and Jump racing, contribution to the ongoing financial health predominantly from Liverpool, Manchester, of the racecourses. Warrington and St Helens. Its core market lives within a 30 minute drive. Racecourses can offer an attractive mixture of more intangible factors such as Haydock is one of the busiest racecourses picturesque settings and history, backed by in the country, with around 30 days of The racecourse is therefore important to practical points such as good transport racing each year with average attendances the local economy and is a significant links and ample, free, parking. This package of almost 7,000 and over 15,000 on its local employer, providing 70 direct is increasingly being used by racecourses busiest days. permanent jobs and, including catering to turn them into 365 day a year staff, employing 650 (via various businesses, utilising their substantial Haydock has successfully hosted live contractors, including catering, security facilities outside of racedays. music after race meetings which has and tote) temporary raceday employees. attracted new people to Racing. On its busiest fixture it is estimated that The availability of appropriate onsite over 700 people are employed. accommodation can be a barrier to The racecourse also holds around 1,000 racecourses developing non raceday non raceday events a year. It has a diverse Haydock Park activities, hence several racecourses have and busy calendar of non raceday events, either opened hotels or are developing them. ranging from small to medium sized Annual racedays c.30 The hosting of conferences, functions and events to multi day conferences. It Non raceday events 1,000 exhibitions are typical non raceday activities, benefits from a strong relationship with the Permanent employees 70 but other activities include golf courses, local authority, one of its key non raceday Raceday staff 650 concerts, and car boot sales. Racecourses customers, attracting approximately Raceday attendance 200,000 can tailor their offering according to their 100,000 non raceday visitors in total. Non raceday attendance 100,000 facilities and local markets. Combining raceday and non raceday Direct expenditure £15m activities, Haydock’s total annual Costs attendance is around 300,000. It is Racecourses’ largest costs consist of prize estimated that 5-10% of racegoers will Since 2002 Haydock has invested over money (£106m in 2008 – see Owners stay overnight, supporting local hotels £2m in spectator facilities, including a section), wages and salaries costs of £52m and restaurants. The associated total redevelopment of the County Stand. from its 2,700 FTE, integrity payments of direct expenditure it generates for the A project to build a new track is ongoing, £25m and a variety of operating costs – locality, including money spent with local with completion due by 2012. In keeping including ongoing maintenance costs which travel companies, hotels, bars, with its ‘local course’ status, one of are vital (and support capital expenditure) in restaurants and construction companies, Haydock’s aims is to use local ensuring a positive experience for is estimated to be at least £15 million. construction companies and suppliers. racegoers. Racecourses, in common with other major sports, have experienced significant cost inflation in recent years.

23 Attendances and racegoers

The 60 racecourses staged 1,423 fixtures in Figure 12: Day by day comparison of racing attendances – 2005 and 2008 2008 (with racing taking place on 362 days ‘000s of the year), attracting combined 1,949 2,000 1,913 attendances of 5.7m, equating to an 2005 2008 average meeting attendance of 4,029. 1,500 1,232 After football, horseracing attracts the highest total attendances of any sport in 1,000 Britain, aided by its year round nature. 985 699 711 626 623 500 593 542 Figure 13 shows total attendances for 459 483 385 405 Jump and Flat fixtures and average attendance from 2002 to 2008. 0 Monday Tuesday Wednesday Thursday Friday Saturday Sunday

Average attendance Having averaged around 4m throughout the 3,137 2,848 3,497 3,757 5,269 7,033 4,942 1980s, horseracing attendances rose to a peak of over 6m in 2004. Total attendances 2,211 2,367 2,298 3,323 5,244 7,191 4,013 have since weakened to 5.7m over the four Source: BHA; Deloitte analysis. years to 2008. However 2007 and 2008 were respectively the wettest and seventh wettest summers since records began, Day by day comparison of racing week racing attendances have decreased, which inevitably impacted overall attendances in 2008 more people now attend weekend fixtures. attendances through both abandonments As shown by Figure 12 above, the average The most notable increase was Friday and reducing spectator numbers. attendance at race meetings broadly attendances, which have risen by 247,000 increases as the week progresses, with (25%) since 2005. Flat racing attracted 3.6m attendees in weekend racing attracting the largest crowds. 2008 with 2.1m visitors to Jump racing, the In 2008 the lowest average attendances difference is due to the number of each In recent years there has been a marked were on Mondays, Tuesdays and type of fixture. Jump fixtures recorded shift in the pattern of weekly racing Wednesdays, with an average attendance marginally higher average attendances attendances as Figure 12 illustrates by of 2,292 over these days. (4,115 versus 3,982 respectively). contrasting 2008 with 2005. Whilst mid In total 3.7m attended on either Friday, Figure 13: Total and average racing attendances in Britain – 2002 to 2008 Saturday or Sunday, 65% of total attendances from just 44% (642) of the m ‘000s 6.0 6.1 5.9 5.9 fixtures. The highest average attendance of 6.0 5.8 5.8 2.2 5.7 5,000 2.1 2.2 7,191 is on Saturday, representing a 2% 2.3 2.2 2.2 2.1 4,934 4,799 4,657 increase since 2005. 4.5 4,750 The implication for Racing is that to 3.9 3.9 3.7 3.5 3.6 3.6 3.0 4,536 4,500 maximise its value it must continue to focus 3.7 4,377 on attracting high weekend crowds. 4,376 However, that shouldn’t preclude midweek 1.5 4,250 4,029 fixtures being marketed to these social groups with more leisure time – such as the 0 4,000 growing ‘grey’ market. 2002 2003 2004 2005 2006 2007 2008 1,158 1,220 1,299 1,300 1,342 1,330 1,423

Flat Jump Number of fixtures Average attendance per fixture

Note: Total attendances for Flat racing in each year include a very small proportion of attendances for mixed meetings or both Flat and Jump.

Source: BHA; Deloitte analysis.

24 ECONOMIC IMPACT OF BRITISH RACING SECTION 3

Attendances by region Racing’s diversity attendances in the first six months of 2009 British Racing has a huge spread of are 3% down in total, compared with the Figure 14: Attendances by region – 2008 attendances from iconic fixtures firmly equivalent period in 2008 (and just 1.1% on established in the public conscience, the average), this is a lower decline than many 5% wider sporting calendar and indeed social leisure activities have suffered. 5% calendar, to much smaller, locally focused

32% fixtures. 15% Profile of racegoers Figure 15: Top 10 meeting attendances Racing has a relatively small core of high in 2008 frequency racegoers that is responsible for around half total attendances. For them the 18% Rank Event (days) Total racing itself is typically central to the 25% raceday experience. However, for many 1 Royal Ascot (5) 287,876 other less frequent racegoers, while racing 2 Cheltenham Festival (3) A 177,501 is a part of the attraction, it is just one of London and South East North 3 Epsom Derby (2) B 160,000 many factors involved. Racing has Midlands, East Anglia and Wales Yorkshire 4 Aintree Grand National (3) 144,826 acknowledged the need to expand its Scotland South West 5 Glorious Goodwood (5) 102,068 appeal to a wider demographic through the 6 Cheltenham Open (3) 70,024 development of mixed entertainment and Source: Management information. 7 Chester May (3) 63,840 racing events discussed below, but also 8 Doncaster St Leger (4) 57,263 through the root and branch rebranding Figure 14 shows the regional spread of 9 Ascot – King George (3) 56,696 exercise being led by Racing Enterprises. attendances for 2008. 10 York – John Smith’s (2) 46,762 The combination of music and racing has

• While Racing has a national footprint Note A: Cheltenham Festival Wednesday was abandoned been particularly successful. Well over there are some areas of particularly owing to high winds. York Ebor meeting which was abandoned, 250,000 people attended fixtures with a attracted 70,000 from three days in 2007. intense activity. significant music element in 2008. Note B: Includes an estimated 100,000 attendees on the Hill who pay limited admission fees. Newmarket’s Friday nights were visited by • The five Scottish and nine Yorkshire 125,000 and are well established in the Source: HBLB; Deloitte analysis. racecourses generated attendances of social calendar. Many more recent music over 300,000 and 600,000 respectively, events at other racecourses are also popular. illustrating the popularity of racing in The top ten race meetings in 2008 these regions. Scottish Racing and Go attracted 1.1m attendees, and as shown on Ladies days and nights are extremely Racing in Yorkshire help co-ordinate and page 38 represent some of the highest popular and vary from those with national market racing in the areas. attended sporting events in the country. significance (Royal Ascot), regionally (the Once abandonments and transfers are Friday at Aintree’s Grand National meeting) • Racegoers around London are adjusted for, attendances at these flagship and the numerous more local events that particularly well catered for with typically events have increased since 2005 take place. at least one high quality fixture staged emphasising their enduring popularity. every weekend of the year. Whilst certain major race meetings attract The future • In 2008, Ascot had the highest total the largest crowds, Racing also appeals to The extremely competitive nature of the annual attendances (574,880). a broad segment of the population leisure market means racecourses will have Cheltenham (367,466) and Newmarket throughout the country, with even relatively to continue to find new blends of Racing (355,287) were respectively the busiest small weekday regional fixtures regularly and entertainment to complement their core exclusive Jump and Flat courses. attracting over 1,000 people, predominantly racing product. There is evidence this is from local communities. happening but more can be done, including an increased understanding of their existing The most recent attendances data show and potential customers’ requirements to that Racing’s attendances are holding up enable tailored offerings to be created. reasonably well in the downturn; while

25 26 ECONOMIC IMPACT OF BRITISH RACING SECTION 3 Owners

Racehorse owners are the single biggest Figure 16: Horses in training and number of owners – 2001 to 2008 contributors to the funding of British Racing g ’000s n i

through both their purchase of horses from n i 16,000 15,349 a 15,083 r 14,568 14,501 breeders, and ongoing training and racing t 14,129 4,272 n 13,510 4,393 i 13,183 13,292 4,377 4,419 expenditure paid to trainers and jockeys s 4,399 e 4,647

s 4,460 4,276

r 12,000 and supporting industries such as vets, o h

f 2,133 2,293 farriers and horse transport companies. o 1,730 1,854 r 1,505 e 1,318 1,333 Including horse purchases, and net of prize b 8,000 1,248 8,461 8,228 8,557 8,784 m 7,683 8,225 money receipts their investment is u 7,545 7,475 N estimated to have exceeded £430m in 4,000 2008 (excluding Point-to-Point horses).

