The Economic Impact of the British Greyhound Racing industry 2014

Economic Impact of the British Greyhound Racing industry 2014

REPORT PREPARATION, METHODOLOGY AND LIMITATIONS INTRODUCTION AND SCOPE OF OUR REVIEW The Greyhound Board of Great Britain (“GBGB”) commissioned Deloitte LLP (“Deloitte”) to produce this Report, which has been prepared in accordance with the contract dated 24 September 2013. The Report sets out the results of research and analysis of the Economic Impact of the British Greyhound Racing industry.

· This report may not be suitable for the use of any person other than the GBGB. Accordingly, publication of this report to persons other than the GBGB is for information purposes only and no person other than the GBGB should place any reliance on this Report; and · We do not assume or accept or owe any responsibility or duty of care to any person other than the GBGB. Accordingly, any person other than the GBGB who, contrary to the above, chooses to rely on this Report, does so at their own risk and we will not be responsible for any losses of any such person caused by their reliance on this Report.

OUR RELIANCE ON INFORMATION In preparing this Report we have used information and data which have been provided to us by a wide variety of organisations including the GBGB, other British Greyhound Racing organisations, the Betting industry and Government sources. In all cases (and including information from organisations not listed), we have relied upon such information and data as being true, correct and complete and have not audited, tested or checked any such information or data.

USE OF THIS REPORT AND LEGAL RESPONSIBILITY Some of the matters discussed in this Report are by their nature technical. The intended recipient of the report, the GBGB, is familiar with the issues, facts and other matters addressed and the Report was written with that in mind. This Report is prepared for the sole and confidential use of the GBGB and for the purposes set out in the terms of engagement. In preparing this report our only responsibility and duty of care is to the GBGB. We did not, and do not by consenting to publication of this Report, assume or accept or owe any responsibility or duty of care to any other person. The GBGB has asked for our consent to making this report publicly available by posting it on GBGB or other Greyhound Racing websites, and other appropriate distribution methods as agreed with Deloitte. We have agreed to provide such consent on the following conditions:

SPECIFIC LIMITATIONS OF OUR REVIEW In accordance with our terms of engagement, or due to our findings when performing our work, the following specific limitations should be noted: · There is a diverse range of British greyhound trainers in terms of reason for training, size of kennel, type of racing etc. There is also a significant crossover between owners and trainers. Given the size of trainers’ businesses the amount and robustness of information available for the training sector is extremely limited and hence considerably less than for other aspects of the British Greyhound Racing industry addressed in this Report. · We have not considered the financial aspects of the British Greyhound Breeding industry. · The economic impacts in this Report do not specifically include the likely economic contribution made by off-course British Bookmakers from profits made on British greyhound racing other than that generated through the voluntary contribution payments and tax paid on betting operators’ gross win on British greyhound racing.

CONSULTATIONS We have consulted with individuals from over 15 organisations from every sector, including: · Administration – GBGB, British Greyhound Racing Fund; · Racecourses – Greyhound Racing Association, Sheffield, Pelaw Grange, Racecourse Promoters Association; · Trainers – Greyhound Trainers Association, several trainers including open race trainers and those contracted to a particular racecourse; · Betting industry – Association of British Bookmakers, Bookmakers’ Afternoon Greyhound Service; · Broadcasting/media – Racing Post, Satellite Information Services.

© Deloitte LLP. All rights reserved. Photography: Steve Nash/Greyhound Board of Great Britain

GLOSSARY OF TERMS ABB Association of British Bookmakers BAGS Bookmakers’ Afternoon Greyhound Service Individual placing a bet, or punter British Greyhound Racing Fund Company operating the majority of the pool betting facilities at greyhound racecourses Fixed Odds Betting Terminal Full Time Equivalent Greyhound Board of Great Britain Gross Profits Tax (being 15% of Gross win) Greyhound Racing Association (operator of four racecourses) Only available to greyhounds whose trainers are attached to the racecourse Amount staked by bettors less prizes paid out Greyhound Trainers Association The British Greyhound Racing industry Licensed Betting Office Greyhound racecourses licensed by the GBGB

NICs Open races

National Insurance Contributions Usually of a higher quality, open to all greyhounds regardless of trainer racecourse attachment Over The Counter (betting) Pay As You Earn Employees working only on days when racing takes place Racecourse Promoters Association Retired Greyhound Trust; an independent charity, numbers 269668 and SC044047 Racing Post Greyhound Television Satellite Information Services Ltd Value Added Tax

Contents
FOREWORD INTRODUCTION EXECUTIVE SUMMARY INDUSTRY CASHFLOW RACECOURSES OWNERS TRAINERS BETTING 2 3 4 8 10 16 20 23 27 28

Bettor BGRF Datatote

OTC PAYE Raceday (staff) RCPA

FOBT FTE GBGB GPT

RGT

RPGTV SIS

GRA

VAT

Graded races

TAXATION EMPLOYMENT

Gross win

GTA Industry

LBO Licensed tracks

ECONOMIC IMPACT OF THE BRITISH GREYHOUND RACING INDUSTRY 2014

1

Foreword

We are pleased to introduce this Economic Impact of the British Greyhound Racing industry report prepared by Deloitte, and would like to thank them for producing a very comprehensive snapshot of our industry which will prove invaluable as we seek to move the industry forward in the coming years.
Dealing mainly with financial data up to 2012, this is the first time that a comprehensive review of our industry’s economic position has been undertaken. That period included as testing a time financially as the sport has ever faced, with the economy in general struggling with the deepest recession in recent years, and Greyhound Racing was not immune to its impact. Like most spectator sports, greyhound racing derives income from patrons attending live events and a night at the dogs remains one of the most enjoyable and inexpensive ways to spend leisure time. The industry also receives a large proportion of its funding from the Betting industry, arising from wagering activity on the sport, mainly in licensed betting offices. Greyhound racing has long been an important product for the British and Irish off-course Betting industry, providing an exciting sport with high levels of integrity for their customers to enjoy whilst also generating healthy and stable margins for bookmakers. In addition to the direct payments under contractual agreements between GBGB-licensed racecourses and the Bookmakers’ Afternoon Greyhound Service (BAGS), Greyhound Racing also receives funding via the British Greyhound Racing Fund (BGRF). Unlike horseracing, we do not benefit from a statutory Levy and bookmakers make voluntary payments to the BGRF. The vast majority of British betting shops do pay into the Fund which is greatly appreciated but it would certainly help Greyhound Racing if all were to do so. The continued migration of betting offshore is a contentious issue. Under agreements between BGRF and individual betting companies, GBGB does not have access to the payments made by specific operators, however it is believed that the majority of offshore based companies do not contribute to the BGRF on betting taken offshore. This presents growing funding issues for Greyhound Racing. Greyhound racing is transmitted to an increasing number of countries around the globe and is proving an exceptionally popular betting medium wherever it is shown. It is paradoxical that at a time when the worldwide appeal of British greyhound racing has never been greater, many in the sport are struggling.

Maurice Watkins CBE, Chairman

Barry Faulkner, Chief Executive

In order for the industry to thrive rather than just survive financial progress is required to maintain integrity standards, support rehoming initiatives, assist with residential kennel maintenance and enhancement, carry out veterinary and welfare research and help to finance structural improvements at stadia, including racing surfaces. Greyhound Racing will then be better placed to promote itself by encouraging ownership, including enhanced prize money, supporting British breeding and developing industry training programmes. Looking to the future it is essential that the British Greyhound Racing and Betting industries work closely together to agree a fair and equitable division of profits made from betting on the sport to the benefit of all.

2

Introduction

As the sport’s governing body the Greyhound Board of Great Britain (“GBGB”) commissioned Deloitte to assess the contribution of Greyhound Racing to the British economy.
This report combines analysis of the more traditional measures of activity levels, and ultimately the health, of British Greyhound Racing – such as attendance at racecourses, number of greyhounds registered, number of owners and prize money – with key economic metrics including employment and the tax contribution of the sport. The report focuses on the period up to the end of 2012, including references to 2013 developments where information is available. It therefore covers a prolonged period of challenging economic conditions in Great Britain and we comment on this impact where appropriate. • The data included in this report has been gathered through a combination of: - Extensive consultations with Greyhound Racing’s stakeholders, including racecourses, owners, trainers, governing bodies, betting organisations and others involved in the core industry; - Data supplied directly by Greyhound Racing stakeholders; - Results of the 2013 GBGB Ownership research; and - Additional primary research and analysis performed by Deloitte. • The internal cashflows within Greyhound Racing are relatively complicated and of less relevance to those outside the industry. This study therefore focuses on the cashflows into and out of the core industry wherever possible, the core taken to include the racecourses, trainers, and other bodies directly involved in Greyhound Racing such as administration (e.g. GBGB, BGRF) or betting/media (BAGS/SIS). • The impact of the Betting industry is addressed via the voluntary contribution paid on British bookmakers’ turnover on greyhound racing to the BGRF, and BAGS payments ultimately paid by the Betting industry to the racecourses. The report also sets out the total turnover and gross win of the British Betting industry from betting on British greyhounds and considers the direct taxation this generates.

