Economic Impact of British Racing 2013 /8.19 MB

ECONOMIC IMPACT OFBRITISH RACING 2013

FOREWORD 2

EXECUTIVE SUMMARY 4

INTRODUCTION 8

SECTION 1: OVERALL ECONOMIC IMPACTOVERALL ECONOMIC IMPACT 10RACING’S CASH FLOW 12

SECTION 2: ECONOMIC FACTORSEMPLOYMENT 14CAPITAL INVESTMENT 16RACING’S TAX CONTRIBUTION 18

SECTION 3: RACECOURSESRACECOURSES 20ATTENDANCES 24

SECTION 4: HORSEMENOWNERS 28TRAINERS 32BREEDERS 36

SECTION 5: COMMERCIAL PARTNERSBETTING 39BROADCASTING 42SPONSORSHIP 44

SECTION 6: INTERNATIONAL, RURAL, SPORTINGAND LEISURE CONTEXTINTERNATIONAL COMPARISONS 46RURAL CONTEXT 50RACING’S POSITIONWITHIN THE SPORTS MARKET 52RACING’S POSITION IN THE LEISURE INDUSTRY 54

REPORT PREPARATION, METHODOLOGY AND LIMITATIONS 56

FEATURE ARTICLESFRANKEL 27PRIZE MONEY DISTRIBUTION 33THE ECONOMICS OF BEING A JOCKEY 35QIPCO BRITISH CHAMPIONS SERIES 45BLACK CAVIAR 49HORSEWELFARE 51

ECONOMIC IMPACT OF BRITISH RACING 2013B

CONTENTS

This Report has been written in general terms and therefore cannot be relied upon to cover specific situations;application of the principles set out will depend upon the particular circumstances involved and we recommendthat you obtain professional advice before acting or refraining from action on any of the contents of thispublication. Deloitte LLP would be pleased to advise readers on how to apply the principles set out in thispublication to their specific circumstances. Deloitte LLP accepts no duty of care or liability for any loss occasionedto any person acting or refraining from actions as a result of any material in this Report. Further details coveringthe scope and limitations of our report, its use and our legal responsibilities are set out on page 56.

© Deloitte LLP. All rights reserved.

Graphic Design: www.heliographic.co.uk · Photography: Dan Abraham; www.racingfotos.comTrevor Jones; Trevor Jones Thoroughbred Photography britishhorseracing.com

Perth

Hamilton Park

Ayr

MusselburghKelso

Newcastle

HexhamCarlisle

ThirskCartmel

Ripon

WetherbyYork

BeverleyPontefract

Aintree

Chester

Uttoxeter Nottingham

Fakenham

Great Yarmouth

Huntingdon

LeicesterWolverhampton

Ludlow

Worcester

Hereford

ChepstowCheltenham

Towcester

Stratford-on-Avon

Bath

Taunton

Exeter

Newton Abbot

Wincanton

Newbury

Salisbury Goodwood

Ascot

Fontwell Park

Sandown ParkWindsor

Folkestone

KemptonPark

Lingfield Park

Brighton

Plumpton

Warwick

Southwell

Market Rasen

DoncasterHaydock Park

Catterick

Redcar

Sedgefield

Bangor-on-Dee

LAMBOURN

Racecourses Training centres

Ffos Las

NEWMARKET

MALTON

MIDDLEHAM

EPSOMEpsom Downs

ECONOMIC IMPACT OF BRITISH RACING 2013 1

5.6mATTENDANCE AT 1,369 FIXTURES

NET EXPENDITURE OFOWNERS ON TRAINING

FEES AND HORSEPURCHASES £4

75m+

£3.45bn

85,000+

£1.1billionDIRECT EXPENDITURE OF BRITISH RACING

17,500

17,400

£950m+

£275m+TAX CONTRIBUTION BYBRITISH RACING

INDIVIDUAL RUNNERS IN 2012

4,366NUMBER OF FOALS BORN

8,215NUMBER OF OWNERS

TOTAL DIRECTAND INDIRECTEXPENDITUREOF BRITISH

RACING

TEN YEAR CAPITALEXPENDITURE OFBRITISH RACING

DIRECT, INDIRECTAND ASSOCIATEDEMPLOYMENT OFBRITISH RACING

FTE OF CORE INDUSTRY

ECONOMIC IMPACT OF BRITISH RACING 20132

British Horseracing AuthorityForewordIt is our great pleasure andprivilege to introduce the 2013Economic Impact of British Racing,and present a comprehensivepicture of the numbers that liebehind one of the world’s greatestand wonderfully diverse sports.

This report’s findings have been eagerlyawaited. The last such study waspublished in 2009 as Britain, andindeed much of the world, was enteringa downturn that has sadly proved in linewith the most pessimistic of forecastsfour years ago.

British Racing has faced, and largelycome through, a significant test. Wewere never going to be immune to thewider financial difficulties that stillprevail, but can all be extremely proudof the scale of our sport’s continuedcontribution to the British economy.Core industry expenditure of over£1.1 billion and a total economic impactof £3.45 billion are just the headlinedemonstrations of British Racing’simportance.

Resilience is a recurring themethroughout. This resilience is howeverno accident, coming instead as a resultof the collective steps taken within thesport over the last decade.

Our structure as a racing jurisdiction isin many ways unique. The quality of ourracing may be the envy of the world butour central funding model is quite theopposite, but this in turn provides animperative to diversify our revenuestreams, to both seek new customersand enhance the enjoyment andexperience of our most loyal supporters,and explore different markets.