0 A large proportion of this expenditure is 20012002 2003 2004 2005 2006 2007 2008 injected into the rural economy. 9,164 8,898 8,949 9,266 9,403 9,329 9,551 9,539

This section first considers the contribution Flat Mix Jump Total number of owners with a horse in training of owners by examining the number of Note: Horses in training and owners represents the monthly averages during the year. horses in training and owners in the Source: BHA; Deloitte analysis. industry – both considered key barometers of the health of the Racing industry. In addition it considers the level of prize Around 40,000 While the accepted measure of the number money paid by British Racing as, while of racehorses in the industry is the average financial return is not the main driver of individuals are estimated number of horses declared as being in horse ownership, the possibility of a return training during the year, this average is on their outlay for a successful horse is to have an involvement significantly less than the number of horses nonetheless important. in horse ownership in in training at some point in the year. Weatherbys have estimated that for 2008 Figure 16 shows how both numbers of some way. over 25,000 horses were in training at some horses and owners have grown to record point (excluding c.3,750 registered as levels since 2002. privately trained hunters many of which only 13,000 members. In total around 40,000 ran in Point-to-Points). Over 18,000 British The relatively high costs of keeping a horse individuals are estimated to have an trained horses actually ran in 2008. in training (as discussed later) has led to a involvement in horse ownership in some variety of ownership models which reduce way. There are numerous reasons for the the cost per individual, thus making significant difference between the two ownership accessible for many more people. In 2008 there were an average of 15,349 measures including: horses in training, up 16% from 2002 (5% Of the near record 9,539 owners (2007 – from 2005). • young horses, particularly two year olds, 9,551) with horses in training in 2008, only at the early stage of their training but with 2,545 (27%) owned horse(s) individually. The majority (c.80% in 2008) of owners are no immediate racing plans; The remaining 6,994 (73%) therefore involved in ownership of 1-2 horses. engaged in some sort of shared ownership However, at the other end of the spectrum • injured horses; and arrangement including racing partnerships the number of owners with a string of 21 or or through companies. more has increased markedly from 64 in • the natural flow of horses into and out of 2006 to 92 in April 2009. Many of these the industry due to retirements etc. These ownership figures do not fully reflect owners are overseas nationals and by this the number of individual ‘part owners’ route inject substantial funds into British Figure 17 overleaf sets out the estimated involved in syndicates and racing clubs. If Racing and the British economy. average cost of horses in training split by these were added the number participating code, together with the total expenditure in racing would be significantly higher. For and amounts recouped by owners. example, the Elite Racing Club has over

27 OWNERS

Figure 17: Average owners operating expenditure per horse Figure 18: Total owners operating expenditure on horses – 2008 Total expenditure 2005 2008 Average spend per horse Flat Jumps £m £m ££ Basic training fees (including gallops) 179 238 Basic training fees (including gallops) 12,818 11,488 Vets, medical and farriers 24 30 Vets, medical and farriers 1,651 1,717 Transport and racing expenses 11 20 Transport and racing expenses 1,581 1,385 Sub total 214 288 Sub total 16,050 14,590 BHA Registration and entry fees 6 6 BHA Registration and entry fees 400 400 Jockey fees 10 11 Jockey fees 547 576 Race entry 12 17 Race entry 946 725 Insurance 7 10 Insurance 557 426 Total owners’ expenditure on training 249 332 Total owners’ expenditure on training 18,501 16,717 Keep costs 25 15 Note: Majority of dual code horses included under Jumps. Adjustments have been made to several cost categories from the ROA survey results to reflect available 2008 industry data. Cost inflation of 3% has been assumed for 2008 in the absence of specific data. Keep costs are not included. Total owners’ expenditure 274 347

Source: BHA; ROA Owners survey; Deloitte estimates. Income Owners’ prize money 82 85 The ‘average’ ownership costs shown in Sponsorship 7 7 Figure 17 above are based on a sample of horses of which the vast majority raced in Net owners’ expenditure 185 255 the year and a large majority more than once. It does not therefore reflect the cost of Source: BHA; ROA Owners survey; Deloitte estimates. those 7,000 horses (excluding hunters) who, while in training at some point, did not run, which would be expected to be much lower. • the availability of more detailed information stables, livery yards, studs etc where they on horses in training which facilitated a incur keep costs – again borne by the owner. In total owners are estimated to have incurred more accurate estimate of training fees costs of £332m for horses in training – the than in 2005, which was acknowledged Once these keep costs are added to costs majority from training fees of £238m but with as a prudent estimate. of horses in training, owners’ gross costs additional costs arising from vets and farriers, are estimated to be about £350m. transport, race entry and BHA registration There are significant regional variations in fees, jockey costs and insurance. training fees with the highest fees in Newmarket and then Lambourn. In some The estimated £70m increase in net regions average basic training fees owners’ expenditure since 2005 is primarily (including gallops) are less than £9,000, a function of: compared with £17,000 in Newmarket.

• an increase in horses in training of 5.4% The costs of a horse not in training are (based on average horses in training); usually lower than when in training, although they can still be significant. • estimated training fees inflation of 3% p.a. The horses are either kept at trainers’ as trainers passed on higher operating yards with the basic costs of feeding costs, with higher increases for some and bedding plus any veterinary costs expenditure, notably transport; and passed on to the owner, or sent to other

28 ECONOMIC IMPACT OF BRITISH RACING SECTION 3

Figure 19: Prize money by source – 2002 to 2008 Owners injected more £m than £430m into Racing 125 in 2008 – much of it 106 103 100 99 98 15 100 94 9 directly into the rural 8 9 15 84 16 18 18 16 15 15 15 economy. 75 18 12 12 12 17 17 13 12 60 62 50 55 56 12 53 Horse purchases 43 39 The cost of acquiring horses has been 25 excluded from the analysis due to a lack of robust information on the buying and selling 0 of horses. However, this cost does 2002 2003 2004 2005 2006 2007 2008 represent a significant further injection of HBLB BHB/BHA Owners Sponsors Racecourses funds into Racing by owners. By way of illustration the average cost of horses sold Source: BHA; Deloitte analysis. at the two principal auction firms in Britain – Tattersalls and Doncaster Bloodstock Sales Prize money Once owners’ sponsorship of £7m is added – in 2008 was c.£28,000. Owners may As Figure 19 shows, record prize money of this means on average owners recovered recoup some of this expenditure from £106m was paid in 2008, and over the last 26% of their outlay (excluding horse subsequent sales. five years has been around £100m per year. purchases). Owners receive c.80% of total prize money The expenditure relating to the purchase of (£85m for 2008). The average runner in British races won horses has been incorporated indirectly via £1,084 in total prize money in 2008 (c.80% the expenditure of British breeders. Once The majority of prize money (£59m in 2008) of which goes to owners). This statistic has this £182m breeders’ expenditure is added is provided by the Levy Board and BHA but been in a narrow range of £1,050-£1,090 to the net £255m costs discussed here, racecourses contributed £30m including since 2004. owners injected more than £430m into amounts passed on from sponsorship Racing in 2008. contributions and owners paid £17m in It is widely acknowledged that the cost of entry fees. Prize money therefore owning racehorses in Britain is greater than enabled owners to recoup 24% of in many other major Racing nations. Looking forward their gross expenditure. The gross cost per run is over £3,500 Levels of ownership have declined marginally (net c.£2,700 after owners’ prize money). in 2009 owing to the economic climate. Prize money to costs ratios are therefore However, owners, trainers and breeders are much lower. working closely together to devise ways of cushioning the downturn’s impact, initiatives The unique nature of British Racing explains such as the ROA/TBA racehorse leasing a significant proportion of the additional scheme have already proved popular. costs. Notably, horses are typically trained some distance from the racecourses, rather than at the racecourse as in other countries. However while this leads to higher cost it does offer owners much more varied racing and locations, adding to the thrill of ownership.