Report structure
The report is structured into six key sections as described below: Section 1 – Industry cashflow: Assesses the overall economic impact of the British Greyhound Racing industry via the aggregate level of expenditure by its participants and consumers, and how these inflows then flow out of the industry. Section 2 – Racecourses: Examines the role of greyhound racecourses and promoters within the industry with a discussion of their varying business models, detailed analysis of their revenues and costs and discussion of racegoer attendances. Section 3 – Owners: Looks at the impact of owners through analysis of the number of greyhounds and owners, type of ownership and an assessment of owners’ costs and income (prize money). Section 4 – Trainers: Assesses the contribution of trainers to the industry – their number, distribution, revenues and costs. Section 5 – Betting: Examines the close ties of the industry with betting, discussing all forms of betting on the sport including traditional licenced betting shops and growing online betting activity. Section 6 – Economic factors: Discusses Greyhound Racing’s aggregate levels of taxation and employment.

Methodology
A detailed methodology, including assumptions and parameters for the study, is included inside the front cover, but the key points are as follows: • The study measures the direct expenditure of core participants in British Greyhound Racing (owners, trainers, racecourses and others) and its consumers (racegoers and bettors). Whilst the report does not quantify the additional stimulated economic activity as money flows onward through the economy in other non-related industries, this will be significant and a multiple of direct expenditure.

ECONOMIC IMPACT OF THE BRITISH GREYHOUND RACING INDUSTRY 2014

3

Executive Summary
This report examines the economic impact of the British Greyhound Racing industry. Key participants include racecourses, trainers and kennel staff and administrative bodies, with the industry’s consumers being greyhound owners, racegoers and bettors (on and off-course).
Key measures of the British Greyhound Racing industry
The £119m inflows into the core industry can be categorised as follows: • The off-course British Betting industry provides c.£34m via its £8m voluntary contribution to the BGRF (based on 0.6% of total turnover on British greyhound racing) and the £26m paid to BAGS each year for the staging of c.2,300 BAGS fixtures. • On-course betting at the racecourses provides c.£14m, mainly via the retention (typically up to 30%) from pool betting operations, with a small amount also coming from on-course bookmakers. • The racecourses generated c.£37m in receipts (including VAT) from racegoer admissions, food and drink. A further £8m of revenue came from other commercial activities across the sport. Greyhound owners contributed an estimated gross sum of c.£26m into the core industry, mainly via the training fees paid to trainers (but excluding purchase of greyhounds). Once prize money received is accounted for the net contribution of owners totals c.£17m.

£1.3bn/£237m £119m 4,980 2m 4,000+ 7,000+

Retail betting turnover and gross win Core industry income1 Number of fixtures (across 26 racecourses) Annual attendances Number of owners Employment

Notes: All figures represent 2012 except for betting turnover and gross win which are for the year ending 31 March 2013. 1. Includes VAT on racegoer spending and training fees.

4

Core industry income

Racecourses
• Britain’s 25 licensed greyhound racecourses operate a variety of business models driven largely by their ownership structure (group; bookmaker owned; or independently operated) and the types of fixtures held (BAGS and/or non-BAGS). • Raceday income of c.£31m (excluding VAT) was generated in 2012 from c.2m attendees, with the majority of this coming from hospitality offerings (catering). Racecourses offer very affordable packages for admission and catering to attract racegoers in a hugely competitive leisure market. • BGRF contributions to racecourses of £3.5m were made up of £2.4m prize money payments and bonuses, with additional payments for Welfare, Regulation and Integrity. • BAGS payments of around £25m were paid to the 18 racecourses hosting BAGS fixtures in 2012 in return for staging meetings at relatively racegoer-unfriendly times but where an appetite for betting products in LBOs exists.

£34m
Off-course betting

£26m £14m
On-course betting Owners gross expenditure

• Other commercial activities generated c.£8m and included RPGTV payments, race sponsorship and non-greyhound related activities such as hotels and motorsports events. • The main costs incurred by racecourses in 2012 included prize money of c.£14.5m, raceday costs and overheads of £35m, wages and staff costs of £21m with smaller amounts incurred on welfare and integrity, interest and tax. • Racecourses are estimated to have spent over £7.5m on capital projects in the five years to 2012. Typically BGRF capital grants match up to 50% of the total cost of capital works. • In general Britain’s greyhound racecourses deliver modest returns to their owners with an estimated £2m positive operating cash flow in 2012, a large proportion of which was used to improve the working capital position. Cash generated would be negative if non-greyhound revenues were excluded. A handful of racecourses, notably those with BAGS contracts, generate a large proportion of the profits.

£8m
Commercial revenue

£37m
Other racegoer expenditure

• Greyhound Racing’s outflows are aligned closely with its inflows and the industry operates on very low cash reserves. • Major operating outflows include prize money of c.£14.5m, trainer expenditure (including staff costs and contribution to owned greyhounds) of £30m, non-trainer employment costs of £17m, Welfare and Integrity costs of £5.5m and other operating costs (mainly at racecourses) of £36m. Financing costs of c.£3.5m were also paid by racecourses.

Attendances
• With over 2m attendees in 2012 greyhound racing was Britain’s fifth best attended sport (excluding the Olympic and Paralympic Games). • Over 50% of all meetings take place on Friday and Saturday nights, and will attract the large majority of total attendees. • Racegoers cover a wide range of age and economic backgrounds, helped by the broad range of price points and competitively priced admission packages available. However, a large majority of attendees come racing only once or twice a year, hence the challenge for the sport is to encourage more regular attendance.
ECONOMIC IMPACT OF THE BRITISH GREYHOUND RACING INDUSTRY 2014 5

EXECUTIVE SUMMARY

Trainers

4,000+
Owners

835
Trainers

c.8,000
Greyhounds registered annually

• The 835 licensed trainers registered in 2013 employ a variety of different business models. 60% of these have 10 or fewer greyhounds in their care and are more likely to carry on the sport as a leisure pursuit, while at the other end of the scale 8% of trainers have 51 or more greyhounds in their care and will typically run their operations as full-time businesses (or certainly seek to). • The total revenue received by trainers was estimated at £27m in 2012, comprised largely of training fees paid by owners, with additional sums for trainer runner bonuses and prize money won by greyhounds owned by trainers themselves. • Trainers own an estimated 37% of all greyhounds in training, a trend that has been increasing in recent years, with the need for trainers to supply minimum levels of greyhounds to fulfil contracts with BAGS racecourses a key driver in this growth. • The main expenditure item incurred by trainers is staff costs. In 2013 over 3,300 individuals were licensed to work in kennels in addition to the trainers themselves. Other significant costs will include food, transport, veterinary and associated keep costs. • In aggregate it appears highly likely that trainers (including those for whom it is more a leisure pursuit) make a loss from their greyhound operations estimated as a net £3m p.a., hence the trainers are net contributors to the financing of the industry. Trainers and their staff also often work long hours, demonstrating their commitment to the industry. Under the current level of funding it appears very challenging to return a profit from a greyhound training business, which in turn is leading to a lack of young trainers entering the sport. The average age of licensed trainers is 59 and this needs to be reduced through new, younger trainers entering the industry in order to ensure its long term health.

£14.5m
Prize money

Owners
• In 2012 c.8,000 greyhounds entered training, down from c.8,700 in 2009. The number of registered owners has declined from c.4,800 to c.4,000 since 2009. The challenging economic conditions are likely to have been a contributory factor. • The total expenditure (excluding initial purchase) incurred by owners in 2012 was estimated as c.£26m which works out at an average of c.£2,700 per greyhound. Once prize money is deducted the net cost of keeping a greyhound in training was c.£1,700 in 2012. Overall prize money represented a 35% recovery of training costs. • Syndicates play an important role in making ownership more affordable, and thus attracting new owners, by helping to spread the cost of the initial greyhound purchase and all further training and retirement costs across a number of individuals. • Although no reliable data exists on the total cost of greyhound purchases the cost still represents a significant expense to owners (and those trainers that own greyhounds). Owners are estimated to have spent
6

in excess of £5m on purchasing greyhounds in 2012, mostly from Irish breeders, before any pre-training and registration costs are taken into account. • Total prize money paid out in 2012 was c.£14.5m, comprised of £2.4m BGRF contributions with the remainder from racecourses funded through other revenues, particularly BAGS payments. BGRF contributions have fallen in recent years in part due to declining take from the voluntary contributions paid by betting operators. • The limited growth in prize money over the last decade, combined with higher costs of ownership (given high UK inflation levels), have meant net costs of owners have increased markedly. While the vast majority of owners expect to make a loss, in the 2013 GBGB Ownership Survey over half of respondents stated that the cost of ownership is generally too high, highlighting the threat of further falls in ownership.

It will be essential that the British Greyhound Racing and Betting industries work closely together, including agreeing a fair and equitable division of resulting profits, to grow betting turnover.