For the first time, we have deliberatelyseparated the sections on ourparticipants from those on ourcustomers. British Racing is prioritisingits presentation to commercial partnersin the Betting industry, and thebroadcasting and sponsorship sectors.

Putting funding arrangements withbookmakers on to a truly commercialfooting remains our sport’s biggestchallenge – many of the financialcontrasts inherent in the pages thatfollow are testament to that – and onewe are committed to overcoming. Webelieve the relationship is heading in theright direction, even if not yet fully thenumbers.

We want to meet the needs of ourcustomers in order that our producersreceive appropriate reward. Theparticipants at the heart of our sportcontinue to make significant financialcontributions, most notably ownerswhose expenditure has risen despite afall in the number of horses in trainingover the period covered.

The racecourses section details thevariety of business models that exist inthis key sector, and their requirementfor a wide range of income sources.The programme of investment acrossBritish racecourses over the previousdecade has certainly been rewarded, ashas an increasingly commercial outlook.

The report’s feature articles also serveas a perfect snapshot of British Racing:the superstar athletes both at homeand attracted from abroad; anunstinting commitment to the higheststandards of horse welfare; the world’sbest races not resting on laurels butpackaged for modern consumers; theimportance of prize money for all takingpart in the sport and the commitment ofthose working at the sharp end.

We still bear strong comparison tothose that operate in similar sectors toours, such as the sports and leisuremarkets, though British Racing and itsmany stakeholders will never becomplacent and instead take a long-term view and seek to learn from theexperience of others, including thesesports and leisure industries whereappropriate.

The British Horseracing Authority, asgoverning and regulatory body, takes itsresponsibility on behalf of the sportextremely seriously.

We are confident in our ability to carryout our varied roles, leading and servingthose we work for and playing a centralpart in creating the environment inwhich all revenue streams can bemaximised.

The report naturally highlights that thenumbers, the sport, the industry, are allmade up of a great many differentcomponent parts: in addition to as everthanking the Sports Business Group atDeloitte for their work, we would like toexpress our gratitude to all those whohave played their part in the collation ofthis report, and who make BritishRacing what it is in 2013.

FOREWORD

Paul Bittar, Chief Executive,British Horseracing Authority

We were nevergoing to beimmune to thewider financialdifficulties thatstill prevail,but can all beextremelyproud of thescale of oursport’scontinuedcontribution tothe Britisheconomy.


Deloitte ForewordThis is the third Economic Impactreport the Sports Business Groupat Deloitte has produced for theBritish Racing industry. In additionto painting the picture of the sport’seconomic footprint in 2012, itexamines how the sport has copedwith the worst recession to hit theUK economy since the 1930s.

We are privileged in the SportsBusiness Group to work full time insport, including a significant amount oftime in Racing, which enables us tocompare British Racing’s scale andperformance to other sports andleisure activities.

We have consistently maintained thatsport is better placed than most partsof the leisure and entertainmentindustries to withstand the worst of thecurrent economic headwinds due tothe passion and commitment of itscore followers and participants – adedication Racing benefits from morethan most. This Report is furtherevidence of this resilience, as whilethere have inevitably been contractionsin some sectors of British Racing, otherareas have held their own whilst somehave experienced substantial growth.

In real terms (after adjusting for effectsof inflation) the core British Racingindustry in aggregate shrunk by 1.2%per annum since we last reported in2009, not substantially worse than theUK economy’s contraction. Consideringthe industry relies on the discretionaryleisure spend of racegoers, racehorseowners (often very substantial), puntersand viewers etc., this is a creditableperformance.

The industry’s core employment hasreduced but still stands at c.17,400 fulltime equivalents, made up of over20,000 full time, part time and racedayposts. British Racing also generatesover £275m in tax revenues for theExchequer. Our 2009 Report describedan unprecedented period of investmentin the sport’s racecourses and equine

facilities, hence spending levels werealways going to be much lower in themost recent period even before theimpact of the credit squeeze. However,the estimated £203m investment since2008 brings the total for the lastdecade to over £950m (around 75% onracecourses), and this investment hasundoubtedly played a part in helpingRacing withstand the economic storm.

Racing has exhibited some of thetrends we have seen across othermajor British sports. While attendanceshave held up well, indeed growing to amodern era record of 6.15m in 2011prior to the dampening impact of theBritish summer weather in 2012,racecourses’ raceday revenues haveseen limited growth. Racecoursesreacted to the financial pressures ontheir consumers by limiting ticket priceincreases and, as with many sports,there was a softness in the corporatehospitality market as firms were unable,or reluctant to be seen, to entertaintheir staff and clients. Nonetheless,Racing remains comfortably the bestattended sport in Britain after football,and its festivals number amongstBritain’s sporting crown jewels.

Broadcasting has been responsible formost of the major revenue gains tosport in the last five years. The growthof Racing’s media revenues – whetherfrom selling pictures to bookmakers,allowing punters to watch racing on themove via their mobile or smartphone, orfrom selling British Racing to close to40 countries worldwide – has beenone of the success stories of the lastfive years.