29 Trainers

There were 592 licensed trainers in Britain Figure 20: Licensed trainers’ yards with horses in training – 2001, 2005 and 2008 with horses in training in 2008, with a 250 further 126 permit holders and 276 trainers 2001 Number 2005 Number 2008 Number of trainers of trainers of trainers of hunter chasers. The scale of training 232 Total 526 Total 569 Total 592 yards varies very significantly as illustrated 200 210 by Figure 20. 178 150 The smallest 320 yards trained c.2,000- 3,000 horses in 2008, meaning the 100 remaining c.12,500-13,500 of the average 97 102 96 90 number of horses in training came from the 88 73 70 76 other 272 yards. 50 65 62 63 65 37 42 42

The total number of licensed trainers has 0 increased steadily from 500 in 1993 to 592 1-10 11-15 16-20 21-30 31-40 41+ in 2008. The majority of the growth has Source: BHA. been seen at the top and bottom end in terms of horses in training. The number of yards with more than 41 horses has grown There has been a limited number of new Trainers’ revenues by around a third between 2001 and 2008 yards coming on stream in recent years, Trainers’ primary revenue source is the to 102 (of which 25 yards had more than with the usual route into training being to training fees paid by owners – as discussed 100 horses in training). take over an existing yard as a trainer retires in the Owners section earlier. In addition or leaves the sport. Nonetheless several trainers keep 7-8% of the prize money There has been a marked growth at the new yards have been built. The planned earned by the horses they train. Trainers’ smaller end since 2001, although this development of smaller starter yards by stable staff also receive 5% of prize money, growth has slowed somewhat between Jockey Club Estates in Lambourn will also in aggregate equating to c.£14m divided 2005 and 2008 (320 from 306 yards). While provide a stepping stone for new trainers amongst them in 2008. larger trainers benefit from the number of entering the sport. horses, and often an ability to attract the Many trainers also buy and sell horses, but bigger spending owners and hence no reliable data is available to accurately generally better horses, smaller trainers do Geographic spread estimate the scale and value of this horse still regularly achieve big race wins. Hence Trainers are based throughout Britain but trading. Like prize money, though this can be while challenging for new trainers to there are several areas with particularly high an important source of revenue for trainers establish themselves there is certainly the density of trainers – notably Newmarket, to supplement their basic training fees. potential to move up ‘the training pyramid’ Lambourn, Middleham and Malton. These or indeed to succeed as a more niche areas have extensive training facilities both Training fees have increased by an trainer specialising in a certain at individual trainers’ yards but also through estimated 3% per annum since 2005 as type of horse. public gallops. Here Racing is deeply operating costs and stable staff wages have ingrained in the local economy and accounts increased. for a high proportion of local employment and expenditure. The Lambourn feature article in this section illustrates the importance Racing can have in a specific region.

30 ECONOMIC IMPACT OF BRITISH RACING SECTION 3

Lambourn and the North Wessex Downs

Lambourn is an internationally renowned horseracing centre in Berkshire, home to around 10% of Britain’s racehorse trainers. It forms one of four main clusters of Trainers’ expenditure businesses associated with racing in the The methodology adopted to estimate the North Wessex Downs area, alongside East economic impact of Racing assumes the Ilsley, Hungerford and Marlborough. initial expenditure of training horses is incurred by the owners via the training fees The North Wessex Downs is a sparsely paid to trainers. However trainers play an populated rural area. Of its population of important role in both distributing the initial 125,000, approximately two thirds work in injection from the owners within the the surrounding urban areas, yet only 5% training fees and associated costs flows industry, and thereafter as the expenditure of the economically active population is into the economy each year, a large flows through the economy. directly employed in agriculture through proportion of which is paid first to trainers farming. The contribution of the core before being recycled throughout the Trainers’ largest item of expenditure is the Racing industry to the area is therefore economy as secondary expenditure wages and salaries of the c.5,600 full time extremely important and Racing is firmly supporting local businesses. The impact and c.2,400 part time staff employees embedded in the community. at a local level is most obvious in the (including self employed and the trainers Lambourn cluster. themselves), with employment levels varying The table below illustrates the scale of the from over 100 for some of the largest, often Racing industry. The 1,400 Racing workers comprise over in Newmarket, yards to fewer than a dozen 20% of all employment in agriculture, for the smaller yards. The impact of Racing on the North community and social and personal service Wessex Downs area activities across the North Wessex Downs. A framework of minimum wages and general working conditions is agreed Horses in training or at studs 3,500 In 2005 Jockey Club Estates acquired the annually between the National Trainers Direct racing employment 1 1,438 Lambourn gallops and have since invested Federation and National Association of Owner expenditure on horses £3m in upgrading the facilities. The Stable Staff – between 2005-2009 the trained in North Wessex Downs £35m investment has helped cement Lambourn’s minimum rates (which vary by experience) position as a major Racing centre with Note 1: Direct racing employment comprises trainers, studs increased by 3-5% per year (excluding 2% and supporting businesses. significant recent increases in both the in 2008). The annual wages and salaries of number horses using the gallops and the Source: RICS Rural Research Conference 2008. yard employees and trainers, including number of winners of British races. social security payments, were estimated to be between £130-140m in 2008. These The Lambourn area is predominantly a Racing is not only a vital contributor to the wages generate substantial additional training area but there are also major stud region’s economy, supporting the livelihood expenditure with a large proportion of it farms and stables located throughout the of those who work in and around it; it also spent in the local, often rural, economy. region. Across the North Wessex Downs plays an important social role. The The wages generate an estimated £40m in there are over 3,500 horses at training Lambourn Open Day attracts over 10,000 annual employment taxes. yards and stud farms, which represents visitors to the trainers’ yards and over 10% of the total in Britain in 2008. surrounding areas, illustrating the broad Trainers’ other major expenditure items appeal of Racing in the region. include veterinary and farriers fees, horse To support the trainers, many other equine transportation and keep fees. Again, the local focused businesses are located in the From an environmental perspective too, economy benefits from this expenditure. area, including farriers, large veterinary Racing is important. The North Wessex practices, horse feed merchants and a Downs is an Area of Outstanding Natural Trainers have also invested significantly in major racehorse transport company. It is Beauty and the maintenance of the gallops maintaining and improving their training estimated that there are over 100 core is likely to have encouraged biodiversity in facilities over the last five years. Including racing businesses in the North Wessex the area. Whilst modern artificial gallops public training facilities, notably at Downs which in total directly employ over that do not require free draining grassland Newmarket and Lambourn, this expenditure 1,400 people. have been used elsewhere, the Lambourn is estimated at £60m over the last four years. area’s rich history as a training centre The region benefits from the injection of ensures that it will remain at the heart for substantial owners’ expenditure on the British horseracing for many generations c.2,000 horses in training. Over £35m of to come.

31 Breeders

Breeding industry Figure 22: Value and average price of horses sold at Tattersalls and Doncaster The thoroughbred breeding industry is the Bloodstock Sales British public auctions – 2002 to 2008 first link in the many chains of Racing. As s £m £’000s e e c l i r such the British breeding industry is a major a p s 300 60

l 45 e l contributor to the current, and future, a t a o

41 s

T 51 overall health of British Racing. e 48 g 250 50 a r

257 e 245 v The British breeding industry is complex 34 41 A 40 41 and diverse, and a major global player. 200 36 40 37 36 27 195 36 176 In 2008 nearly 6,000 foals were produced 23 171 150 157 30 from Britain’s 10,740 active broodmares, 141 the sixth highest total in the world, based on 2007 comparatives. 100 20 16 14 15 12 13 10 The industry ranges from an estimated 300 50 8 10 full time stud farms who typically have both mares and stallions standing, to the c.4,400 0 0 breeders who exclusively own broodmares. 2002 2003 2004 2005 2006 2007 2008 Broodmare only breeders are typically part- Tattersalls total sales Tattersalls average sales price time and their breeding activities often form Doncaster total sales Doncaster average sales price part of a farming business. The majority Source: Tattersalls; Doncaster Bloodstock sales. (c.3,800) own one or two broodmares who are often boarded at other studs. Breeding industry revenue Between 2002 and 2007 the aggregate Figure 21 below sets out the number of The breeding industry generates revenue value of public sales increased by over 80% stallions, broodmares and foals born in primarily through the sale of horses. from £164m to a record £302m. The Britain in 2005 and 2008. Individually breeders will also generate increase was driven by a combination of revenue from nomination fees, keep fees, higher volumes (32% up for Tattersalls to Figure 21: British based bloodstock etc – but these are largely internal to the 5,064 in 2007) and average price (up 38% industry as they are the expenditure of other for Tattersalls). These increases reflected 2005 2008 breeders or trainers. Although overseas the global boom in bloodstock markets. mares being covered in Britain would Stallions 326 345 represent economic benefit to the British Bloodstock purchases are typically a high Active broodmares 11,947 10,740 breeding industry, comprehensive figures value purchase, and often for leisure British foals born 5,727 5,920 for this are not available. purposes, hence are vulnerable to economic conditions. Therefore the global Horses are sold through public auctions or economic downturn has resulted in Source: Thoroughbred Breeders Association. via private sales, with the majority of bloodstock values falling markedly. In 2008 yearlings sold via public auction in Britain British public sales declined to £212m – Over the last ten years the breeding sector through Tattersalls and Doncaster although this is still higher than 2004 values has seen an increased concentration of Bloodstock Sales, both internationally – through lower prices and more unsold mares and stallions at a relatively small renown and major investors in British horses. Further falls have occurred in the number of studs. The fact that 27 Racing. The volume and average price of first half of 2009. operations own more than 20 broodmares horses sold at public auctions is regarded illustrates this point. as a key indicator of the health of the The figures above are for all sales breeding industry, but also of the wider conducted at those auctions. It includes Racing industry – Figure 22 above plots overseas horses sold in Britain. Irish horses both measures between 2002 to 2008. are a particularly significant element but Irish and British vendors are not separately identified by the auction houses. In addition

32 ECONOMIC IMPACT OF BRITISH RACING SECTION 3

In 2008 nearly 6,000 foals were produced from Britain’s 10,740 active broodmares, the sixth highest total in the world.

to public sales, a much lower volume of private sales occur. These sales are typically for much higher values with the horses sold a mixture of yearlings and older horses – it is not possible to accurately estimate the total values of such sales but the practice is thought to have declined in recent years.