£55m+
Betting
• After horseracing, greyhound racing competes with football to be the second biggest sport in terms of LBO turnover. Over £1.3bn a year is bet on British greyhounds in Britain’s LBOs which in 2012 resulted in a gross win of £237m and a margin of 18%, significantly higher and less volatile than a number of other sports. • Although the gross win from greyhound racing has declined since 2008/09 it has stabilised since 2011 and there is some evidence of recovery in 2013. • BAGS payments from the Betting industry for the right to show these races in LBOs totalled £26m in 2012 and represent the primary means by which it contributes to British Greyhound Racing. The other mechanism by which the Betting industry contributes is via voluntary contributions to the BGRF, currently set at 0.6% of turnover. These totalled around £8m in 2012/13 having stabilised in recent years after a sharp overall fall in turnover in 2009/10. • Of the £237m gross win received by the Betting industry in 2012, £33m was passed onto the British Greyhound Racing industry via BAGS payments and voluntary Fund contributions. £36m was paid in Gross Profits Tax (“GPT”), with the remaining £168m being retained by the Betting industry to cover operational costs and contribute to profits. • The growth in online as a betting medium is less pronounced in greyhound racing than some other sports, but nonetheless its continual growth provides a challenge to the industry as negligible BAGS payments currently flow from this medium along with limited voluntary BGRF contributions. • British greyhound racing has been successfully sold as a betting product to over a dozen other territories by SIS. There is considerable potential to increase revenues with further overseas sales due to the unique nature of the sport and its recognition as a quality product. • In order to maximise the chances of success in growing turnover from new and existing British greyhound punters through betting product innovation, and pursuing the international opportunity, it will be essential that the British Greyhound Racing and Betting industries work closely together including agreeing a fair and equitable division of resulting profits. Generated in tax by the industry in 2012

Taxation
• Over £55m was estimated to have been generated in tax by the British Greyhound Racing industry in 2012. The majority of this came from the £36m GPT on betting, with an estimated £11m in VAT from racegoer admissions and catering (including some irrecoverable VAT incurred by racecourses) and training fees paid by owners, £8m in employment taxes and c.£1m in corporation tax from the racecourses.

Employment
• Greyhound Racing’s core industry employed over 7,000 individuals in 2012. Due to the event-based nature of the work a large number of these are raceday staff employed by the racecourses and part-time staff employed by trainers. Aside from racecourses and trainers the remaining other core industry employees are those working in administration and media and those in the Betting industry with a direct link to greyhound racing.

ECONOMIC IMPACT OF THE BRITISH GREYHOUND RACING INDUSTRY 2014

7

Industry cashflow
The economic impact of the British Greyhound Racing industry has been assessed by studying the sources of money flowing into the core industry, and those amounts leaving it altogether.
It is important that any double-counting of expenditure is eliminated to derive an accurate net figure, especially in Greyhound Racing where flows are often complex and go both ways – one core participant’s expenditure is often another’s income. For the purposes of this exercise we have taken the core British Greyhound Racing industry to include the 25 racecourses, administrative bodies such as GBGB, BGRF and BAGS and the licensed trainers. The following descriptions of the flows in and out of the core industry are high-level in nature, with more detailed commentary being included in later sections.
8

Inflows
• The gross win (i.e. amount lost by bettors) of the British Betting industry from off-course betting on British greyhound racing was £237m in 2012. A proportion of this is paid to the core industry via: 1. Payments to BAGS. BAGS pass on the £26m fee paid by SIS, who provide the pictures to over 10,000 UK and Irish betting shops, to the 18 racecourses they have contracts with to show racing on fixed mornings, afternoons or evenings. 2. Voluntary contributions paid to the BGRF by British bookmakers on their total turnover on British greyhound racing. Set at a rate of 0.6%, in the 2012/13 period this raised just over £8m. The Fund also receives voluntary contribution payments from the small number of online and telephone bookmakers who are based in Britain, but the majority are located offshore and it is believed very few contribute to the Fund.

In total, payments by the offcourse betting industry in 2012 (for rights and BGRF contributions) were less than 15% of the gross win generated by betting on British greyhound races. • On-course tote betting revenue of over £13m (based on a gross turnover of c.£45m) was generated at Britain’s 25 licensed racecourses. Racecourses have a retention of up to 30% on the total pool value before winning bets are paid out. The racecourses also raised other on-course betting revenue of c.£700,000, representing payments from traditional bookmakers. Together with tote revenue on-course betting therefore generates c.£14m for the core industry. • Racegoer admissions, food and drink purchased by the 2m+ racegoers in 2012 generated c.£37m (gross including VAT) for the industry. This represents the largest revenue stream for many racecourses. Racecourses have invested in hospitality and catering facilities in recent years as they are competing for consumer spending against a huge number of other leisure activities.

1
Figure 1: British Greyhound Racing’s key cashflows

Inflows
Retail Gross win £237m Online Betting Fund Paying Track betting revenue £14m BGRF £8m

BAGS £26m

Outflows
Non-trainer Employment £17m Integrity £1.5m £4m Welfare Other operating costs £36m

Online Betting Non Fund Paying Tote turnover £45m

Core British Greyhound Racing
25 Tracks 840 Trainers GBGB/BGRF BAGS £119m Prize money 1 £14.5m

Capex £2m Tax £19m
2

On-course betting Racegoer Admission, food and drink £37m Greyhound owners Gross £26m Net £17m

£3.5m Trainer expenditure £30m Financing

Commercial revenue £8m

Basis of preparation: For the purposes of the cash flows the following organisations are included in the British Greyhound Racing industry – racecourses, GBGB, BAGS, BGRF and trainers. Several high-level assumptions have been required, hence the cashflow should be regarded as illustrative only, but nonetheless it provides a valuable insight into British Greyhound Racing’s cashflows. Movements in working capital have been assumed to be cash neutral. All flows exclude VAT except raceday admissions and catering and owner expenditure, with the implicit assumption that all other participants can reclaim VAT. Notes: 1. Of this £14.5m prize money, £9m is paid to owners. The remaining £5.5m is retained by trainers. 2. Trainers’ employment taxes included in Trainer expenditure total. Source: Deloitte analysis.

• The racecourses generated c.£8m of other commercial revenue from a variety of sources. These included payments for RPGTV fixtures and race sponsorship, as well as nongreyhound activities such as on-site hotels and staging motorsport events. • Excluding greyhound purchases, owners are estimated to have spent a gross £26m in 2012. Once prize money won is deducted the net amount spent is c.£17m. Owners therefore make a considerable financial contribution to the industry.

• Trainers incurred £30m of expenditure in total. This includes wages and employment taxes, feed, vets, transport, rent, maintenance and utilities. • Other industry operating costs totalled £36m of cash leaving the industry. The majority of this will be the operating costs of the racecourses, namely their catering costs of sales, administrative costs and overheads, with small amounts being incurred by other industry bodies. • An estimated £19m of taxation was paid from the core industry in 2012, largely made up of the irrecoverable VAT element of raceday admissions, catering and owners training fees. c.£8m of employment tax is also generated along with some corporation tax paid by racecourses. Note this sum excludes the £36m gross profits tax generated from betting on greyhound racing. • £4m was incurred by the industry on welfare expenditure, consisting of welfare contributions from the racecourses and the BGRF’s £1.4m grant to the Retired Greyhound Trust (“RGT”) (an independent charity) and grants for other welfare projects.

The RGT also engages in extensive fundraising activities through its 72 branches, involving over 1,000 volunteers, and in 2012 rehomed nearly 4,000 retired greyhounds. • Integrity payments of £1.5m were also paid. Like welfare expenditure these amounts are vital in maintaining the British Greyhound Racing industry’s high standards of integrity which are essential for it to continue to be an attractive betting product. • Around £3.5m was incurred by racecourses as financing costs, including a small amount of dividends paid to shareholders of some racecourses.

Outflows
• Prize money totalling c.£14.5m was paid out in 2012. Approximately 63% of this (c.£9m) passes to owners with the rest to trainers who own the remaining 37% of greyhounds. • Wages of around £17m (excluding employment taxes) were paid to around 3,000 individuals with full or part-time roles in the industry (excluding the staff working at trainers’ kennels). The majority of these employees work at racecourses, with smaller numbers in administration, betting and media.

Overall
Total industry outflows exceed the inflows of £119m by over £3m, demonstrating an overall movement of cash out of the industry. A significant reason for this net outflow is that trainers are net contributors to the British Greyhound Racing industry, putting more cash into the sport than they ultimately take out.

ECONOMIC IMPACT OF THE BRITISH GREYHOUND RACING INDUSTRY 2014

9

Racecourses
In 2013 Britain had 25 licensed greyhound racecourses. In 2012 nearly 5,000 fixtures were staged attracting over 2m attendees. All greyhound racecourses are busy venues, each staging 100+ fixtures each year – comfortably the most events per venue of any professional sport in the UK.
This section discusses the various business models employed by Britain’s greyhound racecourses – notably their estimated revenues, costs and profits – focussing on cash flows rather than accounting profit as this is more representative of the financial position of racecourses. • Those owned as part of a commercial group structure, specifically GRA which operates four racecourses; • Those owned by bookmaking firms, comprising six racecourses; • Independently operated racecourses which have BAGS contracts in place (eight racecourses); • Other independently operated racecourses (seven). In addition racecourses carry out other revenue generating activities such as using their facilities for motorsport events.

