hall aitken social and economic regeneration consultants The social and economic impacts of regional casinos in the UK February 2006
1 Summary This report aims to identify and quantify the impact of regional casino development. It examines the assumption that such development is beneficial to local economies and communities, particularly in relation to anticipated regeneration benefits. Background The government proposes to liberalise casino gambling. This will result in eight small, eight large and one regional casino under current proposals, although there is significant pressure to increase this number. We set out to assess the contribution of any new regional casino development to regenerating its neighbourhood. To do this we have reviewed studies from across the world looking at the impact of casino development and gambling in general. We have then related this information to the social and economic benefits expected from any new regional casino development. We have brought together findings from different sources to develop a comprehensive picture of what the impact of a new regional casino is likely to be. Key findings Our three key findings are that: the estimates of economic benefit from a regional casino development are both optimistic and potentially misleading; the social costs of regional casino development are potentially high and, for most locations, would outweigh any economic benefit; and the proposed regional casino will, on balance, undermine government targets on neighbourhood regeneration. Economic impacts There has been little detailed assessment of the economic impacts of the new regional casino concept. Pion Economics assessed the demand for casinos in North-West England in mid 2005 1. Reviewing this report we noted that: The figures suggested for the Gross Value Added (GVA) arising from a regional casino are the highest possible figure, based on their own assumptions. It identifies a market for a regional casino but expects this to involve little additional spend in the area. The assumptions made for tourist numbers seem highly optimistic as most day visits originate from within the region and may be double counted as the resident market. The report expects most spend will be diverted from other leisure activities (from our interpretation: 12.75M from other gambling and 26.75M from other leisure). So the only potential regeneration benefits might be distributive 2 benefits in other words sharing benefits more equitably across different groups. And no clear case has been made for these. On the contrary: It is unclear how much spend will be retained locally any tax gains will be distributed nationally rather than locally. 4 1 Pion Economics: Casinos in England s Northwest An Assessment of Market Demand, June 2005 2 Distributive benefits are the distribution of the costs or benefits of interventions across different groups in society including benefits that impact on income, gender, ethnic group, age, geographical location or disability (as defined in the Treasury Green Book ).
The betterment 3 effect raises serious questions because of the value of the licence and planning permission to the successful applicant. This is set against the negative effect on the value of assets from which spend is diverted. There will be a significant number of jobs created by a casino, both long and short-term, but: many of these are likely to be displaced from elsewhere in the leisure sector; these jobs will not necessarily match the needs of the local population; and there is strong evidence to suggest that many of the jobs will go to migrant workers. In the late 1980s Atlantic City in the US was a run-down large-scale seaside resort. Large-scale resort casinos were seen as being the means of regenerating the city and turning round its declining fortunes. The city authorities had high hopes for the impact of the investment and expected that an economic renaissance would follow the first casino. However these regeneration benefits did not transpire for Atlantic City. The New Jersey Governors Advisory Commission on Gambling 1988 saw the warning signs early on: it is clear that retail businesses and retail employment in Atlantic City have continued to decline despite the presence of gambling, and that rampant speculation has rendered the redevelopment of vast parts of Atlantic City difficult if not impossible. There is no compelling evidence that suggests the Atlantic City effect will follow a large regional casino in the UK. But there is a clear risk that it could. It is our view, on the basis of international evidence, that many existing and competing businesses would be blighted or undermined by the presence of a regional casino. Significant numbers of businesses and neighbourhoods may be affected. Social impacts Our research suggests there will be significant social impacts from opening a regional casino. Many of these negatively impact on the Government s own social indicators and are therefore likely to undermine regeneration in the communities currently suggested. The proposed regional casino will generate (and depend upon) a significant increase in gambling expenditure. Evidence from research undertaken in the USA, backed up by the Henley Centre 4 report, suggests the number of problem gamblers will nearly double by 2010. The number of problem gamblers in the UK will increase by some 38% as a direct result of the new Act. And data from the Pion report suggests that 260,000 new people (equivalent to a city the size of Nottingham) would take up gambling as a result of a regional casino opening. We have broadly applied these figures to the catchments of six cities that have been suggested as locations for a single regional casino. Our calculations suggest that the rise in costs of problem gambling would vary between 15 million to over 60 million, depending on the location. There is limited evidence surrounding the impact of Category A gaming machines but several official reports suggest that these machines are responsible for disproportionate increases in problem gambling we have not allowed for this potential further increase in our calculations. The impacts of problem gambling on health, employment, crime, homelessness and equality are well documented. These impacts will be felt more strongly within the local communities closest to the new casino. Our opinion, based on international evidence, is that the social impacts of any significant increase in problem gambling will undermine key areas of the Government s current social inclusion and neighbourhood renewal strategy. 3 Betterment describes the increase in value of land (or other asset) as a consequence of adjacent development or, in this case, as a result of a planning or licensing decision. 4 Economic and Social Impact Study of the Proposed Draft Gambling Bill, Henley Centre, 23rd January 2004. 5