A number of the largest studs – notably Darley and Shadwell – transfer the majority of their production straight to their respective owners and trainers – home breeding their racehorses. These operations produce large volumes of high quality horses each year and have invested heavily in their top class facilities and bloodstock.

Given the combination of lack of country Figure 23: Breeders expenditure The estimated £20m annual maintenance specific vendor data for breeder public and employment /capital spend reflects the costs of building sales, private sales and the importance of and maintaining high quality horse boxes, home bred racehorses, the economic £m fencing and ancillary buildings. It does not impact of the breeding sector has been reflect bloodstock investment or the sale of estimated by building up breeders’ Wage costs 113 studs. The Thoroughbred Breeders expenditure rather than using sales values. Transport 7 Association (“TBA”) estimate the capital Vets, medical & farriers 27 value of studs, excluding bloodstock, to be Other operating costs 35 £20 billion. Breeders expenditure As Figure 23 sets out, total expenditure by Annual maintenance/ 20 The TBA estimate that there are 4,000 full breeders was estimated at £202m in 2008. capital spend time employees in the industry. The number at each stud will vary with over 100 at the The labour intensive nature of studs means Total annual expenditure 202 larger studs. For example Darley Stud has the largest cost is wages and salaries with 250 in Newmarket alone, to a much lower an estimated £113m total cost in 2008. Employment number at the smallest operations. The breeding sector therefore pays around Full time 4,000 £30m in employee and employer taxes Part time (1/10 time spent) 5,000 The 5,000 part time employees includes the each year. Breeders also incur significant owners of broodmares who often fit their equine related expenditure on veterinary Total (FTE) 4,500 breeding activities round their main job, but costs, farriers, feed and to a lesser extent nonetheless play a vital role. horse transport. Source: Thoroughbred Breeders Association.

33 Betting

Overview Figure 24: Levy receipts by source – 2001/02-2008/09 Until the 1990s horseracing, together with £m greyhound racing, supplied almost all 120 115.3 110.7 7.1 bookmakers’ betting product. However 105.6 since then betting operators – in what was 5.5 4.9 99.3 99.2 7.6 100 already one of the most liberal markets 13.8 5.8 5.5 6.1 26.6 93.0 13.1 anywhere in the world – have been able to 6.2 7.1 7.6 79.9 87.6 11.1 10.8 6.5 develop a diverse portfolio of products 80 72.9 4.5 81.1 12.8 including sports betting (particularly football), 5.9 10.1 75.6 74.7 73.5 67.0 65.6 numbers games, virtual racing and crucially 60 62.8 highly profitable Fixed Odds Betting Terminals (“FOBTs”), as well as online. 40 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 A There is a continuing trend of consolidation Retail Telephones Internet Betting exchanges Other in the traditional high-street shop (LBO) Note A: Includes £1.4m discretionary payments from offshore betting internet operators which has been classified within betting business, with the estate much changed exchanges as primarily from Betfair. Levy receipts represent year to March in all cases. from a few years ago. Source: Levy Board; Company/group financial statements; Deloitte analysis.

As a result, the British betting industry is the most diverse in the world, with a mix of fixed The betting industry has historically been • a shift to internet channels including odds, pool and spread betting, together with resilient to economic downturns. The those offshore; and betting exchanges. The competitive nature of evidence from 2008, and first half of 2009 the British betting industry results in the indicates that this resilience may not be as • the growth in exchange betting receipts highest return to stakes bet by horseracing strong as that historically experienced in the (although still relatively small in absolute punters of any major betting country. face of the deep recession. This is also the terms – in large part due to the levy being first such test for the new diverse gambling applied to the 1.5-5% commission The combination of these and the changing industry. applied to winning bets). tax regime in 2001 (a shift to 15% gross profits tax from a tax on turnover), has fuelled Betting operators in part attributed the a very substantial increase in both betting Racing’s income from betting record £115m levy receipts in 2007/08, to turnover and betting operators’ profits. – Levy £16m of receipts derived from profits from Racing generates a large majority of its direct big staking ‘high rollers’ (predominantly Meanwhile, in a time of general shift in revenue from betting via the 10% (with some attributed to customers of Ladbrokes). business online and considerable exceptions) statutory Levy on British betting investment by traditional bookmakers, the operators’ gross win from British Racing. The marked fall from the record £115m levy impact of exchange betting has yet to be The majority of Levy receipts is allocated to in 2007/08 to £93m (including a voluntary fully assessed. Betfair, the leading betting fund either prize money or integrity services. contribution of £1.6m from offshore operators) exchange, has reported revenue growth Racecourses’ revenue from on-course in 2008/09 is a concern for British Racing. from £107m in 2005 to £240m in 2008. betting is discussed on page 22. The gradual increase of the gross profits Since the change in the tax regime aggregate threshold for individual LBOs under which Levy receipts have, until 2008/09, typically abated levy charges of less than 10% are been in the £100-110m range but as Figure applied has also had an impact. The actual 24 illustrates this masks several trends: levy percentage realised from LBOs is now close to 9%. • a gradual decline in traditional shop receipts; Several former British based internet sportsbook operators moved offshore and in • fluctuations in telephone receipts as a turn ceased paying the levy (and gross profits product of being the channel by which tax) which contributed to the decline. Others ‘high rollers’ bet; are reported to be threatening the same.

34 ECONOMIC IMPACT OF BRITISH RACING SECTION 3

Figure 25: British Betting Industry Gross win by type against an efficient negotiation between the CAGR Racing and Betting industries, and hence in £m 2002/03- need of major reform or replacement. 4,000 2008/09 3,626 3,601 3,235 10.1% 3,135 Regardless, there is a strong desire in the 2,953 3,000 2,551 Racing industry to develop commercial partnerships with the betting industry. A 2,026 14.2% (other frustration is that operators are not 2,000 betting) competing on content, with the innovation 1,230 1,153 1,119 1,077 1,077 1,010 that creates between sports and their 1,000 858 partners. There is a drive to attract the 2.8% ‘flutterer’, to create understandable exotic 0 bets. (i.e. low stakes but potential high 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 42% 45% 38% 34% 33% 34% 28% returns) that appeal to a broader demographic than traditional punters. Horseracing12Other betting British Racing’s percentage of gross win The development of new bets must Note 1: British Racing gross win includes betting exchange commissions, typically 1.5-5%, on winning bets and which has grown from complement more effective promotion of £23m in 2002/03 to £76m in 2008/09. Note 2: Excludes online casino and poker and offshore sportsbook. horseracing as an exciting sport to bet on – with the betting industry working closely Source: HM Revenue and Customs; Company/group financial statements; Deloitte analysis. with the Racing industry.

Racing’s proportion of betting From their introduction to LBOs in 2002 the There is also pressure from Racing, and industry’s gross win gross win generated from FOBTs is now elements of the Betting industry, to address Figure 25 sets out the estimated total gross greater than that generated by British Racing. the perceived ‘unfair’ competitive advantage win of betting operators from British Racing offshore operators have by avoiding a and total from all betting, and the While British Racing remains the single cumulative 25% tax/levy on gross win. proportion derived from British Racing over biggest sports betting product of the seven years to March 2009. bookmakers, and the reason many people Looking outside the UK, the international visit betting shops, its relative share of gross reputation of the British Racing, as the Since 2003/04 the betting industry’s gross win has declined from 45% in 2003/04 to highest quality and most diverse in the win from British Racing has been over less than 30% in 2008/09. world, provides an opportunity to grow the £1 billion each year, and reached a peak of existing relatively small revenues from £1.2 billion in 2007/08. This fell back to overseas bettors. £1 billion in 2008/09. Challenges 0 The marked decline in gross win from British Currently over £200m of overseas betting The Betting industry has generated over Racing in 2008/09, and hence the Levy turnover is generated through a £5.5 billion in gross win from British Racing generated, is reflective of a number of trends combination of overseas betting feeding over the last five years to 2008/09, of which which are currently against Racing – notably into the Tote’s pools and At The Races and £513m was paid to Racing via the Levy. an ageing demographic, a shift to other Racing UK’s international revenues which betting products (which is typically beneficial are driven by betting activity. While progress Total betting gross win has experienced a to betting operators given the higher and/or has been slower than hoped there remains period of prolonged growth throughout the more predictable returns of other betting the opportunity to significantly grow this current decade – with a £1.6 billion (78%) products) and the continued movement revenue if it could be broadcast to a wider increase between 2002/03 and 2008/09. offshore of former British betting operators. international market. While horseracing gross win has grown in absolute terms until 2008/09, the drivers of Racing continues to argue that it does not the growth has been the explosion of receive an adequate or fair return from the FOBTs and, to a lesser extent, non racing betting industry given the value of its sports betting. FOBTs are highly profitable product. Furthermore, the current structure and unlike Racing, and other sports, have of the Levy (itself a product of 1960’s predictable returns in the region of 2%. legislation) is seen by Racing as working

35 36 ECONOMIC IMPACT OF BRITISH RACING SECTION 3 Broadcasting

Overview Figure 26: Broadcast audiences for key Racing fans now also have the option of Broadcast coverage is a crucial ‘shop meetings – 2004 to 2008 watching races live online with At The window’ for sport, as it allows access to a Races and Racing UK, who are both m greater proportion of the population than building an associated range of interactive 10.5 just racegoers. 10.2 and betting services. 10 9.7

