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A new U.K. report asserts that vices like gambling, tobacco, and unhealthy foods might not stimulate the economy as much as previously thought.
It’s been a long-held belief that activities like gambling or consuming unhealthy food or drink might have adverse effects on individuals, but are actually beneficial to the economy. The basic idea is that curbing gambling or drinking might lead to more people staying in and spending less money, which would hurt job creation, tourism, tax revenue etc.
The new report, conducted by Sheffield Addictions Research Group (SARG), argues there’s an opportunity loss when people concentrate their spending on gambling or tobacco.
For instance, if someone spends a significant amount of money gambling, they might not have money left for eating out. The report states that when people forgo vices like gambling, they reallocate their money elsewhere.
Thus, quoted figures about gambling’s contribution to the economy may overstate things.
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Gambling, Tobacco Expenditures ‘Leak’ Out of the UK
One of the core arguments of the Sheffield study is that many companies in the gambling and tobacco industries are multinational in structure.
Therefore, spending on gambling or tobacco tends to, at least partially, “leak” money out of the U.K. economy.
Conversely, money spent on retail, recreation, or trades stays in the U.K. longer. It’s essentially being recycled, rather than leaving the country entirely. That’s especially prevalent in the tobacco industry, where very little of the money generated actually stays in the country.
The study argues that a 10% decrease in tobacco spending would boost the economy by £1.86 billion and create more than 31,000 full-time jobs. The same 10% reduction in gambling would lead to a £1.25 billion boost and more than 22,000 new jobs. Finally, cutting 10% in sweets (which also have significant international ownership) would lead to a £389 million boost.
There was one vice industry that didn’t seem to help the economy when reduced, however. Alcohol is so vital to pubs and restaurants that the study didn’t find a conclusive benefit from decreasing alcohol sales. That’s despite giant multinational corporations owning many popular brands.
One Significant Area the Study Misses: Offshore Gambling
The study presents an interesting new way to view the economics of gambling in the U.K., but it omits one significant factor.
Indeed, spending money at local casinos or online platforms in the U.K. will inevitably result in some money leaving the country. But there’s another avenue where a whopping 100% of the proceeds leave the country: offshore operators.
Generally, when governments crack down on legal gambling, it pushes consumers to black- or gray-market offshore platforms. By their very nature, these reside outside the country.
It’s why some politicians around the globe have pushed for officially regulated online gambling sites to recapture some of the money that’s being funneled straight out of their local economies, with zero tax revenue.
Of course, understanding the behavior of gamblers is difficult, and this challenge is significantly amplified when considering offshore platforms. These obviously don’t provide any data or insights to the public. Furthermore, many individuals who use them may be more reticent to report their behavior accurately.