Revenues
Total racecourse revenue in 2012 was estimated at £81m coming from five main sources: 1. Raceday income Comprising income from admissions and hospitality offerings (catering), Britain’s greyhound racecourses generated an estimated £31m (excluding VAT) in 2012 from their c.2m attendees. Catering offerings are important to racecourses as a revenue source, and the majority of raceday income comes from spending on food and drink rather than admissions alone. The volume of fixtures means greyhound racecourses operate their catering functions inhouse, rather than the outsourcing model often used by sports with markedly fewer events. The decline in real disposable income due to the challenging UK economic climate of recent years has contributed to racecourses offering very competitive pricing on raceday packages to attract racegoers. An example of this is the industry-wide ‘6 pack’ offer of admission, racecard, drinks, bets, a

Business models
Britain’s 25 greyhound racecourses (down from 26 in 2012 following closure of Oxford), can be broadly categorised according to their ownership structure, types of fixtures held and other parameters, the main categories being:

10

2
Figure 2: 2012 Greyhound fixtures by type three or four, having declined notably over the past 10-20 years. The pitch charges from these bookmakers, together with income from other on-course betting such as rental from betting shops at racecourses, generated c.£700k in 2012. 3. BGRF contributions Payments from the Fund to the racecourses take a number of forms, prize money and welfare contributions being the most significant. Prize money contributions from the Fund are paid on the same basis to all racecourses depending on the number of runners, with additional payments for any fixtures televised on Sky from 2013. Welfare contributions to the racecourses take the form of ‘Welfare attendance’ (for vets etc.). Welfare represents the largest area of expenditure for the BGRF, playing a vital role in GBGB’s commitment to greyhound welfare. In addition racecourse integrity grants are made for regulatory purposes. Welfare and Integrity grants to racecourses totalled £1.2m in 2012.

1,019

730

684

1,677

870

BAGS am BAGS pm BAGS evenings

BAGS track non-BAGS Non-BAGS track

Source: RCPA; BAGS; Deloitte analysis

4. BAGS For those racecourses with BAGS contracts, the service provides arguably the most important source of income. In return for staging fixtures in what are perceived as relatively racegoerunfriendly times the racecourses receive payments from BAGS who in turn sell the pictures to bookmakers via a central contract with SIS. The fixtures take place from as early as 10.30am, with evening fixtures running up to 9.30pm. This ensures that there is a competitive betting product for bookmakers to show in their shops seven days a week when other sports such as horseracing are not scheduled to take place (notably the mornings), and when there are breaks in the coverage of other sports (e.g. between horse races in afternoons and evenings). 18 racecourses hosted BAGS fixtures in 2012 (17 in 2013), receiving c.£25m in total for the staging of c.2,300 fixtures. The payments received by each racecourse vary depending on the contract agreed with BAGS, but payments for morning and afternoon fixtures are higher than for evening cards as evening fixtures are existing meetings not put on specifically for BAGS.

meal and return admission which is available at most British racecourses. Racecourses holding BAGS morning and afternoon fixtures generally offer free admission to these fixtures. When all fixtures are included the average non-betting revenue generated per attendee was £15 in 2012, equating to an average spend of £18 when VAT on the cost of admission and catering is included. 2. On-course betting Tote (or pool) betting is available at all British greyhound racecourses and the total amount staked by racegoers into pools in 2012 totalled over £45m. The majority of racecourses have a retention of c.30% from the pools which generated £13.4m for the racecourses in 2012. Racecourses either rent tote equipment, or purchase it outright and pay maintenance charges to run the pools for their fixtures. In addition to pool betting facilities all racecourses must have a minimum of three on-course bookmakers at all fixtures in order to produce an industry starting price (SP). The number of bookmakers at most racecourses is

Figure 3: Greyhound Racecourse cashflows model

On-course Raceday income bettting (admissions, catering etc.) £14m £31m BGRF payments £3.5m

Outflows Total c.£79m
Corporation Tax £1m

25 4,980 2m
Other
(Motorsport, sponsorship etc)

Tracks

Fixtures

Attendees

Welfare £2m Capex £2m Financing £3.5m

£7.5m BAGS payment £25m

Net movement +£2m
Inflows Total c.£81m
Prize money £14.5m Raceday costs and overheads £35m Staffing £21m

Note: Figures rounded to nearest £0.5m. Net movement of +£2m arises after other (non-greyhound) revenues of £7.5m accrued. Source: RCPA; BGRF; GBGB; BAGS; Deloitte analysis.

ECONOMIC IMPACT OF THE BRITISH GREYHOUND RACING INDUSTRY 2014 11

RACECOURSES

2. Raceday costs and overheads/ operating costs These are estimated to have totalled c.£35m in 2012, an average of c.£7,000 per fixture, although this will vary greatly depending on the racecourses involved and other activities they may carry out. The main operating costs incurred are on catering costs of sale, utilities, maintenance (of racing surface and facilities) and marketing. 3. Wages and staff costs Staff costs totalled c.£21m in 2012, this comprising both full-time employees and the many more employed on racedays. Totalling c.450 people in 2012, the number of full-time staff employed by Britain’s greyhound racecourses will vary greatly depending on the scale of operations, from a handful of full-time employees at the smaller racecourses up to nearer 40 at the larger venues.

5. Other sources of income Race sponsorship is only usually present for major races. Although not currently a major source of income for the industry, the profile of greyhound sponsorship was significantly boosted in 2013 with the announcement that the winner of the 2014 Derby will receive £200k due to an increase in the sponsorship provided by William Hill. Payments to racecourses shown on RPGTV (seven in 2012, rising to 12 in 2013) will also be included in this income – please see Betting section for more details on this initiative. Whilst greyhound racing will form the main activity held at Britain’s 25 racecourses, a number of other activities take place which provide a valuable source of additional income for the racecourses in question. Motorsport, usually in the form of speedway or stock car racing, takes place at 12 of the venues, with the racecourses either charging the motorsport organisers rent for using the venue (the organiser taking gate receipts etc.) or hosting the activity themselves. Other activities that take place include car boot sales and other (non-motor) sports, for example Sheffield’s Rugby League team have agreed to play their home games at Sheffield greyhound stadium. Several racecourses also have other leisure activities such as nightclubs and hotels.
12

In 2012 it is estimated that racecourses generated around £7.5m from such commercial activities, and without this there would be an overall negative movement of cash from these businesses. In total £42m (51%) of racecourse revenues in 2012 were derived directly or indirectly from betting activities. Nonetheless, that still means over £39m (49%) was generated from other sources, illustrating how greyhound racecourses provide multiple leisure offerings to a diverse set of customers.

Figure 4: Estimated capital expenditure by racecourses 2008-2012 (£’000s)
3,000

Operating costs
The costs associated with staging professional sport have increased markedly in the UK in the last decade. Arguably unique in UK sport, greyhound racecourse costs are very much driven by the expense of running three or more times each week. The main costs incurred in the (day-today) running of Britain’s greyhound racecourses are discussed below. 1. Prize money In 2012 c.£14.5m was paid out by racecourses in prize money at the 4,980 fixtures staged. This total is made up of contributions from the racecourses, the BGRF contributions described above and sponsorship. Prize money is the largest cost element for racecourses after staffing.

2,500

2,000

1,500

1,000

500

0

2008

2009

2010

2011

2012 1

Notes: Based on grants allocated by BGRF. Excludes capital costs of reopening Coventry in 2012. 1. 2012 Capital expenditure estimated as c.£1.8m from racecourse accounts analysis, the figure above represents estimates from grant allocations only. Source: BGRF; Deloitte analysis.

2
Raceday staff were estimated to total over 2,500 in 2012. Again the number employed at each racecourse will depend on the number of racegoers, catering offerings etc., but on Saturday nights when most racecourses stage fixtures a large proportion of these 2,500 staff will be working. Employment is discussed in more detail in Section 6. 4. Welfare and integrity payments Racecourses also contribute to welfare and integrity, largely via the BGRF contributions discussed in the income section above. Many racecourses make substantial donations and also work in association with RGT branches which help house and rehome retired greyhounds that have previously run at the racecourse.

Other costs/cash outflows
In addition to operating costs greyhound racecourses have a variety of other costs and/or cashflows, including: • Financing costs comprising interest paid (net), and in a small number of cases dividends. In total financing costs are estimated to have been £3.5m in 2012; • Taxation (although the relatively low level of profitability means that c.£1m in corporation tax was paid in 2012).

Capital expenditure
Investment by racecourses forms the large majority of capital expenditure generated by the British Greyhound Racing industry. The racecourses are aided in this respect by the BGRF capital grant facility, which awards matching discretionary grants of up to 50% of the net cost of applications that meet the approved funding criteria (minimum net cost £5,000 VAT exclusive). Based on the grants provided, in the five year period to 2012 Britain’s greyhound racecourses are estimated to have spent over £7.5m on capital

projects. The amounts invested have been dampened by falling Fund contributions, and the challenge the racecourses face to raise matching funds. Without adequate ongoing investment in maintaining and indeed improving facilities, racecourses risk losing customers to competing leisure activities. Examples of major capital expenditure projects at racecourses in recent years include:

• Improvements to customer facilities, such as refurbished restaurant and bar areas; • Enhanced welfare provisions, including relaying of the racing surface and purchasing of equipment to maintain it to a high standard; • Renewal of tote systems to enhance betting opportunities available to racegoers.