The sponsorship and commercialmarkets are tough, with the majority ofwhat growth there is generally reservedfor the biggest brands and properties insport. Yet British Racing has madeprogress in this sphere, with thecreation of the QIPCO BritishChampions Series and BritishChampions Day arguably the biggestdevelopment. Those sports that are themost successful tend to be the best at

showcasing their biggest days andstars, using them to draw in newfollowers to the sport. Frankelundoubtedly helped, but Racing wasalso well organised to leverage hisimpact beyond the usual industry presscoverage in 2012. Most notably thiswas enhanced through the activities ofGreat British Racing, the industry’scentral marketing and promotion body,which has played a key role in buildingthe sport’s profile since its creation fouryears ago.

Top level sport now transcends nationalborders. The heritage and reputation ofBritish Racing means it continues toattract many of the top horses in theworld and that it benefits from anincreasingly diverse set of majorinternational investors.

During the course of preparing ourreport we have spoken to individualsfrom over 30 organisations drawn fromevery sector of the industry. We wouldlike to thank everyone involved for theirtime, responsiveness, information andfor the spirit of openness in which allour consultations were performed.

We hope you enjoy reading the reportand that it proves a valuable tool forBritish Racing.

Alan Switzer, DirectorSports Business Group at Deloitte

Racing remainscomfortably thebest attendedsport in Britainafter football,and its festivalsnumberamongstBritain’ssporting crownjewels.


This report examines the economicimpact of British Racing.Key participants in Racing includeowners, racecourses, trainers,breeders, jockeys, stable staff,racing organisations, media andracing consumers such asracegoers, punters and sponsors.

In addition to assessing its owneconomic impact, this report positionsBritish Racing in the context of theBritish sports, betting, leisure andrural economies, as well asinternational racing.

The report updates the analysisincluded in the previous 2009 editionand focuses on the period up to, andincluding 2012. The intervening periodhas seen the worst recession in the UKsince the 1930s, hence an importantpart of this report considers howRacing has coped with the resultingeconomic challenges.

Economic impactBritish Racing generated an estimated£3.45 billion in direct, indirect andinduced expenditure in 2012 (upmarginally from £3.41 billion in 2008).This small nominal increase means the

industry has shrunk in real terms oncethe impact of inflation is built in, butgiven the industry relies on discretionaryleisure spend of racegoers, owners,viewers, punters and others, this stillrepresents a resilient performance in theface of strong economic headwinds.

Core industry expenditureThe £1.11 billion inflows into the coreindustry can be categorised as follows:

• Owners incurred direct grossexpenditure of £389m whilstreceiving income of £85m throughprize money and sponsorship. Thisresulted in net expenditure of £304m(excluding horse purchases) andrepresents a 10% increase since2008, despite a fall in the averagenumber of horses in training.

• The expenditure of the breedingindustry, primarily the 300 full timestud farms, was estimated asbeing £189m.

• Racecourses received expenditureof £371m by racegoers, sponsorsand corporate customers (excludingmedia).

• Media operations generated £173min revenues primarily through picturesales to Licensed Betting Offices,Racing’s two dedicated horseracingbroadcast channels and relateddomestic and international bettingorientated broadcasts.

• £75m was received by Racing frombetting operators through thestatutory 10.75% Levy applied to theprofits on British Racing from Britishbetting operators, and an agreedcontractual contribution by Betfair,both paid to the Horserace BettingLevy Board. Levy receipts have fallenconsiderably over the last five yearsand now represent less than 7% ofthe total inflows to the industry.

• Racing’s outflows very closely alignwith its inflows hence the industryoperates on limited cash reserves.Major outflows include wages(£324m), prize money (£98m), horsecosts such as veterinary and farriers(£90m) – together with a variety ofother operating costs.

• Very little cash “leaves” the sport inthe form of returns to non-Racingshareholders. Interest payable wasestimated as being £26m which,combined with dividends and sharebuy-backs of £12m, representedless than 3% of the £1.1 billion cashinflows.

EXECUTIVE SUMMARY

Racecourse£371m

Owners£304m

Media£173m

Breeders£189m

Levy£75m

CORE RACING INDUSTRY EXPENDITURE

Key measures of Racing – 2012

£3.45bn Total economic impactof British Racing

£1.11bn Core British Racingindustry expenditure

£203m British Racing’s capitalexpenditure (2009-12)

£276m British Racing’s taxcontribution

17,400 Core industryemployment (FTE)

British Racinggenerated anestimated£3.45 billion indirect, indirectand inducedexpenditurein 2012.

£710m British betting industry’sgross win on British Racing

13,716 Average number ofhorses in training

8,215 Number of owners

5.58m Total racecourseattendances

85,200 Direct, indirect andassociated employment


Employment• Racing’s core industry, comprisingthose directly involved in the day-to-day operation of the sport, equates toc.17,400 Full Time Equivalents in2012 – made up of over 20,000 full-time and part-time positions, togetherwith many thousands of raceday staff.

• Headcount has declined by 8% onaggregate since 2008 as employmentlevels have fallen in many sectors inresponse to lower activity levelsand/or as racing organisations havesought to control costs.

• The largest proportion of employeesare involved in the production andtraining of racehorses with over10,000 FTE involved in theseactivities. Racecourses and their directservice providers, notably caterers,are the next largest employers.

• Further activity within the economyas a result of the Racing industry,including those directly related toRacing such as vets and farriers,sustains another 29,000 jobs. Inaddition, the British Betting industryemployed an estimated 38,800 FTEs(including many part-time roles), themajority in Licenced Betting Officeswhere British Racing remains thelargest sports betting product.