British Racing benefits from extensive 8.3 7.7 broadcast coverage, through both terrestrial 8 International reach services – BBC and Channel 4 – and two The reputation and quality of British Racing dedicated racing channels, At The Races 6 is demonstrated by its global broadcasting and Racing UK, which between them reach. Both At The Races and Racing UK broadcast live every race staged in Britain. 4.0 product is broadcast to over 20 countries, 4 Racing therefore has the most broadcast 3.1 3.1 3.0 with new territories being added each year. time of any sport in Britain. 2.8 2 1.7 1.6 1.8 1.6 1.6 The broadcast pictures facilitate increased 1.5 overseas betting revenue which, while still 1.3 1.1 1.1 Domestic average 0.8 relatively small in comparison with British 0 A total of 93 days racing (encompassing 2004 2005 2006 2007 2008 betting levels, is steadily growing – with races from 201 individual fixtures) was Grand National Royal Ascot (Ladies day) overseas revenues of over £10m shared Derby Cheltenham Festival broadcast on either the BBC or Channel 4 (Gold Cup) between the channels in 2008 from over in 2008. The BBC will reduce its coverage £200m of overseas bets placed on British Source: BARB; Deloitte analysis. from 2010 but Channel 4 coverage will racing. continue and will take up most of those meetings the BBC is no longer televising. At The Races is a free satellite/cable British Racing’s biggest occasions have a channel which has over 1.5m individual global eminence, with the Grand National Viewing figures are typically in the range of viewers per month from a potential base of viewed by over 500m people worldwide. 0.5-0.8m but are significantly higher for the 13m homes. It broadcasts races from 30 Major British meetings, such as Royal biggest meetings as illustrated in Figure 26. racecourses in Britain as well as races from Ascot, are becoming ever more international Ireland and overseas, televising more than with runners and winners from Australia, The Grand National is consistently placed in 1,100 British and Irish meetings in 2008. USA, Hong Kong and South Africa. This the top 10 most viewed sports events in any international dimension should increase its given year often attracting more than 10m Racing UK is a subscription based channel global racing presence further still. viewers (in 2008 from a 67% audience share). which is owned by 30 racecourses. The channel had an estimated 51,000 residential Whilst the picture for horseracing The two dedicated racing channels operate subscribers in 2008 (up from 36,000 in broadcasting is relatively complex, it different business models, both of which 2006). Many commercial premises also remains not only a key promotional tool for were profitable in 2008 enabling them to regularly show Racing UK with over 2,300 the sport, but a platform for reaching pass substantial revenues on to their such subscribers. Racing UK was part of existing and new customers with significant respective racecourse partners. the Setanta Sports package until Setanta opportunities for further developing the entered Administration in June 2009 and horseracing product. ceased broadcasting. It has now reverted The Grand National is to a stand alone subscription model. consistently placed in the top ten most viewed sports events in any given year often attracting more than 10m viewers.

37 International comparisons

British Racing is highly regarded on the Figure 28: Top International Flat races – 2006 to 2008 global stage. This section compares and contrasts British Racing with many of its Rank Race Racecourse Country main competitors by examining the quality and quantity of racehorses, attendance 1 Breeders’ Cup Classic Santa Anita USA levels and betting turnover. 2 Arc de Triomphe Longchamp France 3 International Stakes York Britain 4 Prince of Wales’s Stakes Ascot Britain Quality of racehorses 5 King George VI and Queen Elizabeth Stakes Ascot Britain 6 Queen Elizabeth II Stakes Ascot Britain Figure 27: Top international classified 7 = Japan Cup Tokyo Japan Flat thoroughbred racehorses by training 7 = 2000 Guineas Newmarket Britain location – 2008 9 = Irish Champion Stakes Leopardstown Ireland 9 = Champion Stakes Newmarket Britain

14% 11 Derby Epsom Downs Britain 12 Moulin De Longchamp Longchamp France 30%

7% Note: Compiled annually, based on a rolling three-year average of ratings of the first four finishers in each race according to the World 3% Thoroughbred Racehorse Rankings.

9% Source: International Federation of Horseracing Authorities (“IFHA”).

9% 16% Cultural, structural and • betting turnover – demonstrating the 12% intangible factors attractiveness of racing as a betting British Racing benefits from a variety of product;

USA Britain Australia France intangible factors which, although not Japan Ireland UAE Other quantifiable, are almost universally accepted • number of different runners; and as key elements in Racing’s prosperity. Source: IFHA; Deloitte analysis. • racecourses attendances – an indicator Owning a racehorse in Britain has an of the popularity of racing as a spectator Britain provided around 16% of the world’s ‘aspirational’ element to it. The continued sport. top ranked Flat thoroughbred racehorses in association of the monarchy with Racing 2008 – the highest after the USA. (for example, Royal Ascot) is indicative of More people attend Racing in Britain than in the relatively high social standing that the any other country except the USA and In the last five years horses trained in Britain sport commands. Unlike in some Japan. won £52m in overseas prize money, international racing countries, ownership is compared with £31m won in Britain by a respected recreational activity. Average attendances at British fixtures are overseas trained horses (including Irish). similar to those in Ireland and are higher Another factor that adds to the appeal of than anywhere outside Asia. British Racing is the variety of races, from Attracting the best major courses of international renown such Global racing attendances have suffered Britain stages many of the world’s top Flat as Ascot and Aintree to small rural courses. major declines in recent years – most races as illustrated in Figure 28. Seven of Britain’s racecourses are unrivalled globally pronounced in Asia but also felt elsewhere. the top 12 races, based on the rating of the in terms of their diversity, with each having The increased betting options, diverse horses running in them, were staged in its own distinct character and features. leisure offerings and a failure of Racing to Britain in 2008 across four racecourses. Racing in Britain is accessible to all and engage with new young racegoers are enjoys a reputation for both high quality common issues. Britain’s limited declines Britain, along with Ireland, is the dominant sport and good value entertainment. since 2004 (following a period of sustained global force in Jump racing. The Cheltenham growth), has been much shallower than in Festival is the undisputed “Olympics” of Figure 29 across compares British Racing many countries but nonetheless an issue Jump racing, and the Grand National is with other major racing nations by looking British Racing must actively seek to arguably the world’s most famous race. at three key measures: address.

38 ECONOMIC IMPACT OF BRITISH RACING SECTION 4

Figure 29: Leading horseracing nations – betting, horses and attendances Figure 30: Leading horseracing nations – betting turnover and returns to the r

e £m v racing industry o 15,000 n r u t

g Japan

n Country Total Return % i t t 12,000 e betting to B on horse racing Britain 9,000 racing industry £m £m USA 6,000 France Japan 13,979 741 5.3 Britain 2 12,134 118 1.0 Australia 3,000 USA 7,343 589 8.0 Ireland France 3 6,636 531 8.0

0 Hong Kong 4,560 104 2.3 020,000 40,000 60,000 80,000

Number of different runners Note 1: Based on 2007 for all countries and using exchange rates as at 31 December 2007. Note: Attendance data are for 2008 when available or estimates if not. All other data is for 2007. Bubble size represents aggregate attendance. Note 2: Consists of estimated levy for calendar year 2007 and commission paid by the tote to racecourses for on-course activities. Source: Horseracing Ireland; IFHA; Japan Racing Association; Deloitte Analysis. Note 3: Includes betting on trotting races which is significant. Source: IFHA; Deloitte analysis.

Betting on Racing from other sources, including admissions, As Figures 29 and 30 show, Britain’s catering, media, sponsorship and other British Racing has in effect been forced to absolute betting levels on Racing rank commercial activities. develop a more diversified funding model. second only to Japan in the world’s leading It is increasing placed at a major horserace betting markets. It is well ahead This contrasts with the situation in many international disadvantage as it is not able of a number of significantly larger markets other countries, where income from betting to match the levels of prize money paid by by adult population. In terms of average forms the large majority of racing's revenue. some other countries. This situation risks betting turnover per adult British Racing is The betting industry support primarily being exacerbated if further declines in ranked fourth behind, Australia and Ireland comes through distributions to racing from betting revenue paid to British Racing and Hong Kong. the respective national horseracing betting through the Levy are experienced. Racing is operator, which is almost always a therefore considering all options, including a The gross win from British Racing has, until monopoly pool betting operator. replacement to the Levy system, to arrest a fall in 2008/09, held up well in the last five this decline. years, in contrast to the declines, or Figure 30 illustrates this point by comparing stagnation at best, in many racing markets. the absolute and percentage returns received by British Racing compared with Summary Major racing nations are developing ways of other major racing nations. British Racing Overall Racing in Britain enjoys a higher promoting exotic bets with international receives around 1% of horseracing betting profile across all forms of media, and is appeal as part of their strategy to arrest the turnover from British betting operators, better supported by racegoers and bettors decline. compared with the much higher returns of than in many of the other leading other countries which are as high as 8% in horseracing countries. the USA and France. Competitive pressures Britain’s alternative funding model have led to reductions in take-out rates It already plays a valuable role in Britain operates a different Racing funding (i.e. amount not paid out in prize money) international racing but initiatives to increase model from many other countries, notably it and hence returns to the respective racing this presence further are being developed has much lower receipts from betting. In industries in many countries such as Hong such as Royal Ascot’s ongoing recruitment Britain, only around a third of racecourses’ Kong, but even there rates paid to racing of the world’s top horses. revenue is from betting, despite it remain much higher than in Britain. generating the second highest betting turnover. Two thirds of revenue is derived

39 Rural context

Horseracing is a significant contributor to the economic and social infrastructure of the rural economy in Britain as a whole, and makes an even more marked contribution to certain local economies.