ECONOMIC IMPACT OF THE BRITISH GREYHOUND RACING INDUSTRY 2014 13

RACECOURSES

Profits
The profit levels of Britain’s greyhound racecourses vary significantly from one to the next. Whilst some racecourses generated significant profits in 2012 it is apparent that a number operate closer to break-even on any given year. Racecourses therefore do not, as a whole, deliver a significant return to their owners, meaning limited funds are available for investment in facilities.

Figure 5: 2012 Greyhound racecourses and total attendances Changes to number of racecourses since 2003 + Coventry Pelaw Grange Catford Coventry Hull Milton Keynes Oxford Portsmouth Reading Rye House Walthamstow

-

Looking forward
Since 2003 there have been nine racecourse closures, a number of which were driven by redevelopment for alternative use. There were also two additions to Britain’s licensed greyhound racecourses however, with Pelaw Grange upgrading from an unlicensed venue and Coventry reopening in 2012. The declines experienced by the British economy as a whole have been challenging in recent years but there are more consistent signs of recovery emerging. It will be critical that racecourses offer all customers a high quality experience if they are to remain competitive and take advantage of improving economic conditions. A potential significant issue facing the industry is that if commercial property values start to rise again following years of decline, some owners may judge that without major improvements to the funding of the sport they would generate much higher financial returns from the sale of racecourses for alternative use.

Shawfield (Glasgow) Newcastle

Sunderland Pelaw Grange

Kinsley Sheffield Doncaster Belle Vue (Manchester) Monmore Green (Wolverhampton) Perry Barr (Birmingham) Hall Green (Brimingham) Henlow Harlow Swindon Romford Mildenhall Yarmouth

Nottingham Coventry

Peterborough

Sittingbourne Wimbledon Crayford

Brighton Poole 100,000 Attendees
Note: Size of bubble relates to total 2012 attendances. Source: RCPA; Deloitte analysis.

14

2
ATTENDANCES
Greyhound racing was one of the best attended sports in Britain in 2012, attracting over 2m attendees. The sport’s attendance figures are driven by the large number of fixtures and whilst attendances at the c.2,300 BAGS fixtures will typically be less than 100 for those taking place in daytime, those on Friday and Saturday evenings will be considerably higher. Excluding the Olympic and Paralympic Games, greyhound racing was the fifth best attended sport in Britain in 2012 behind football (42.2m), horseracing (5.6m), and the two rugby codes (Union 4.7m, League 2.3m) but ahead of a number of other popular sports including cricket (1.8m). Attendance at British greyhound fixtures is aided by the wide geographical spread of the racecourses. The best attended racecourses are located around the major population centres of the South East, Midlands, North West, Yorkshire and North East. Friday and Saturday evenings remain the most popular nights for attendance. Over 50% of all fixtures take place on these nights, with 19 of Britain’s 25 racecourses racing on Friday evenings and all but one racing on Saturday evenings. Racegoers at greyhound fixtures cover a diverse range of age and economic backgrounds. With a relatively large number of fixtures taking place on weekdays, greyhound racing is well placed to market itself to those groups which have more free time, such as retired individuals, compared to other sports. The large number of evening fixtures also makes greyhound racing a popular activity for group nights out, with many racecourses offering special packages for groups, including stag and hen events, as well as being very popular venues for Christmas parties. Figure 6: 2012 Greyhound fixtures by day of the week

1,508 2,276

1,196
Whilst there exists a loyal but relatively small core of regular racegoers who will make up a sizeable portion of attendees, most visitors to greyhound racing in Britain only attend once or twice a year, usually incorporating a restaurant offering. If these people could be persuaded to return just one additional time it would provide a significant boost to attendances and raceday revenues. Capturing all customers contact details to enable targetted and tailored marketing is key in achieving this goal.

Other days

Fridays

Saturdays

Source: RCPA, BAGS, Deloitte analysis.

Britain’s greyhound racecourses also offer a broad range of price entry points, ranging from free entrance at BAGS and some other fixtures to competitively priced packages offering entrance, food and drink and free bets, such as the industry wide ‘6 pack’. There are also a number of hospitality options available at most racecourses where racegoers can enjoy a seated meal with a view of the racecourse and at-table betting facilities.

ECONOMIC IMPACT OF THE BRITISH GREYHOUND RACING INDUSTRY 2014 15

Owners
Greyhound owners make a substantial and important contribution to the industry in Britain, notably via the c.£26m they spend annually on training fees and associated costs.
Owners also incur significant expenditure on the purchase of greyhounds, but the large majority of this will flow to Irish breeders so will not directly impact on the British Greyhound Racing industry. There is a significant overlap between the activities of owners and trainers due to the fact that trainers own a significant proportion (c.37%) of greyhounds themselves, but for the purposes of this section we focus on the expenditure of non-trainer owners. This section therefore considers owners’ contribution to the sport, firstly by examining the number of owners and greyhounds entering training, both considered barometers of the health of the industry. Secondly, the cost of greyhound ownership and the return through prize money are discussed. Figure 7: Registered greyhounds and individuals involved in sole or partner ownership – 2009-2012
10,000 4,784 4,491 4,061 9,000 8,672 8,552 3,000 7,972 7,000 7,964 2,000 4,039 4,000 5,000

Greyhound numbers
The number of greyhounds registered has declined in recent years, from 8,672 in 2009 to 708 fewer in 2012 (down 8%). As recently as 2006 the number of greyhounds registered was over 10,000. Given that greyhound ownership is a discretionary leisure spend, the relatively modest declines over the past four years demonstrates a level of resilience among owners considering the challenging economic climate. Nonetheless, further declines in greyhound numbers risk putting pressure on many parts of the industry. Notably, the number of races taking place with fewer than six runners is increasing – in 2013 over 7,900 graded races were estimated to have taken place without the full complement of

8,000

6,000

2009

2010

2011

2012 Owners

1,000

Registered Greyhounds

greyhounds – with such races both being less attractive to the racegoer and generating less betting revenue.

Note: Number of greyhounds registered by GBGB in each year. Owner numbers include single owners and those in partnerships. Syndicates are excluded. This brings some consistency since the ownership numbers are for new registrations in each of the years shown. Source: GBGB; Deloitte analysis.

Owner numbers
There are a variety of different greyhound ownership models in Britain, the most common being Individual owners (73% of all registered ownerships in 2012). The other main ownership categories are Partnerships (14%) and Syndicates (13%).

16

3
Figure 8: Estimated ownership costs p.a. in 2012 Expenditure Training fees Additional costs (vets, transport etc.) TOTAL Income Prize money (63% of total to owners) Net expenditure
Note: For non-trainer owned greyhounds only. Source: GBGB; Industry consultations; Deloitte estimates.

Total £m 24 2

Average per greyhound (£) 2,500 200

26

2,700

9

1,000

17

1,700

The total number of individual, partner and syndicate ownerships declined from over 4,900 in 2009 to over 4,200 in 2011 (a 13% decline), however, it stabilised at around this level in 2012. When syndicates are accounted for there will be significantly more individuals involved in greyhound ownership than the c.4,000 in Figure 7, as they can involve up to 100 people.

Owners’ costs
The gross cost of keeping a greyhound in training was estimated as c.£2,700 on average in 2012. This works out as a cost of c.£7.50+VAT a day, for the days when greyhounds are in training. The c.£2,700 cost also covers periods in the year when the greyhound is not in training (greyhounds will typically have periods of rest and time off to recover from injury or when bitches are in season). The £2,700 sum is largely composed of training fees (including irrecoverable VAT) plus incidental costs such as vet fees and travel to open races. Travel to graded races is usually included in the basic training fee. Training costs vary depending on the trainer in question – the size of their operation, location and success will all impact their rates. Some trainers charge as little as £6+VAT a day, whilst some of the most successful trainers can charge nearer to £10+VAT, but this is very much the exception.

Figure 9: Number of registered ownerships 2009-2012 split by type
5,000 4,927 575 4,000 630 3,722 3,000 4,634 499 594 3,541 3,164 4,277 552 561 4,190 541 572 3,077

Syndicates play a particularly important role in attracting new owners to the sport, as they allow costs to be reduced by sharing expenditure across a number of individuals. This is especially useful in spreading the initial cost of purchasing a greyhound which may well be prohibitive to some individuals. Figure 8 sets out that the estimated average training cost of a greyhound is c.£2,700p.a., meaning each member of a ten person syndicate would pay £270 per year before prize money contributions. By illustration, if the greyhound cost £5,000 to purchase (hence a good chance of being a high quality greyhound) and assuming a three year career, the total net cost per syndicate member would be around £1,000.

2,000

1,000

2009 Individuals Syndicates

2010

2011

2012

Partnerships

Source: GBGB; Deloitte analysis.

ECONOMIC IMPACT OF THE BRITISH GREYHOUND RACING INDUSTRY 2014 17

OWNERS

Prize money
The total prize money paid in 2012 was around £14.5m. This comes from two main sources: 1. BGRF contributions, totalling £2.4m in 2012. The same formula which determines prize money payments is applied to all 25 racecourses, the basic rate being £5 per graded run with additional bonuses available during the year, together with extra funding for those fixtures televised on Sky from 2013. 2. Racecourse contributions, comprising c.£12m in 2012 – the largest cost for racecourses after staffing. This sum will also include any amounts of race sponsorship
18

received by the racecourses. All racecourses pay prize money to owners of every greyhound running in graded races, and some also pay their contracted trainers for each runner they provide (see Trainers section for further detail). In open races, whilst the win money will generally be more than for graded races the payment for unplaced greyhounds can be less. BGRF contributions to prize money fell markedly, from over £3m in 2005 and 2006 down to around £2m in 2010 before rising slightly to its current level. The oveall decline since 2005 is a direct result of falling voluntary contributions by the Betting industry.