Capital expenditure• The last decade has seenunprecedented capital investmentthroughout British Racing, with over£950m estimated to have been spenton racecourses (c.£700m), equine,media and other racing facilities.

• The economic downturn and creditcrunch have understandably had animpact on the level of capital spendingwith an estimated £203m investmentbetween 2009-12, compared to£706m in the previous five years.

• Nonetheless, further investment infacilities is planned including a £45mredevelopment of CheltenhamRacecourse – in part funded by theinnovative Jockey Club Retail Bondwhich raised c.£25m. Racecoursefinancing in general will be assistedby the re-instatement of LevyBoard loans.

Taxation• British Racing generated over £275min tax in 2012 and over £1.4 billion inthe last five years.

• Betting on racing provides the largestproportion of tax generated forGovernment at around £100m in2012. This has fallen sharply fromover £150m per annum earlier in thedecade, in part as betting on racinghas migrated to remote means – thelarge majority of which are currentlyoffshore and hence not subject toBritish betting taxes or Levy.

• Employment taxes from the industry’s17,400 FTEs, VAT paid by racegoersand some racehorse owners and amodest amount of corporation tax(rare, as profit maximisation istypically not the central objective ofmany Racing organisations) –together contributed £176m in tax tothe Exchequer.

Racecourses• Overall revenues for Britain’s 60licenced racecourses (in 2012) are acombination of central distributionsfrom the Levy Board and internallygenerated revenues from racedayadmissions, media rights,sponsorship, and other commercialactivities.

• Distributions from the Levy Board fellby over a third compared to 2008,but growth in other racecourserevenues – notably media rights –meant total revenue edged up by 1%to £478m.

• Revenues from admissions andcatering (grossed up to reflect theactual spend of racegoers) – totalling£214m, have been flat asracecourses have limited priceincreases where possible given thesqueeze on consumers’ disposableincome. A challenging corporatehospitality market has also had adisproportionate dampening effect onthese income streams.

• Racecourses experienced significantcost inflation in areas such as utilitiesand security – together withsignificantly increasing theircontributions to prize money. Thesefactors contributed to modest profits,estimated to have been less than£10m excluding exceptional items in2012, and a small net cash outflowas the racecourses made net loanrepayments to financiers.

£950m+Capital investmentin Racing in the last

10 years

Inflows Total £478m

Net movement(£6.4m)

60Racecourses

1,369Fixtures

5.6mAttendances

c.2,200FTEs

Outflows Total £484m

Racecourse Cashflows

Racing’s coreindustry,comprisingthose directlyinvolved in theday-to-dayoperation of thesport employsc.17,400Full TimeEquivalents(FTEs) in 2012.

£275m+Tax generated byRacing to Governmentin 2012


• While it remains a tough sponsorshipmarket, racecourses have had somesuccess in growing such revenues.Helped by initiatives including theQIPCO sponsorship of theBritish Champions Series andexpanding offerings beyond purerace sponsorship into areas such asstand sponsorship and categorysponsorships by industry, suchrevenues grew to £31m in 2012.

• The 60 racecourses’ aggregaterevenue was the largest in sport afterfootball in Britain – although RugbyUnion, its nearest rival, has narrowedthe gap. Racecourses’ modestrevenue growth outside of mediarights matches the experience ofmany other sports in the last fiveyears, certainly for all but the biggestglobal brands and athletes.

Attendances• Racing is the second best attendedsport in Britain after football, and in2012 accounted for four of the tenhighest attended sporting events(excluding the London 2012 Olympicand Paralympic Games).

• Racecourse attendances reached amodern era record of 6.15m in 2011but dropped to 5.58m in 2012(1,369 fixtures at an average of 4,077per fixture), hindered by the poorweather which led to abandonmentsand lower attendances at traditionallywell attended summer fixtures.

• Attendances at the major festivalsand premium fixtures held up well,with over 1.25m people attending thetop ten meetings in 2012.

• Racecourses frequently combineother entertainment with the coreracing product in order to attract newracegoers. Over 350,000 peopleattended the 35+ fixtures with asignificant music element in 2012,and Ladies’ Days are extremelypopular at both a national and morelocal level.

Horsemen• British Racing benefits from a hugevariety of owners – ranging from majorinternational owners, typically focusedon Flat racing, to a large number ofracing clubs and syndicates whichallow thousands of people to getinvolved in horse ownership.

• Collectively these owners are thesingle biggest contributors to thefunding of British Racing throughboth their purchase of horses frombreeders (£189m being breeders’expenditure and commission paid onhorse purchases) and ongoingtraining and racing expenditure paidto trainers, jockeys and supportingindustries (£369m). After receipts ofprize money and sponsorship of£85m, owners are estimated to havemade a net injection of over £470m in2012 (compared to £465m in 2008).

• The net increase came despite falls inthe number of horses in training andnumber of owners. Cost inflationresulted in the average cost ofkeeping a horse in training rising,estimated to be £17,500 for a Jumphorse and £21,500 for a Flat horsein 2012.

• Prize money was £98m in 2012(of which owners get c.80%, with therest distributed between the jockey,trainer and stable staff), less than the£100m in 2004, representing asubstantial fall in real terms.Increasing prize money is a focus ofthe industry, with 2013 levelsexpected to be around £110m,similar to the previous record(from 2009).

• Britain’s 450+ professional jockeysare amongst the hardest workingand toughest sportspeople in thecountry, and on average earn around£35,000 before substantial direct andtravel expenses.