Employment The importance of Racing to the rural economy is illustrated by Figure 31 below. While naturally farming employs many more people, Racing’s employment is still sizeable, and employs more people than forestry, logging and related service activities.

These figures are combined national totals Figure 32: UK agricultural industry income trends 1973 to 2008

– as noted below Racing has an even more £bn significant impact on certain local areas of 10 Total income from farming Trend line Britain.

8 Figure 31: Employees in rural industries

Rural economy sector Total 6 employees

4 Farming 200,000 Horseracing 18,600 Forestry and primary wood 11,000 2 processing 0 1973 1975 1977 1979 1981 19831985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007

Source: DEFRA; Office of National Statistics; Deloitte analysis. Note: Income represents business profits plus remuneration for work done by farm owners and other unpaid workers and is stated in real terms at 2008 prices.

Source: DEFRA. Unlike in many rural industries employment levels in Racing have increased in recent years. Levels of employment in farming Equine industry and over 4m riders. Figure 33 across have steadily declined, in part due to the While the number of thoroughbred horses in provides a snapshot of the scale of the falls in agricultural income which as shown training or breeding of c.40,000 represents industry through number of horse owners in Figure 32 have fallen in real terms by a relatively small proportion of the total and riders. Furthermore over 500,000 more than half since 1973. The jobs horse population of over 1m, thoroughbred hectares are dedicated to maintaining and Racing provides are therefore more valuable horseracing acts as a valuable ‘flagship’ for producing horses. than ever. the wider equine industry. The 2.1m people who ride at least monthly The most recent study of the equestrian (and many of the 2.2m more occasional industry, performed by the British riders) are almost certainly open to Racing Equestrian Trade Association in 2006, involvement whether in ownership or going estimated the total expenditure within the racing. The Racing industry already equestrian industry to be £4.3 billion per engages with many of these people, but is annum including riding lessons and is developing new schemes to build on this. driven by the over 700,000 horse owners

40 ECONOMIC IMPACT OF BRITISH RACING SECTION 5

Figure 33: Horse owners and riders Point-to-Point Racing m

Number of horses 1.4 Number of owners 0.7 Population that rides once a month 2.1 Point-to-Point racing is an amateur form Population that rides at least 2.2 of Jump racing which provides an once a year important link between grass roots horse Total riders/annum 4.3 racing and professional Jump racing and Land dedicated to horses 0.5 attracts over 600,000 attendees each year (million hectares) over the November to June season. It has a rich history dating back over 200 years and extends across Britain with over 200 Source: BETA National Equestrian Survey 2006. fixtures held in a year across 117 courses spread across the country. The British Horse Industry Confederation has estimated that, excluding Racing, there Point-to-Point meetings are run by local Keep costs for a Point-to-Point horse vary are 24,000 businesses active in the Hunts or recognised Point-to-Point Clubs significantly but average around £180 per equestrian industry (incorporating riding and by volunteers who give their time and week over the duration of the season. schools, farriers, livery yards, retailers and energy for free. The volunteers are the With ancillary items such as farrier costs, manufacturers of equestrian supplies), cornerstone of Point-to-Point with up to veterinary bills and travel the average cost which employ almost 50,000 full time 100 involved at each fixture. Meetings of owning a Point-to-Point horse is employees. A significant proportion of the form an integral part of the local estimated to be over £6,000 per annum. these businesses and jobs are rural based. community. Once employment in the equestrian sector Point-to-Point key statistics 2008/09 is added to Racing, it is the largest sporting For Hunts and Clubs, Point-to-Points offer employer in the country. the opportunity to raise vital funds. Annual racedays 212 Revenues are driven by attendances, with Hunter certificates registered 3,754 spectators attracted to local meetings for Riders certificates issues 830 The 2.1m people who a low cost family day out, the opportunity Number of courses 117 to see thoroughbred horses up close and Raceday attendance 630,000 ride at least monthly are to experience the vibrant raceday almost certainly open to experience. Bar and catering facilities, Direct expenditure £30m trade stands and various other Source: PPA; BHA; Deloitte estimates. Racing involvement entertainment (such as country fairs and whether in ownership or fairground rides) provide opportunities for organisers to boost attendances and Whilst retaining regulatory control, the BHA going racing. The Racing generate additional on-site spend. has recently delegated day to day running of Point-to-Point racing to the newly industry already engages In total Point-to-Point Racing is estimated formed Point-to-Point Authority (PPA). with many of these to contribute around £30m to Racing. Around two thirds of this is spent by Point-to-Point has a strong track record, people, but is developing owners – primarily consisting of the as the grass roots support to Jump new schemes to build training, registration and entry fees of the Racing, in developing owners, riders, c.3,750 horses, with the majority of the trainers and horses that have on this. rest being expenditure by spectators. subsequently achieved success in the professional sport.

41 42 ECONOMIC IMPACT OF BRITISH RACING SECTION 5 Local aspects

Local impact of racing The impact of Racing on Britain’s economy and society has been a constant thread in this study. However, the effect of the industry is also particularly important to the local economies of certain key racing locations, as the feature article on the Lambourn area illustrates.

In addition to on-course expenditure, the areas surrounding racecourses benefit from secondary expenditure around the raceday. Such expenditure may include transport to and from the meeting, accommodation, food and beverage and entertainment for those staying in the area overnight.

Local impact of racecourses The feature article on Haydock Park on The total off-course The local impact of Racing and the off-site page 23 further illustrates the impact a busy expenditure it generates is demonstrated by urban racecourse has on the local economy. expenditure of racegoers the example of York Racecourse, for whom in 2008 is estimated as the University of York undertook a study to evaluate its impact on the local economy in Off-course expenditure being £222m. 2007. York Racecourse is northern The level of off-course expenditure naturally England’s premier Flat course with a varies across the fixture list, with Racing’s capacity of over 40,000 and in addition to flagship festivals attracting the largest A substantial proportion of this expenditure the annual Ebor Festival has in recent years crowds and generating the greatest is derived from the major multi day events has been used as a temporary site for expenditure. such as the Cheltenham Festival (aided by Royal Ascot (2005) and the St Leger an estimated 7,000 Irish racegoers per day) Festival (2006). The total off-course expenditure of racegoers to a very low proportion of racegoers for a in 2008 is estimated as being £222m. single day midweek fixture. It has been The study considered the local employment estimated that 1 in 20 racegoers include an and expenditure effects of York Racecourse Figure 34: Estimated off-course overnight stay and incur expenditure of in 2007 and reported that: expenditure in Britain 2008 £41m on accommodation, transport and food and beverage. £m • York Racecourse increased total direct 150 147 and indirect expenditure in York by £44m; 57 The remaining racegoers are day trippers and are estimated to incur expenditure of • The expenditure created 1,354 job years 100 £147m on transport, off-course food and of employment; 90 beverage and other spending – an average 41 50 £27 per attendee. 34 • A total of 347,000 visitors were attracted 10 31 to York Racecourse in 2007, which In addition to this expenditure from racegoers 0 accounted for 8% of all visitors to York; Overnight Day visitors Trade paper the estimated £34m spent annually by visitors sales racing consumers (including racegoers) on Accommodation and entertainment • These visitors contributed about 15% of Travel Trade paper sales specialist racing papers, primarily the Racing the total visitor boost to expenditure and Post, is included in off-course expenditure employment to the city of York. and brings total off-course expenditure in Source: Deloitte analysis. Figure 34 to over £220m.

43 Racing’s position within the sports market in Britain

The sports and leisure market in Britain Figure 36: Top ten attended sporting events in Britain 2008 remains extremely competitive. The ability to attract attendees, sponsorship, broadcasters, Rank Sport Event (duration in days) Aggregate attendance other commercial support and media coverage is a key indicator of how effective a 1 Tennis Wimbledon (13) 476,000 sport is in competing for market share. This 2 Horseracing Royal Ascot (5) 288,000 section assesses British Racing’s position 3 Motorsport Formula One (Silverstone) (3) 240,000 within the UK sporting landscape in terms of 4 Golf The Open (4) 202,000 attendees, revenues, and employee numbers. 5 Equestrian Badminton (3) 200,000 6 Horseracing Cheltenham Festival (3) A 178,000 When comparing sports it is important to 7 Horseracing Derby meeting (2) B 160,000 consider the often different factors that 8 Horseracing Grand National meeting (3) 145,000 have shaped their respective commercial 9 Motorsport MotoGP (Donnington) (3) 135,000 structures. For example none of the other 10 Cricket England v South Africa (Lord’s) (5) 109,000 sports discussed in this Section have an equivalent to the large body of racehorse Note A: One day of the four-day Cheltenham Festival was abandoned in 2008. The Festival attracted an attendance of c.209,000 over four full days in 2009. owners who inject very substantial sums Note B: Includes an estimated 100,000 attendees on the Hill who pay limited admission fees. into the sport each year. Source: BHA, Deloitte analysis.