3
Payments of prize money are made directly to trainers who deduct the amounts from the owners’ monthly training bills. The prize money paid to owners is important, even though it is not the main driver of greyhound ownership. In the 2013 GBGB Ownership Survey, while 88% of respondents stated that ownership was more of a hobby than a business pursuit and expected to make a loss or break even, 59% of owners also stated that the cost of ownership generally is too high. Once prize money paid to owners is deducted the average net cost of keeping a greyhound in training is estimated to be c.£1,700 p.a. in 2012, although there will be significant variation. Prize money received by owners represents a 35% recovery of training fees and associated costs. After prize money is accounted for the net expenditure of all owners is estimated to have been around £17m p.a. based on a gross expenditure of c.£26m (disregarding the initial purchase of greyhounds and associated costs). It should be noted that with c.37% of greyhounds being owned by practising trainers, an estimated £5.5m of the total prize money fund will be cycled back within the industry to the trainers who own these greyhounds. This money is therefore used to part fund the costs of training these greyhounds. The purchase price of greyhounds can vary enormously depending on the age of the greyhound and its breeding. Those greyhounds most likely to run in graded races tend to be priced in the range of £300 to £2,000, whilst those with established pedigrees more likely to be running in open races can cost more than £5,000 and some markedly higher. Around 8,000 greyhounds are estimated to have entered training in Britain in 2012, so using the conservative estimate of a £1,000 purchase cost per greyhound and excluding the c.37% owned by trainers, owners can be said to have spent over £5m extra to fund their ownership. This sum is before any pre-training, registration and trialling costs are taken into account which could result in the total being nearer to £7m.

Future challenges
In addition to concerns over prize money, the GBGB Ownership Survey highlighted concerns amongst owners regarding other aspects of the sport, notably: • The growing trend in the number of trainers owning greyhounds, which was seen as limiting the opportunities for new owners to enter the sport whilst contributing to a lack of good training options for existing owners. • Only 27% believed that racecourses where their greyhounds raced made them feel valued. There was also concern over the level of investment in facilities at some venues and the recent pattern of racecourse closures. These factors contributed to 54% of owners not feeling confident about the sport’s future. It is a key industry focus to seek to reverse these trends and in turn retain existing owners and help attract new individuals to the sport.

Greyhound purchases
The initial upfront pre-racing cost of greyhound purchases has been excluded from the analysis due to a lack of robust information. The cost does, however, still represent significant expenditure by owners and trainers. Much of this expenditure leaves the British economy and is paid to Irish breeders either directly or indirectly as trainers buy Irish greyhounds for their owners.

ECONOMIC IMPACT OF THE BRITISH GREYHOUND RACING INDUSTRY 2014 19

Trainers
There were 835 licensed greyhound trainers in Britain in 2013. The nature and scale of the trainers varies markedly – from those with one or two greyhounds, often owned by themselves, who carry out the sport very much as a leisure pursuit, up to the larger operations which train over 50 greyhounds and which will employ full and part-time staff to assist the trainer.
The total number of trainers has decreased from 975 in 2010 to 835 in 2013 (a 14% decrease), with a significant proportion of this decline taking place between 2011 and 2012. At this time the continual improvement of welfare standards and subsequent requirement for additional veterinary inspections to be carried out at trainers’ premises at their expense may have made it no longer viable for a number of licence holders, notably those without any greyhounds in training, to renew. 500 trainers (60%) have 10 or fewer greyhounds in their care. 145 of these were registered as having either no or one greyhound of racing age in training at the time their licenses were renewed (they may have additional puppies and retired greyhounds), down from 235 in 2010 which will mainly be due to trainers with no greyhounds deciding not to renew. This large number of small scale operations therefore forms the majority of practitioners, carrying out their training as a leisure pursuit but acting as net financial contributors to the industry as the training businesses of these license holders will largely be loss-making. 8% of trainers (70 individuals) house more than 50 greyhounds. These form the top end of the training ‘pyramid’, and will typically be full-time professionals with a number of full and part-time staff working for them. These trainers care for 35% of the population. Trainers with between 26 and 50 greyhounds comprised only 14% of all trainers but they care for over 30% of the greyhound population. Trainers with more than 25 greyhounds therefore train 66% of the population despite making up only 22% of all licensed trainers. The average age of a trainer in 2013 was 59, and 45% of all trainers were aged over 60 with only 9% aged 40 or younger. Redressing this age spread is a challenge that the industry needs to face. The next generation of trainers need to be encouraged to enter the sport to ensure its long term health.

20

4
Figure 10: Total Trainers 2010-2013 with 2013 split by kennel size and greyhound population
1,000 975 950 955 835 8% 14% 900 18% 875 850 835 800 20% 14% 750 2010 Total Trainers 2011 2012 2013 0-10 11-25
Source: GBGB; Deloitte analysis.

2013 trainers split by size of kennel

2013 greyhounds split by size of kennel

than open races (certainly higher quality open races), as only greyhounds kennelled by trainers with a contract with the respective racecourse are permitted to run in BAGS graded races. Another reason for the number of trainerowned greyhounds is that trainers with small numbers in their kennels (1-10 greyhounds) often do not have any, or have limited, external owners. Other than the 10% of BGRF prize money allocated to them, trainers do not receive any prize money unless an arrangement is agreed with the owner. This will usually only be the case for open races where trainers may receive up to 10% depending on individual arrangements. Racecourses staging BAGS fixtures commonly contract a number of trainers to each run a minimum number of greyhounds each week in order that the number of races required by BAGS can be filled. The amounts paid to trainers vary considerably from racecourse to racecourse but typically range from £4 to £10 per runner, although some racecourses do not pay appearance fees to trainers.

35%

31% 60%

26-50 51 or more

Greyhounds in kennel

As would be expected most trainers are located within a reasonable travelling distance of either their nearest racecourse, or the racecourse that they may be contracted to. The most populous region for trainers in 2013 was the South where 28% of licensed trainers were based covering the region’s nine racecourses.

Trainers’ revenues
Training fees paid by owners represent the primary income stream for trainers, and were estimated at £20.5m in 2012. These fees will vary depending on the reputation, location and size of kennel, but broadly fall into a range of between £6 and £8 a day (excluding VAT). By comparison the daily cost of putting a pet greyhound in kennels can be well over £10, although these will be for much shorter stays. Trainers own a sizeable proportion of all greyhounds in training, an estimated 37%. One reason for this relatively high proportion of trainer-owned greyhounds is that a number of trainers, mainly those attached to BAGS racecourses, are contracted to supply a minimum number of runners to a racecourse per week. Therefore, if they do not have enough greyhounds owned by ‘traditional’ external owners they may need to purchase and run greyhounds in their own name in order to meet the requirements of their racecourse contracts. This is reflected in there generally being a higher percentage of trainer-owned greyhounds in BAGS

Figure 11: 2013 Greyhound trainers by region
Scotland

Figure 12: Trainers’ overall revenue and costs (£m) Revenue Training and associated fees 1 Prize money 2 TOTAL Costs Net

8%
North East

10%
North West

20.5 6.5 27 30 (3)

7%

Yorkshire

13%
Midlands East

Wales

16%
South

2% 28%

16%

Notes: Estimated revenues and costs are by necessity high level given lack of available financial data. 1. VAT exclusive. Owners pay this sum+VAT, hence the £24m in Figure 8. 2. Includes track contract payments to some trainers. Source: Industry consultations; Deloitte estimates.

Source: GBGB; Deloitte analysis.

ECONOMIC IMPACT OF THE BRITISH GREYHOUND RACING INDUSTRY 2014 21

TRAINERS

Financial challenge
While it is difficult to estimate trainers’ total expenditure given the diversity of business models and lack of available financial information, the figure of £30m in Figure 12 has been derived through discussions with a broad range of trainers and means that in aggregate trainers are estimated to make a £3m loss p.a. from their greyhound operations. Part of this aggregate loss is attributable to the assumed loss of the smaller trainers who are more likely to be training as a leisure activity, but it is also likely that at least some trainers with significantly more greyhounds are at best breaking even and/or only able to pay themselves very modest wages. Many trainers and their staff work long hours for comparatively limited financial reward, demonstrating their dedication and commitment to the sport. As the number of greyhounds trained at a kennel increases it is more likely that the trainer will be full-time, however a number still need to have other sources of income away from greyhound racing in order to make a living. A related concern is that the current level of funding, and difficulty in returning a profit for greyhound training businesses, is leading to a lack of young trainers entering the sport. This is an important challenge for the industry to address as without new trainers replacing those who leave the sport the current level of racecourses and/or fixtures risks becoming unsustainable.