• Britain’s foal production of 4,635 wasthe seventh highest in the world in2011 (last year for which global datais available). The breeding sectoremploys c.3,900 FTEs across c.300full-time stud farms in Britain, andover 3,500 part-time breeders.

• The global reputation of BritishRacing means it has become thedestination of choice for investors inbloodstock for an increasingly diverseset of international buyers. It isestimated that £150m of the £221msales at Tattersalls in 2012 weremade to non-British buyers from over50 countries.

• The Breeding sector was one of thefirst to experience the impact of theglobal economic slowdown, withsharp falls in bloodstock values andsubsequently foal production levels.Britain’s foal production fell by 26%from the peak 2008 levels to the4,366 recorded in 2012. However,public auction sales have grown by25% since the low of 2010, driven bythe top end of the market.Expenditure at Tattersalls andDoncaster Bloodstock Sales totalled£247m in 2012.

• Much of this fall in production hasbeen at the lower quality end of themarket hence, while the sector hasshrunk in terms of employment andexpenditure, it is not as dramatic asthe production falls would suggest.Total breeders’ expenditure has beenestimated at £170m in 2012.

EXECUTIVE SUMMARY

Owners

8,215Trainers

557

Jockeys

450+

Horses

13,716

4,366Foals born

in 2012

Owners are thesingle biggestcontributors tothe funding ofBritish Racingthrough boththeir purchaseof horses frombreeders andongoing trainingand racingexpenditure.


Betting• British Racing competes in arguablythe most competitive betting market inthe world, which results in the highestreturns to stakes bet by horseracingpunters of any major country.

• In 2012/13 the gross win from BritishRacing is estimated to have been£710m – consisting of c.£570mgenerated from Licenced BettingOffices but excluding all but one ofthe top 20 online betting operatorswith a British focus.

• Total gross win has fallen from the£1 billion+ recorded in 2008/09.The fall reflects the intensecompetition from other sports bettingand products, lower margins, and amigration to remote forms of betting(including increasingly via smartphones) – primarily with operatorsoffshore.

• The move offshore has contributed tothe significant falls in the Levy – the10.75% statutory Levy on Britishbetting which operators pay on theirgross win from British Racing – whichis forecast to have generated £75min 2012/13 compared to an averageof over £100m p.a. around themiddle of the last decade. Racinghas, however, benefited fromincreased media rights payments bybookmakers in recent years.

• Racing continues to seek analternative mechanism to the Levycapable of capturing revenues fromall bets placed on British Racing.The landmark five-year agreementwith Betfair, whereby the exchangewill pay 10.75% of gross win fromBritish punters betting on BritishRacing, underwritten by substantialguaranteed minimum payments backto the sport, despite being offshore,is one possible template for futurefunding mechanisms.

Broadcasting• British Racing has substantiallygrown broadcasting revenues acrossthe evolving platforms over the lastfive years. The amount paid toracecourses in licence fees hasincreased to £88m in 2012 (£57m in2008), and is expected to exceed£100m in 2013.

• The majority of the growth has comeas a result of the higher rights fees inthe LBO market, arising from theentry of Turf TV into the market in2007. In addition, both the dedicatedracing channels – At The Races andRacing UK – have developed theirvideo streaming products (70m racestreams in 2012) and the jointventure GBI Racing, which sellsBritish Racing to close to 40countries internationally, has helpedgrow revenues.

• The Grand National is consistentlyplaced in the top 10 most viewedsports events in any given year.A peak audience of8.9m viewers watchedthe first GrandNational televised onChannel 4 in 2013 –now British Racing’sexclusive terrestrialbroadcaster.

International standing• British Racing is highly regardedacross the international racingmarket, and is the global hub forJump racing.

• British Racing provided around 14%of the world’s top ranked Flatthoroughbred racehorses and stagedseven of the world’s top 15 rated Flatraces over 2010-12. It regularlyattracts star horses from across theworld, most notably in 2012 when

the ‘supermare’ Black Caviarappeared at Royal Ascot

for her only raceoutside of Australia.

• The globaleconomicslowdown hasresulted in manymajor racingnations experiencing

contractions in horsenumbers, betting and/or

racecourse attendances.Britain has been more resilient

than most to such stresses.

• British Racing operates a differentfunding model from many othercountries, notably in that it is muchless reliant on betting. Less than 2%of betting turnover on British Racingis paid back to the sport, asignificantly lower percentage than inother major racing nations.

World’s topthoroughbredhorses

7 of 15Top Flat races

14%

British Racingcompetesin arguablythe mostcompetitivebetting marketin the world.

8.9mPeak Channel 4audience for 2013Grand National


BackgroundAs the sport’s governing and regulatorybody, the British Horseracing Authority(“BHA”) commissioned the SportsBusiness Group at Deloitte to performan assessment of the contribution of theBritish Racing industry (“British Racing”or “Racing”) to the British economy.

This report combines analysis of themore traditional measures of the activitylevels, and ultimately the health, ofBritish Racing – such as racecourseattendances, horses in training, numberof owners, prize money and bloodstockauction values – with key economicmetrics including total expenditure,employment, capital investment and thetax contribution of the sport.

This report updates the analysis includedin the 2009 Economic Impact of BritishRacing report (which covered theperiod up to 2008) which has been aninvaluable tool for the Racing industry.