Local regeneration case studies We have undertaken a more in depth look at two of the potential sites for the development of the pilot regional casino: Blackpool and Birmingham. Blackpool typifies the issues in developing a regional casino in a resort where the economy is primarily driven by tourism. Birmingham typifies the issues raised in a proposal to develop the regional casino in a large urban area with localised regeneration needs. Blackpool Key conclusions It is not clear that the jobs created by a regional casino in Blackpool will contribute to increasing economic activity within the targeted local wards. This is because the jobs are not particularly suited to the needs of local residents (re-) entering the labour market. The jobs may attract migrant workers from other parts of the UK or Eastern Europe and any additional jobs may simply substitute for existing employment. Blackpool suffers from a reliance on low paid part-time employment of the sort which seasonal and tourism venues often provide. Further tourism-related development will not change this significantly. Because of the significant risk of the Regional Casino diverting trade and investment away from smaller competitor businesses in the vicinity, net employment gains are likely to be very much lower than those predicted. Because the number of problem gamblers in the casino s catchment may increase from an estimated 4,486 to 6,191, costing an additional 15 million per year by 2010, the attraction of Regional Casino development must be tempered by the adverse social impacts and costs which are likely. Because of Blackpool s unique characteristics, its suitability as a pilot is not clear-cut, so it would not provide useful information for other potential sites in the future. Regional Casino development in Blackpool is unlikely to achieve all that is claimed for it, but little analysis appears to have been undertaken so far into its potential downsides, particularly the social impacts. Blackpool has a substantial existing leisure base and therefore the impact on local businesses may be substantial. In the area immediately surrounding the proposed casino site there are 208 hotels and accommodation establishments, 25 amusement arcades, 5 bingo halls, 2 bowling alleys and 2 cinemas. The concentration of businesses may suggest the risk of the Atlantic City effect to a much greater degree. On the other hand there is a better match between the need for jobs locally and the type of jobs a casino would create, as there is a large transient labour force and a large workforce in the Blackpool leisure and hospitality sector. On the other hand, the jobs may not be suitable for people in the wards targeted for regeneration. But aside from those who are retired, half of the local economically inactive population are long-term sick or disabled. These people will have significant barriers that limit their ability to work and the type of work they can do. Our experience would suggest they need much more intensive and long-term measures to benefit from any new jobs. The training facility that is expected to support the new casino is untested as means of developing a local labour market in this context. 6
The town s regeneration proposals focus on developing tourism as a key economic development activity. It has a high proportion of visitors coming from outside the region, and could therefore demonstrate greater additionality in terms of the casino spend than many other locations. However the large number of existing leisure sector businesses in the town mean there is a potentially greater threat of business blight from the new development taking business away from existing businesses. Birmingham Key conclusions The community benefits in terms of jobs, additional spend in the area, improved amenity, and economic trickle-down effects for this location are not easy to identify. In particular: The jobs created will almost certainly go to people from outside the area being regenerated because they are not suited to the needs of local residents in the target wards. There would be competitive pressure placed on both city centre businesses and local leisure developments such as Star City. Displacement of leisure expenditure would place businesses under threat across a wide swathe of the city. There is little compatibility between the jobs that would be offered and the employment needs of the local population. The jobs would be taken by employees coming from out of town. Because the number of problem gamblers in the casino s catchment may increase from an estimated 17,680 to 24,389, costing an additional 59 million per year by 2010, there are serious questions about the costs and benefits of the proposal. The Birmingham site can demonstrate a clear regeneration need, as evidenced by the large number of social and economic regeneration initiatives already in place, but little compatibility with the likely benefits offered by a casino. The area has high unemployment, significant health problems and a large ethnic minority population. However any jobs created are unlikely to match the needs of the population as the location is a mainly Muslim area and gambling is not a permitted occupation for Muslims. The local population also face greater barriers to jobs due to health issues and a higher rate of long-term unemployment. The proximity of the site to the city centre would make it an attractive location for other more economically mobile groups such as migrants and students. The largest leisure complex in Europe, Star City, is only 2 miles away. It includes a 30 screen cinema, a bowling alley, a gym, 3 shops, 8 restaurants, a small theme park and what is currently the largest casino in Europe. The proposed Birmingham Regional Casino development is also only ten minutes drive from the city centre. It is likely to have a negative impact on Star City, the city centre and other regional leisure and entertainment businesses. 7