Some trainers also buy and sell greyhounds and may make profits to supplement their other revenue. A small number of trainers breed from their own, greyhounds and sell the puppies, but it is not possible to credibly estimate the level of trainers’ income from these activities. Whilst the majority of greyhounds racing in Britain are bred in Ireland, a British breeding industry does exist. In 2013 over 7,500 greyhounds were registered with GBGB, with 83% of these Irish bred. This is a higher proportion than had been recorded over previous years where approximately 75% of greyhounds were Irish bred. The number of dogs being bred in both Britain and Ireland has declined in recent years as a result of the general economic downturn. The total number of British litters had declined from 339 in 2010 to 305 in 2012, a 10% decrease, whilst the number recorded in the first six months of 2013 was 118. In spite of the decline in British litters the number of open races won by British bred greyhounds actually increased, from 651 wins (14%) in 2011 to 750 (16%) in 2012.
22

Trainers’ expenditure
Although the majority of the initial expense of purchasing and training greyhounds is incurred by owners, trainers also contribute a significant amount due to the number of greyhounds owned by trainers themselves. The largest single expenditure incurred by trainers is on staff costs. Over 3,300 people were licensed for trainers’ kennels in 2013, although a proportion of these are family members or owners with greyhounds in training at the kennels who carry out their roles unpaid. Other significant expenses borne by trainers include food, transport and other associated keep costs, together with utilities and maintenance. Vet bills and some transport will usually be recharged to owners. All licensed kennels are inspected at least twice a year by GBGB and must meet minimum standards in order for trainers to keep their licence.

Betting

5
The British Greyhound Racing industry and British Betting industry have a symbiotic relationship. This section sets out the scale of betting – absolute and relative – on greyhound racing. It focuses exclusively on off-course betting as on-course betting is discussed in the Racecourses section.
While the Betting industry has evolved considerably the 1980s, when the only permitted betting was on greyhounds and horseracing, even in what is now arguably the most diverse betting market in the world greyhound racing remains a key product. In Britain’s 8,700 Licenced Betting Offices (“LBOs”) over £1.3 billion a year is bet on British greyhounds, competing with football to be the second biggest sport after horseracing. A large proportion of British greyhound racing has been specifically developed to cater for the needs of the Betting industry – notably the c.2,300 BAGS fixtures (c.45% of all fixtures) – which provide over 25,000 races for shop bettors to bet on and are timed to provide continuous product. Payments to the industry through BAGS represent the primary means by which the Betting industry contributes to Greyhound Racing. Indeed, while total fixtures have declined in the last 10 years as racecourses have closed, the number of BAGS fixtures has increased from c.1,300 in 2003. Major betting companies also own six of the busiest racecourses. In 2012 BAGS fixtures from these racecourses made up over 40% of all BAGS fixtures. The diverse and dynamic nature of a British Betting industry which gives bettors the choice of fixed odds, pool betting and readily accessible online betting, including on betting exchanges, is good for the consumer but does present challenges for the sports providing the betting product. The following trends are particularly relevant to betting on greyhounds: • Shifting patterns in the channels through which people bet. The proportion of total sports betting that takes place remotely via online operations (with a small but declining amount via telephone) continues to increase markedly, largely driven by the activity of younger people. While LBOs remains the largest market, and offer customers a social environment to bet that cannot be replicated online, they are likely to continue to decline – certainly in relative terms and potentially in absolute levels. As is discussed in more detail later, the British Greyhound Racing industry currently receives only limited funding from online betting. • The introduction of Fixed Odds Betting Terminals (“FOBTs”) has transformed the LBO market. While FOBTs have certainly introduced new customers to LBOs, it seems highly likely that some substitution has taken place between betting on greyhounds and FOBTs. • The explosion of sports betting products, notably in-play betting, which are particularly prevalent online. While the high frequency of greyhound racing provides multiple rapid betting opportunities in almost any given time period, the short duration of each race prohibits inplay betting, hence in that respect it is at a competitive disadvantage against other sports. Figure 13: Retail Gross Win by product (£m)
3,028 3,000 2,709 2,500 304 166 2,000 225 844 1,500 1,450 1,000 1,167 1,051 1,302 2,630 280 167 155 768 705 2,790 261 170 274 2,848 243 159 234 698 675 237 184 293

1,547

500

0

2008/09 18.3% FOBTs

2009/10 19.1%

2010/11 17.5%

2011/12 17.4%

2012/13 16.0%

% Greyhound/OTC

Horseracing Football

Other sports Greyhound racing

Other betting

Note: Year shown represents March of the latest year i.e. 2009/10 refers to the year ended March 2010. Source: Gambling Commission.

Retail betting
Figure 13 sets out the gross win from British LBOs since 2008/09 by product type including greyhound racing. The graph shows gross win, as while the much higher amounts staked would illustrate the sheer scale of betting on greyhounds, gross win is the more important measure for the Betting industry. We show total industry turnover on greyhound racing in Figure 14. In 2012/13 the amount staked on greyhound races was £1.3 billion, which after payment of winnings resulted in a gross win of £237m – an estimated margin of 18%. This margin is significantly higher, and is subject to much less volatility, than for many other sports in LBOs, which is a key attraction of greyhound racing for the Betting industry. The ability to deliver such healthy, consistent margins is dependent to a large degree on BAGS racecourses scheduling competitive graded races.

ECONOMIC IMPACT OF THE BRITISH GREYHOUND RACING INDUSTRY 2014 23

BETTING

The £237m gross win represented 16% of the over the counter (“OTC”) betting, equating to just over one third of the total horseracing gross win. Greyhound racing was the third biggest OTC product in 2012/13, after horseracing and football (which overtook greyhound racing). Football betting is significantly impacted by the staging of major international tournaments every two years, with 2012/13 benefitting from added betting volumes on Euro 2012 (which included the English national team). The gross win from greyhound racing has declined markedly since 2008/09 when it was over £300m, in common with the betting patterns on horseracing. However, the decline has slowed since 2011 and there is some evidence that levels will be similar or marginally higher in 2013/14. The televising of many of the top races in LBOs through Sky coverage is thought to have been a contributory factor to this rebound. Several factors have led to the decline in greyhound betting volumes – notably the increasing competition from other sports and FOBTs and a migration of some betting online (accelerated by the growth in mobile betting) – all against a backdrop of challenging UK economic conditions. FOBTs were introduced into LBOs in 2002 and now generate over £1.5 billion in gross win, more than all OTC betting combined and hence representing more than 50% of the total LBO gross win of c.£3 billion.

Figure 14: Voluntary contributions to BGRF and implied greyhound turnover (£m)
14 2,333 14.0 1,944 11.7 10 10.0 8 1,909 1,667 11.5 1,310 1,334 1,334 1,500 2,500

12

2,000

7.9

8.0

8.0

1,000

6

2006/07

2007/08

2008/09

2009/10

2010/11

2011/12

2012/13

500

Voluntary contributions

Implied turnover

Note: Roundings mean voluntary contributions will not equate exactly to 0.6% of implied turnover. 2009/10 relates to a 15 month period. Source: BGRF; Deloitte analysis.

increased in stages from 0.25% to the current 0.6% of turnover. In 2012 the BGRF reported that no less than 92% of LBOs contributed, meaning that up to 8% of LBOs and (it is believed) the majority of online firms did not contribute, or no longer contribute. Figure 14 sets out the voluntary contributions since 2006 and the implied turnover based on 0.6% of it being paid. This will understate the actual turnover as not all LBOs contribute and the number of online firms contributing steadily declined over the period. The record contributions of £14m in 2008/09 mean an implied turnover of £2.3 billion. However, it should be noted that a significant proportion of

the increase compared with the prior two years is widely accepted as being derived from profits from big staking ‘high rollers’ not replicated thereafter. Excluding 2008/09 the figures show a marked decline in turnover, and hence voluntary contributions, between 2006 and 2010 and a flat profile thereafter. However, while impossible to estimate, part of this apparent decline will be related to turnover migrating to operations not making a contribution to the fund.

Distribution of gross win
In addition to the voluntary contributions paid to Greyhound Racing, the Betting industry also supports the sport through other means – the largest of which is payment for the right to show live pictures of BAGS fixtures in LBOs. In 2012 an estimated £26m was paid to BAGS of which the vast majority was paid in media rights to the 18 participating racecourses as set out in the Racecourses section. Figure 15 opposite illustrates how the gross win from greyhound racing retail betting was distributed between Greyhound Racing, Government and the Betting industry.

Voluntary contributions
An important means by which the Betting industry contributes to the costs of the British Greyhound Racing industry is the voluntary contributions made by British betting operators, calculated at 0.6% of greyhound betting turnover. The contributions are made to the BGRF, at a rate agreed by the ABB and British Greyhound Racing Board (GBGB’s predecessor) which has
24

5
Figure 15: Distribution of Retail Gross Win from Greyhound Racing – 2012

Growth in online market
Sports betting has experienced a major migration from traditional LBOs to online, through PCs and increasingly via smartphones and other mobile devices. The migration will take a number of forms ranging from a move to the betting exchanges (notably Betfair, which also takes significant amounts of turnover from on-course bookmakers looking to hedge their on-course positions) and online divisions of major diversified betting operators, to exclusively online betting operators. Online betting often has value advantages to bettors compared to retail betting due to the use of pricerelated offers and concessions available exclusively online. While still significant, the scale of the movement from greyhound racing is likely to be less pronounced than some other sports due to: • Limited live streaming of greyhound races – see below. • Limited in-play options as previously discussed. • The demographic of greyhound racing bettors being older than some other sports. Only a relatively small percentage of greyhound races are available to watch online, in contrast to other sports where live streaming is seen as a key driver of betting revenue. Currently, it is limited to those fixtures shown on RPGTV whose six betting shareholders stream the races (also shown via www.racingpost.com). Over 300 fixtures and 3,800 races were shown in 2012 (from seven racecourses), growing to over 420 and 5,100 respectively in 2013 (from 12 racecourses). While RPGTV is also shown in the LBOs of its bookmaker shareholders, the evening timings of these fixtures and convenience and ease of betting at home means a large proportion of betting activity is conducted online.