The intervening period since 2008 hasseen the worst recession in the UKsince the 1930s (and a downturnglobally). British Racing was notimmune to its effects. An important partof this Report is therefore examininghow Racing has fared during thedownturn, in part through appropriatecomparisons with the figures containedin the previous report.

The report focuses on the period up toand including 2012 but, whereappropriate, individual sectionscomment on developments in 2013.

MethodologyPage 56 sets out in detail themethodology, assumptions andparameters of the study. The followingpoints are particularly important:

• The study measures the economicactivity stimulated directly by theexpenditure of participants in BritishRacing (breeders, owners,racecourses, trainers and others),and Racing consumers (racegoers,viewers, punters etc.), which thenflows through the economy to createactivity in other non-relatedindustries.

• The data included in this report hasbeen gathered through acombination of:

- extensive consultations withRacing’s stakeholders – over 30consultations were conducted;

- data supplied directly by Racing’sstakeholders;

- results of a racegoers’ onlinesurvey;

- results of the 2010 RacehorseOwners Association (‘ROA’) surveyin relation to the training costs ofracehorse owners; and

- additional primary research andanalysis performed by Deloitte.

• The internal flows between Racing’sparticipants are relativelycomplicated, and are of lessrelevance to those outside of Racing.Hence, wherever possible this studysimplifies matters to focus on theflows into and out of Racing.

• The study focuses on 2012 whereverpossible – adjusting for orcommenting on, where appropriate,“exceptional” factors during the year.

INTRODUCTION


• Other direct impacts – mainlyoff-course raceday expenditure byracegoers on goods and servicessuch as food and transport.

• Indirect and induced impacts –quantifies the ‘ripple effect’ as thedirect expenditure by the coreindustry subsequently flows throughthe economy via further Business toBusiness expenditure (e.g. businessspending on suppliers) andconsumer expenditure (e.g. recipientsspending wages elsewhere in theeconomy).

• Betting industry – the impact of theBetting industry is primarilyaddressed via the statutory Levy onBritish betting operators’ grossprofits and betting exchanges’commission on British Racing as paidto the Levy Board, and subsequentlydistributed amongst Racing’sparticipants, primarily owners,through prize money.

This report also sets out the totalamount of gross win of the BritishBetting industry from betting on BritishRacing as this is expenditure of racingpunters. It also considers the directtaxation generated from betting onRacing and the total employment levelsin the Betting industry.

Report structureThis report is broken down into six keysections as described below:

Section 1: Assesses the overalleconomic impact of Racing via theaggregate level of expenditure by itsparticipants, consumers and indirectimpacts.

Section 2: Discusses Racing’saggregate levels of employment,taxation and capital investment.

Section 3: Considers the role ofracecourses in the Racing industry,including a detailed analysis ofracecourse attendances.

Section 4: Looks at the impact madeby horsemen – Owners, Trainers,Jockeys and Breeders – on theindustry, with particular reference totheir revenues and costs.

Section 5: Examines the commercialappeal of Racing as demonstrated byits close ties with the Betting,Broadcast and Sponsorship sectors.

Section 6: Includes a comparison tomajor racing nations, an assessmentof Racing’s position in the ruraleconomy and British Racing’s role inthe sport and leisure markets.

A number of ‘Feature articles’ havebeen included in appropriate sectionswhich examine in more detail particularaspects of British Racing, includingassessing the impact of Frankel – thehighest rated Flat horse of all time,the economics of being a jockey – aprofession amongst the hardest workingin British sport, and looking at theimpact the QIPCO British ChampionsSeries has had on the sport.

Figure 1 illustrates the separatecomponents when determining theeconomic impact of an industry.

• Core industry – primarily expenditureby, or generated from, Racing’sconsumers, racecourses, owners,trainers and breeders but alsoincorporating organisations such asthe BHA, Horserace Betting LevyBoard (‘Levy Board’), At The Races,Racecourse Media Group (‘RMG’),Turf TV, Weatherbys, Tattersalls, etc.

Figure 1: Components ofEconomic Impact

Core Industry

Other DirectImpacts

Indirect Impacts

Raceday

Multipliers

Source: Deloitte analysis.

The periodsince 2008 hasseen the worstrecession inthe UK sincethe 1930s.British Racingwas notimmune toits effects.


Industry sizeBritish Racing’s economic impacthas been estimated based on thedirect expenditure of itsparticipants and the associatedexpenditure of Racing consumers.

In determining the economic impact ofany industry it is normal to attempt toeliminate any double counting ofexpenditure in order to derive the netinjection of expenditure created. This isparticularly important for Racing giventhe often complex, and two-way, flowof funds between the participants of theindustry – one participant’s expenditureis often another participant’s income.The definition of expenditure will varybetween participants and consumersbut essentially it refers to new cashbeing injected into Racing at each of itscomponent ‘levels’.

Figure 2 sets out details of eachparticipant group’s expenditure in orderto estimate the overall economic impactof British Racing.

Core Industry• The spending by racegoers,sponsors and commercial partners atracecourses injected £371m into thecore Racing industry, marginally upfrom 2008.

• The revenue of the broadcasters andprint media (the expenditure ofviewers, betting companies andreaders) of British Racing increasedby 40% from 2008 levels to £173m in2012 – by a significant margin thehighest growth rate of constituentcore Racing expenditure.

• The gross win of the British Bettingindustry from betting on BritishRacing (i.e. the amount lost bypunters) was c.£710m in 2012 –markedly down from the over£1 billion in 2008. A 10.75% (as thestandard rate) statutory Levy on thisgross win is paid to Racing, equatingto £75m in 2012. The remainingc.£635m plus includes c.£100m

gross profits tax with the balancebeing betting operators’ contributionto operating costs and profits.