Attendances After football, horseracing continues to be • Racing’s higher total attendances are, in • Of all the sports shown, Rugby Union has comfortably the best attended sport in part, driven by the large number of fixtures had the most success in growing Britain as shown in Figure 35. (1,423 in 2008) relative to other sports. attendances since 2005 (up by nearly In comparison, Rugby Union’s total 20%), but Cricket, helped by the Figure 35: Total attendances in Britain attendance of 3.8m is driven from around development of Twenty20, also recorded for selected sports 2008 400 domestic competition and solid underlying growth (2005 was an international match fixtures – although Ashes year and hence had higher m attendances at the top horseracing fixtures attendances at Test matches). 40 39.0 compare with those at top matches. g n i c g • Both sports’ above use of innovative e a n n r i u o c i

30 g d

a • Certain race meetings are not only marketing and a willingness to alter/ n a n r U e e u L s o y cornerstones of the British and global introduce competitions that reach out t r h y b e o y g b k l H e l u g c horseracing calendar but are embedded beyond their “core” attendees, provide r i

10 a u r R G b R t 5.7 C within the wider British sporting calendar. lessons for Racing. o 3.8 3.1 o 2.2 1.9 F These are vital opportunities for the sport 0 38.0 5.9 3.2 3.5 2.1 1.9 to promote itself to a wider audience. 2005 attendances Four race meetings – Royal Ascot, the Revenues Cheltenham Festival, Grand National Racing compares favourably when Note: Football and Rugby Union refer to 2008/09 season, all other calendar year 2008. meeting and the Derby meeting – assessing the level of revenues generated featured in the top ten attended sporting by Britain’s racecourses relative to those of Source: BHA; Deloitte analysis. events in Britain in 2008. other sports in the country.

The sport’s attendances, compared with other • Whilst Racing has a core and loyal base The key characteristics of racecourse sports, are characterised by the following: of regular attendees, a large proportion of revenues, and the sources of revenue, its total attendees are irregular racegoers compared to other sports are as follows: • Total attendances of 5.7m in 2008 are who attend meetings once or twice a almost two million higher than those of the year. The ability of Racing to convert the • Britain’s 60 open racecourses in 2008 next best attended sport, Rugby Union, occasional visitor into a more regular generated total revenues of £376m – and two and a half times those of Cricket. customer is likely to hold the key to second only to football – and over £90m achieving future attendance growth and above that of Rugby Union, the sport with effectively competing for market share. the next highest revenues.

44 ECONOMIC IMPACT OF BRITISH RACING SECTION 5

Figure 37: Revenue breakdowns for challenge for Racing is to build revenues Figure 38: Full time employees within selected sports in Britain from commercial sources in future, professional sports in the UK particularly through sponsorship and non- £m ’000s raceday activities. In respect of the former, 400 20 376 a collective approach to develop the most 18,000 98 (26%) of the raceday product, and the linkages 14,100 300 282 between races and race meetings, is likely 15 91

71 n (32%) to be important in marketing the sport to (19%) o i e n u

potential sponsors, including those in 10 g 200 U

57 166 a y e

(15%) t

79 b

sectors which have traditionally been L e g

(28%) 51 g k n y i (31%) u 28 c 150 b i c l relatively untapped. R r l

(47%) g (40%) a r 5 a C 100 112 55 u e 12 b (33%) R 60 t (40%) s 2,400

(20%) r o 1,800 o 60 o 1,100 (36%) 20 • British racecourses have committed F H (33%) 0 £556m in the development of facilities 0 Horse Rugby Cricket Rugby racing Union League and infrastructure in the five year period Note: Racing also employs 8,000 part-time (non-raceday) staff, Event day Broadcast to 2008. This investment provides the which is significantly greater than other sports. Commercial Betting platform for racecourses not only to Source: Deloitte analysis. Note: To aid comparability, racecourse revenues have been primarily estimated from racecourse accounts and hence will increase eventday revenues but also differ from the figures in Section 4, with the largest difference due grow commercial revenues through to catering revenues being shown as net income. Also all levy receipts have been included which differs from some racecourses non-raceday activities. Racecourses generated accounts. Rugby union, cricket and rugby league revenues include income from international matches. much higher event day Source: Deloitte analysis. Employees revenues than all other Whilst employment within the majority of • In contrast to other sports, Racing sports is related to governance, sports outside of football. benefits from substantial betting revenues administration, and delivery of events, as – 26% (excluding LBO media monies) of well as the employment of athletes and total revenues in 2008. However, total coaching staff, the nature of the Racing Looking forward racecourse revenues excluding betting industry means that its operations span Racing’s position within the British sporting revenues (so including LBO media several industry sectors. Full-time landscape is well established. Behind monies) totalled £278m in 2008, similar employees within the Racing industry football, the sport retains its second place to that of Rugby Union. include breeders, owners, trainers, jockeys, ranking in terms of total attendances and and administrative staff (both at revenues, and there is evidence that it is • Encouragingly, racecourse revenues racecourses and other bodies). competing effectively for market share. excluding betting income have increased by £66m (31%) in the three years since Racing employs over 14,000 full time The leisure and entertainment market 2005. This rate of growth exceeds that of employees (rising to 18,600 FTE when part- continues to be hugely competitive, with Rugby Union (25%) and Cricket (16%). time and raceday employees are included). perceptions of which activities deliver the Among sports, this is second only to best value for money increasingly important • Racecourses generated much higher football, whose clubs and administrative in terms of how consumers choose to event day revenues than all other sports bodies employ approximately 18,000. When spend their leisure time and allocate outside of football, £38m more than these employee numbers are considered discretionary spend. Rugby Union. The volume of fixtures is a relative to their revenues, Racing can be major factor, but the biggest race considered relatively labour intensive. The challenge for Racing – like all sports – meetings are also amongst the highest It should be noted that a substantial is to continually assess its product offering grossing sporting events in Britain. number of individuals are involved with in order to attract attendees, sponsors, other sports at grassroots level (either paid other commercial partners and national and • In comparison with other sports, the or voluntary) on a full-time, part-time or international media coverage. relative contribution of commercial casual basis. Horseracing also employs a revenues to racecourses’ total revenues substantial number of people (8,000) on a is proportionately low. A continuing part-time basis.

45 Leisure comparisons

The leisure market Leisure activity attendances Revenues Racing competes for consumers not only Figure 40 below puts racecourse Figure 41 compares the expenditure on with other sports, but with the wider range attendances in the context of other popular Racing with that on other leisure activities of leisure activities. The term ‘leisure’ is all- leisure activities (see also Racing’s position together with a high level estimate of spend encompassing and refers simply to the time within the sports market in Britain ). per visit. The analysis highlights that while spent on activities that are not considered racecourse expenditure per visitor is much to be ‘work’. Consumer expenditure on Figure 40: Total annual number of visits higher than for some of the selected leisure leisure and recreation has boomed over the to selected leisure activities activities it is competitive against others. last twenty years. With a seemingly Racing spend also covers a broad range of unlimited choice of options of how people Total number of visits 1 customers, including corporates. Families can choose to spend their leisure time, and million can utilise free entry for children to create higher disposable incomes, modern very competitive family packages. households devote almost a fifth of their Cinema 164 expenditure to leisure goods and services. Bingo clubs 2 78 As leisure expenditure becomes threatened in Music concerts 24 periods of economic instability, racecourses Figure 39: Activities performed in Casinos 16 have the further advantage of being able to free time Theme parks 13 offer an entry price to suit all levels of demand. Horseracing 5.7

Watching TV 85 The expenditures that have been selected Note 1: Visitor numbers have been quoted for the most recent for Racing and other leisure activities are Time with friends/family 79 years available. those that permit a meaningful comparison Listening to music 73 Note 2: Bingo estimate is for 2005 hence will overstate visits by potentially more than 25%. of spending per visit to be made. For Eating in restaurants 66 Racing this means racehorse owners’ Source: Gambling Commission; BHA; UK Film Council; MINTeL. Sport/exercise 65 expenditure (£430m) and off-course betting

Reading 60 (£1.1 billion) have been excluded. If these Other events that have similarities in having were included then they would be Days out 59 betting as part of their entertainment model significantly greater than all other quoted Shopping 50 such as bingo and casinos currently attract leisure examples other than music concerts Pubs/bars/clubs 47 a greater number of annual visitors, though for which it would be similar. Internet/emailing46 the bingo market has declined markedly in DIY 43 recent years, particularly as a result of the

Gardening 43 smoking ban. Employees The relatively labour intensive nature of Cinema 41 Since racecourses are rarely filled to Racing means it supports more employment 31 Theatre/concerts capacity there is the opportunity for Racing than many similar sized leisure industries. 27 Computer games to increase its attendances by targeting

0 20 40 60 80 100 % other industries’ customers and/or working Figure 42: Number of employees for Applicable to Racing together to cross sell package leisure selected leisure industries (2007-2008) activities. Increased diversification of the ’000s Note: Dark green shading has been used to highlight leisure raceday product, such as combining live activities that could be combined with Racing. Percentages do 40 not sum to 100 per cent as respondents could give more than music with Racing has been successful in 35.4 one answer. recent years, aided by the general Source: Taking Part: The National Survey of Culture, Leisure and resurgence in music concerts. Given the 20 Sport, Department for Culture, Media and Sport, 2006/07. 18.6 18.5 competitive nature of the leisure industry 17.0 15.0 racecourses must fight to maintain their 0 Cinema Horse Bingo Theme Casinos Figure 39 illustrates how a ‘day at the market position. Without ongoing (film/ racing clubs parks races’ combines the description of many of innovation Racing risks losing market share. video) the nation’s favourite leisure activities – this Note: Horseracing employment consists of core FTE industry only. Bingo estimate is from 2005 hence will overstate current levels is one of its great strengths. given the decline in the number of clubs.

Source: Gambling Commission; UK Film Council; Deloitte analysis.