36 7
1

Total Gross Win £237m
168
3

26

2

Gross profits tax Voluntary contributions

BAGS payments

2

Contribution to overheads and profits 3

Notes: 1. Estimate of the retail proportion of the £8m paid to BGRF for the year ending March 2013. 2. Represents the annualised payment to BAGS from SIS for period ending December 2012. 3. Will include production and distribution costs of SIS. Source: Gambling Commission; Company financial statements; BGRF; Deloitte analysis.

In 2012 it is estimated that £33m (14%) of the total gross win was paid to Greyhound Racing through the voluntary contributions and BAGS picture rights. This combined percentage is significantly lower than the equivalent amount paid to British Horseracing which benefits from a statutory levy of 10.75% (with some exceptions) on British betting operators’ gross win, and markedly higher media rights (as a proportion of gross win) following a period of rapid growth in horseracing rights fees. After the above £33m and 15% betting tax is deducted, £168m (71%) is retained by the Betting industry to pay the remaining SIS charges, marketing expenses, other retail operational costs and thereafter to make a substantial contribution to betting operator profits.

ECONOMIC IMPACT OF THE BRITISH GREYHOUND RACING INDUSTRY 2014 25

BETTING

A solution will need to be found to the currently limited online betting voluntary contributions. If not the amounts paid to BGRF risk declining further, leading to threats to the industry and potential knock-on impacts to the Betting industry if integrity, welfare or the sustainability of the British Greyhound Racing industry are harmed.
The level of online betting on greyhound racing is almost certainly increasing markedly, and while accurate estimates of the turnover or gross win from online are currently very difficult to obtain due to a lack of publicly available information, it is probable that turnover in 2013 (even excluding exchanges) was in excess of £200m. The introduction of point of consumption taxation and licencing on online operators in December 2014 is likely to mean turnover levels will become public. The continued growth in online betting provides a major funding challenge for the British Greyhound Racing industry as only a very small number of such betting operators make voluntary contributions and there are only negligible BAGS payments stemming from it. A solution will need to be found, otherwise the amounts paid to BGRF risk declining further, leading to threats to the industry and potential knock-on impacts to the Betting industry if integrity, welfare or the sustainability of the British Greyhound Racing industry are harmed. international territories (over a dozen) as far afield as Azerbaijan, Poland Greece, Spain and the West Indies and Sri Lanka. The product is marketed and sold internationally by SIS, sometimes in conjunction with local partners, with the profits divided between SIS and BAGS. This approach started in 2011 and has been used to fund several initiatives, including producing the Sky coverage of 22 major fixtures in 2013, increasing to 30 in 2014. It is widely accepted that there is potential to substantially grow revenues further, with the product particularly attractive to: • Territories with a lack of history of betting on other sports – notably horseracing – as this makes the simplicity of betting on greyhound racing attractive, for example emerging Central and Eastern European markets; • Locations where there is an ability to work in partnership with British Horseracing; • As and when betting on greyhounds is legalised, in those major betting countries where it is currently prohibited, for example Italy and further afield in South Africa and Hong Kong.

Looking forward
While the amounts of betting on British greyhound racing have declined in recent years, it still remains a key product for the Betting industry, and there are encouraging signs of stabilisation and even improvement. The type of bets offered on greyhound racing have remained relatively unchanged for some time, but recently some product innovation has occurred which is essential in today’s ultracompetitive market. New types of pool bet are being introduced, notably more exotic bets with a low probability of winning but potentially very large returns, which should help bring in new customers as well as appealing to existing greyhound bettors. Online offerings are also being strengthened, including through increased live streaming. In order to maximise the chances of success in such product innovation, pursuing the international opportunity as well as serving the existing core greyhound bettors, it will be essential that the Greyhound and Betting industries work closely together, including on the agreement of a fair and equitable division of resulting profits.

International appeal
The high quality of British greyhound racing, and its status as a trusted and easy to understand betting product, means it is already sold to betting operators across a wide variety of
26

6

Taxation
Greyhound Racing contributed over £55m to the Exchequer in 2012, generated predominantly from tax on British betting operators’ gross win on the sport with the remainder coming from the other constituent parts of the industry.
A large proportion of tax paid to Government from Greyhound Racing activity came from the 15% betting duty, with an estimated £36m paid by bookmakers on their gross win on greyhounds in 2012. Although currently representing a relatively small proportion of betting on greyhounds, any take from remote gambling is further reduced by the majority of online operators moving offshore and thus avoiding this charge. The proposed ‘Point of Consumption’ tax from December 2014 is likely to change this situation so that operators are charged gross profits tax based on where bets are struck rather than where the operator is located. VAT is the next most significant amount of tax paid by the core British Greyhound Racing industry, composed largely of tax on racecourse admissions and catering revenue. These sources of income generate over £6m of output VAT which the ultimate payer (the racegoer) is unable to recover, in addition racecourses are unable to reclaim around 20% of their input VAT hence this represents a further tax contribution. VAT will also be incurred by owners as part of their training fees (provided the trainer is registered for VAT), estimated at over £3m p.a. The 7,000+ people working in greyhound racing are estimated to have generated over £8m in employment taxes in 2012 (PAYE and employee/ employers’ NICs). The employment taxes are limited relative to the number of people employed in the industry reflecting the relatively low earnings of many of the industry’s employees and the fact that significant numbers are also unpaid. Corporation tax paid by the industry is estimated as c.£1m, based on the profits returned by some of the racecourses. The above estimates do not include a number of other taxes such as duty on fuel and alcohol which, while in isolation will be relatively small, will be more significant in aggregate.

Figure 16: Total tax contribution by type (£m)
40 36 30

20 11 10 8 1 0 Gross profit on betting VAT Employment taxes Corporation tax

Source: Deloitte estimates.

ECONOMIC IMPACT OF THE BRITISH GREYHOUND RACING INDUSTRY 2014 27

Employment

The high volume of greyhound fixtures and large number of trainers means there are a significant number of people who work in the sport.
The event-based nature of much of the industry means that part-time and raceday staff employed by racecourses and trainers greatly exceeds the number of full-time employees. Nearly 5,000 fixtures took place in 2012 so a large pool of event day staff are required to stage these events, in addition to the smaller number of those employed fulltime in administration, media and those parts of the Betting industry with a direct link to greyhound racing. British Greyhound Racing’s core industry employed over 7,000 people in 2012 when all individuals are included. Around 1,700 of these will have full-time roles with the remainder being employed part-time or on racedays. Greyhound trainers employ the largest number of individuals within the industry based on the number of individuals licensed by GBGB to work in kennels. These number over 4,000 including the trainers themselves, although significant numbers of trainers carry out training on a leisure basis and will have other primary sources of income. A proportion of greyhound trainers’ staff will be family members or owners with greyhounds trained at the kennels carrying out their roles unpaid. Owners play an integral part in British Greyhound Racing, but as they are not directly employed in the industry they are excluded from the above calculations. Figure 17: People working in the British Greyhound Racing industry – 2012

250

3,000

c. 7,350 heads
4,100
The administration, regulation and governance of the industry is an efficient operation and hence is estimated to employ only c.30 people full-time. This will include, amongst others, staff at GBGB and BGRF, who work to represent the industry and maintain the highest standards of integrity and welfare. Betting industry employees directly involved in greyhound racing on a day-to-day basis are estimated as numbering nearly 200, comprising on-course bookmakers (a minimum of three are required at every fixture in order to form an industry SP), SIS and Datatote staff. The media will also employ a small number of full-time staff directly involved in greyhound racing mainly via the Racing Post. In addition Britain’s c.8,700 LBOs and firms’ head offices are estimated to employ over 35,800 FTE roles in 2012. Although these staff will take bets on numerous sport and gaming offerings and are therefore not included in the core industry employment figures, greyhound racing still remains an important product to the retail betting market.

Racecourses

Trainers and employees

Administration, media and betting (core)

Source: GBGB, Deloitte analysis.

Racecourses employ the next highest number of staff, ranging from a handful at the smaller racecourses to nearer 40 full-time staff at the larger venues. Around 450 staff have full-time roles at racecourses, with another estimated c.2,500 having part-time or raceday positions. These roles may still involve a significant number of hours, with most racecourses racing a minimum of three times per week.

28

6

Greyhound Board of Great Britain Procter House 1 Procter Street WC1V 6DW Telephone: 020 7421 3770 Fax: 020 7421 3777 www.gbgb.org.uk