• Owners incurred direct grossexpenditure of £389m but received£85m back in prize money andsponsorship, resulting in a netexpenditure of £304m. However ifthe expenditure of breeders – £189m– is assumed to be ultimatelyincurred by owners, via the purchaseof horses, gross owners’ expenditurewas c.£578m, with a net expenditureof £493m.

• The expenditure of the core BritishRacing industry was £1,112m in2012 – up from £1,066m in 2008, a4% increase.

• It is important to note that whilsttrainers, jockeys and stable staff are

not shown separately in Figure 2,this is merely a function of theexpenditure method used to assessthe economic impact as not only dothey play a vital role in the industrybut they also provide an economicimpact in their own right. Theirexpenditure is effectively includedwithin that of owners.

Secondary expenditureThe core industry expenditure of£1,112m, augmented by £248m ofoff-course expenditure, generates afurther £2.1 billion of expenditure as theinitial expenditure filters through theeconomy. Business to Businessexpenditure made up £840m of thistotal, with the balance of £1,246mgenerated by consumer expenditure.

This means that for every £1 spent inthe core industry and on off-siteexpenditure, an additional £1.53 isgenerated in secondary expenditure bylinkages in the economy.

Total expenditureExcluding the impact of capitalexpenditure, British Racing thereforegenerated £3.45 billion in direct, indirectand induced expenditure in 2012(a small increase from £3.41 billionin 2008).

Gross Value AddedTotal expenditure generated by theindustry is relevant in assessing thecontribution made to the Britisheconomy. However, using expenditurealone does not acknowledge the factthat no value is added by the sourcingof physical inputs alone. It is what theindustry does with those inputs thatcontributes to the economy, rather thansimply purchasing the inputs.

In simple terms, expenditure can beadjusted to exclude intermediatedemand so that only the real or grossvalue added by stakeholders isincluded in the analysis. An alternative

OVERALL ECONOMIC IMPACT

SECTION 1: OVERALL ECONOMIC IMPACT

Figure 2: The flows into Racing from its participantsand consumers – 2012

Note: Figures in brackets represent the equivalent expenditure in 2008 which have been reclassifiedwhere appropriate. Source: Deloitte analysis.

Core BritishRacing

£1,112m(£1, 066m)

SecondaryConsumer£1,246m(£1,123m)

Levy£75m(£99m)

Off-coursepunters

Gross win£710m

(£1,050m)

Breedingexpenditure

£189m(£207m)Owners

Gross £389mNet £304m

(£275m)

Media£173m(£124m)

Off-courseexpenditure

£248m(£222m)

Racecourses£371m(£361m)

Total directand stimulated

expenditure£3,446m(£3,413m)

Secondaryexpenditure

B2B£840m

(£1,002m)

The expenditureof the coreBritish Racingindustry was£1,112m in2012 – upfrom £1,066min 2008, a4% increase.


measure of industry contribution – andthe one which can be most readilycompared to national indicators suchas Gross Domestic Product (GDP) – isgiven by Gross Value Added (GVA). Toobtain this estimate it is necessary toadjust expenditure to isolate the valueadded in terms of operating profit andwages paid, based on data from theOffice for National Statistics.

On this basis, the GVA associated withthe £3.45 billion in direct and secondaryexpenditure is found to beapproximately £1.65 billion (with £475mfrom the core industry). This representsan increase from the 2008 nominalestimate of £1.56 billion (a 1.3 per centper annum increase).

Real contractionThe above estimates are based uponcurrent prices in 2008 and 2012. Afteraccounting for inflation and rebasingthe 2008 estimates in 2012 prices,total expenditure of £3.45 billion in2012 represents a fall of £300m in realterms from a 2008 rebased estimate of£3.74 billion.

Similarly GVA sees a fall of £80m from arebased 2008 estimate of £1.73 billion– a contraction of 1.2% per annum.

Together this shows that the Racingindustry has grown in nominal termsbut has contracted in real terms overthe period from 2009 to 2012. By wayof comparison, UK GDP (at constantprices) fell by 0.25% per annum overthe period. This shows the industry hascontracted only marginally quicker thanthe economy as a whole.

Given the Racing industry relies on thediscretionary leisure spend ofracegoers, owners, viewers etc., thisshould be regarded as a resilientperformance in the face of strongeconomic headwinds.

Given theRacing industryrelies on thediscretionaryleisure spend ofracegoers,owners, viewersetc., the realcontraction of1.2% perannum shouldbe regarded asa resilientperformance inthe face ofstrong economicheadwinds.

Participant Industry cash inflow (equivalent to assumed expenditure)

Racecourses The expenditure generated by Britain’s 60 racecourses and 109 Point-to-Pointcourses from the expenditure of Racing consumers, namely:• Racegoers: Raceday admission, membership fees, racecards, etc; Cateringspend (actual spend of racegoers); Corporate attendees

• Sponsors and advertisers• On-course betting – commission paid by Tote and on-course bookmakers’ fees• Non raceday attendees – conferences, banquets, on-site hotels, etc.All racecourse cash flows are exclusive of VAT, except for catering and admissionincome which include VAT.