46 ECONOMIC IMPACT OF BRITISH RACING SECTION 5

Figure 41: Expenditure on selected leisure activities in Britain (2007-2008)

£bn £79 £13 £5 £43 £22 £48 2.0 1.90

1.5

1.0 1.00 0.85 0.70 0.5

0.30 0.275 0 Music Bingo Cinema Casinos Theme Racecourses concerts clubs (box office) parks Illustrative spend per visit

Note: Racecourses revenue based on admissions, catering, on-course betting and other sundry amounts. Casino expenditure represents house win plus estimate of secondary spend. Bingo spend is the net loss of attendees on all games plus other spending and is for 2005 hence will overstate current expenditure.

Source: Gambling Commission; UK Film Council; MINTeL; Deloitte analysis.

Looking ahead Given the competitive Leisure expenditure is discretionary and naturally becomes more vulnerable during nature of the leisure periods of economic instability, as industry racecourses experienced during 2008, as people’s disposable incomes are threatened. The must fight to maintain distinction between ‘necessity’ expenditure their market position. and expenditure on luxury goods becomes heightened and people may seek cheaper alternatives to expensive activities, such as The challenge for racecourses will be to watching television and reading. Indeed the continue to provide value for money concept of ‘intertainment’ (increased leisure entertainment that appeals to new race time spent at home) has recently emerged. goers as well as traditionalists. Flexibility of corporate offerings as well as a continued Racing, as a significant contributor to the focus on the raceday experience will be British leisure industry, clearly faces these central to achieving this. challenges. Nonetheless the economic climate brings opportunities for specific leisure sectors if they can react quickly to changing customer demands. For example, a weak pound and lower disposable incomes will encourage people to holiday in Britain, and ‘a day at the races’ may be seen as welcome light relief from economic gloom.

47 Report preparation, methodology and limitations

Introduction and scope of our review 1. Collating industry expenditure • Consumer or wage effects – an increase in Our reliance on information The BHA commissioned Deloitte LLP The methodology used in estimating direct an organisation’s activity level will mean a In preparing this Report, we have used (“Deloitte”) to produce this Report, which and indirect expenditure within the industry higher wage bill. This money will be spent information and data extracted from various has been prepared in accordance with the is discussed in the main body of the partly in the economy. This rise in published surveys, which we assume to be contract dated 18 March 2009. The Report document. consumer demand requires increasing reliable, to obtain the inputs into the sets out the results of research and analysis production of goods and services, hence economic model which we used to estimate of the Economic Impact of British Racing The collation of this information serves two increasing expenditure (the induced effect). the economic impact of the Racing Industry. Industry, and sets this in the context of other purposes. First and foremost as an end in In addition, we have used information and sports, leisure activities and the rural itself, but also as the input to the model The multipliers used in this Report, give both data which have been provided to us by a economy in Britain and major overseas which generates estimates of multiplier the indirect and induced effects of wide variety of organisations including the racing nations. impact activity in the rest of the economy. expenditure in the horseracing industry. BHA, other British racing organisations, An example of this is the need to source overseas Racing bodies, the betting industry Use of this report and legal services that are not related to the core The indirect and induced effects are and Government sources. In all cases (and responsibility industry such as a trainer using the services estimated by Type I and Type II multipliers in including information from organisations not Some of the matters discussed in this of an accountant. the model. Type I multiplier data allows us to listed), we have relied upon such information Report are by their nature technical. The calculate the indirect effects as a result of and data as being true, correct and intended recipient of the report, the BHA, The method used to assess this type of the initial expenditure. Type II multipliers complete and have not audited, tested or is familiar with the issues, facts and other knock-on benefit is outlined below. enable us to calculate the indirect and checked any such information or data. matters addressed and the Report was induced effects generated by the initial written with that in mind. 2. Translating expenditure expenditure. By taking the differences The horseracing industry does not between Type I and Type II effects, it is Specific limitations of our review This Report is prepared for the sole and correspond directly to one of the 123 possible to isolate the consumer spending In accordance with our terms of confidential use of the BHA and for the industry/product groups used for modelling effects of the expenditure. engagement, or due to our findings when purposes set out in the terms of purposes as defined by the Office for performing our work, the following specific engagement. In preparing this report our National Statistics (“ONS”). For this reason it It should be pointed out that in interpreting limitations should be noted: only responsibility and duty of care is to the is necessary to relate industry expenditure to the results from the model, the hypothetical BHA. We did not, and do not by consenting the appropriate industry/product. removal of the horseracing industry from the • The economic impact of those elements to publication of this Report, assume or UK economy would not result in a drop in of the “Horse Industry” outside of the accept or owe any responsibility or duty of This means that the direct expenditure is national economic output of the magnitude British Thoroughbred Racing and care to any other person. treated as a sporting activity, which comes that the industry currently contributes. This Breeding Industries (“British Racing”) – under industry/product group 121 – is simply because businesses and people other than the indirect expenditure which The BHA has asked for our consent to Recreational, Cultural and Sporting Activities. would spend their money elsewhere. arises in these elements as a result of making this report publicly available by British Racing – has been excluded. posting it on BHA or other Racing websites, Indirect off-site expenditure such as on retail The model is intended to show the extent to and other appropriate distribution methods and travel is distributed accordingly to the which the industry is linked with the rest of • The British breeding industry is complex as agreed with Deloitte. We have agreed to relevant industry/product group. the economy and what the contribution of and consists of a number of sub-sectors provide such consent on the following the industry currently is, rather than with distinct, often very different, conditions: 3. Modelling suggesting what would happen to the UK characteristics. In preparing this Report The multiplier methodology described below economy if the industry did not exist. we have looked at the breeding industry • This report may not be suitable for the is used extensively by Deloitte in assessing in aggregate only, and at a high level only. use of any person other than the BHA. both the impact of a given sector or industry The amount and robustness of Accordingly, publication of this report to on the national economy or the economic Consultations information available for the breeding persons other than the BHA is for impact of new developments in a given We have consulted with individuals from sector is currently less than for other information purposes only and no person location. over 20 organisations from every sector, aspects of British Racing addressed in other than the BHA should place any including: this Report. reliance on this Report; and The model is based upon the 1995 Domestic Use input-output table for the • Racecourses – Racecourse Association, • The economic impacts in this Report do • We do not assume or accept or owe any United Kingdom, produced by the ONS. Northern Racing, Jockey Club not specifically include the likely responsibility or duty of care to any Racecourses, Ffos Las, York racecourse; economic contribution made by off-site person other than the BHA. Accordingly, Specifically the model is an alteration of the British Bookmakers from profits made on any person other than the BHA who, publicly available input-output table, which • Other racing organisations – Racing British Racing other than that generated contrary to the above, chooses to rely on has been modified to differentiate between Enterprises, Jockey Club, Levy Board, through the Levy payments and tax paid this Report, does so at their own risk and types of impact that are not published by the Weatherbys, Point-to-Point Authority; on betting operators’ gross win on British we will not be responsible for any losses ONS. This was achieved by using specialist Racing. of any such person caused by their matrix manipulation software. The model • Ownership and training – Racehorse reliance on this Report. details what proportion of inputs each Owners Association, National Trainers • As a simplification of any industry an industrial sector sources from other sectors Association, Jockey Club Estates; economic model of this type can only when producing an extra unit of output. ever be expected to represent an Economic model methodology • Breeding – Thoroughbred Breeders approximation of a real-life outcome. The The methodology applied can be simplified The principle behind a multiplier effect is that Association, Federation of Bloodstock model relies upon data published by into three broad stages described below: a change in economic activity will have Agents; ONS as well as information provided by knock-on effects for the rest of the stakeholders as part of this study. It is 1. Collation of direct and indirect expenditure economy. These effects can be assumed to • Betting industry – Administration of possible that industry linkages have data from available information. take place through two channels: Gambling on Tracks Ltd, Tote; changed since the publication of the 1995 Domestic Use Matrix, but as the 2. Translation of expenditure data into • Supply-side linkages (Business to • Broadcasting – Racing UK; latest available data on which to base our expenditure by industry type to facilitate Business effects) – if industry demand analysis the ONS data used is the most modelling. increases it can be assumed that • International – Various international appropriate. production will increase. This expansion horseracing governing authorities 3. Development and use of an input-output requires more raw materials and and IFHA. model to estimate the wider effects of the associated services from other industries. industry on the economy as a whole. In turn these other industries may need to increase production to meet the demand and they too will increase levels of economic activity (the indirect effect); and

48 ECONOMIC IMPACT OF BRITISH RACING Glossary

BHA British Horseracing Authority

British Racing or Racing British Racing and Breeding Industries

CAGR Compound Annual Growth Rate

FOBT Fixed Odds Betting Terminal

FTE Full Time Equivalent

GDP Gross Domestic Product

GPT Gross Profits Tax being 15% of Gross win

Gross win Amount staked by bettors less prizes paid out

GVA Gross Value Added

HBLB or Levy Board Horserace Betting Levy Board

IFHA International Federation of Horseracing Authorities

LBO Licensed Betting Office

NTF National Trainers Federation

PAYE Pay As You Earn

REL Racing Enterprises Limited

RCA Racecourse Association

ROA Racehorse Owners Association

SIS Satellite Information Services Ltd

TBA Thoroughbred Breeding Association

VAT Value Added Tax British Horseracing Authority 75 High Holborn · London · WC1V 6LS Telephone: 020 7152 0000 · Fax: 020 7152 0001 Email: [email protected] britishhorseracing.com