Media Primarily the expenditure of broadcasters and viewers on British Racing via:• Broadcasters – payments from terrestrial channels and bookmakers (SIS andTurf TV). All amounts paid to Turf TV have been included, but only the racecourselicence fee element of bookmaker payments to SIS.

• Racecourse Media Group and At The Races – through subscriptions (for RacingUK), overseas sales of picture rights, betting commission, etc.

An estimate of Racing’s print media revenues, excluding reader purchases, has alsobeen included.

Owners Owners’ expenditure on racehorses takes two main forms:• Ongoing operating expenditure on keeping and training horses – training fees(including vet costs, transport etc.), jockey costs, entry fees etc.

• Capital cost of buying racehorsesOwners’ expenditure on buying horses is incorporated via breeders’ expenditure.In aggregate, owners recoup a proportion of their ongoing expenditure on horses fromprize money, funded from various industry inflows. It is therefore necessary to deduct prizemoney from owners’ gross expenditure to get their net investment into British Racing.The c.£20m training and keep costs of c.3,400 Point-to-point horses are also included.

Breeders There are an estimated 300 full-time stud farms and over 3,500 other breeders inBritain generating revenue primarily from the sale of horses (via public or private sales).

Given the lack of country specific vendor data for breeder sales, and the importanceof home-bred racehorses, the economic impact of the breeding sector has beenestimated based on breeders’ expenditure. Additionally, c.£20m was paid to Britishpublic auctioneers in commission.

Off-course Over £700m of gross win (the amount lost by bettors) was generated by the Bettingbetting industry on British Racing. The statutory Levy is applied to betting operators’ gross

profits on the sport – at a rate of 10.75% – and generated £75m in 2012 whichwas paid to Racing. Only the Levy element of gross win has been included withinthe core Racing industry expenditure.

Off-course The on-course expenditure of racegoers is captured within racecourse revenue.expenditure In addition, the c.5.6m annual racegoers incur additional expenditure costs on travelling

to the racecourse, accommodation, food and drink outside the racecourse and otherlocal spending. This expenditure has been directly generated by the decision to goracing hence, while not part of the core industry, is still generated by Racing.

Off-course expenditure also includes estimated total Racing press expenditure(arising from reader purchases).

Figure 3: Expenditure of Racing’s participants


The assessment of the economicimpact of Racing as set out onpages 10 to 11 focused purely onthe flows into Racing, but it is alsoinstructive to examine the outflowsfrom the industry. Figure 4 sets outinflows and outflows for theparticipants and racingorganisations detailed in the noteto the chart. The analysisillustrates how Racing’s outflowsare very closely aligned with itsinflows. Where comparable andrelevant, the figures from the 2008report, or restated amounts, havebeen indicated in the text below.

Inflows• Raceday – £138m (2008: £141m)consists of racecourse admissionreceipts from the 5.6m racegoers in2012 (excluding Point-to-point) andon-course betting (commission only).The decrease since 2008 reflectsracecourses’ limited price increasesgiven the challenging economicconditions for their customers, and atough corporate hospitality market.

• Catering – After admissions, cateringis the highest area of expenditure forracegoers. The £138m spend (2008:£129m) represents the gross VATinclusive spend on the racecourse(and some non-raceday spend),however racecourses typicallyoutsource their catering operationsand are paid a commission by thecaterers (hence the £77m shownseparately as an outflow).

• Media – Income of £153m (2008restated: £104m) comprises the totalrevenue of Turf TV, RMG, At TheRaces, GBI Racing plus the amountspaid to the racecourses in licencefees by Satellite Information Services(‘SIS’) and terrestrial broadcasters.The revenue derived from theserights has increased by nearly 50%since 2008, through growth inexisting mature channels and theexploitation of newer media channels– notably online streaming – and a

much wider sale of British Racingpictures internationally. As discussedin the Racecourses section, afterdeducting the media companies’operating costs, £88m of this waspaid to the racecourses in 2012(2008: £57m) – with further increasesexpected in 2013.

• Other commercial – Income of £89m(2008: £82m) is primarily generatedby the racecourses, includingsponsorship and non-racedayactivities, but is augmented byrevenue from other racing bodies.

• Excluding horse purchases,racehorse owners spent a gross£369m (2008: £347m) on their horsesin training in 2012 (excluding Point-to-point horses). As explained inmore detail in the Owners section,while the number of horses in traininghas declined since 2008, the highercosts per horse have resulted inowners injecting more funding intothe sport to train and keep theirhorses than in previous years,despite the economic downturn.

• As explained in more detail in theBreeders section, the expenditure ofthe breeders has been used as aproxy for owners’ expenditure onpurchasing horses, hence in the cashflow model the inflow is shown withseparate components of expenditurein the appropriate categories.

• Total 2012 estimated calendar yearLevy receipts of £75m aresubstantially down on the average ofover £100m from the mid/late 2000sfor the reasons discussed in theBetting section.

Outflows• Prize money – c.80% of the £98m(2008: £106m) prize money wasreceived by owners. The balance isdistributed widely within the sport,and is a vital additional revenuesource to Racing’s participants butone that has declined markedly inrecent years.

• Total wages, including employers’National Insurance and estimated

RACING’S CASH FLOW

Basis of preparation:1. For the purposes of the cash flows the

following organisations are included inthe British Racing industry –racecourses, trainers, breeders, owners,jockeys, Tattersalls, DBS, BHA, HBLB,Weatherbys, RMG, Turf TV, At The Racesand several Racing trade bodies.

Several high level assumptions havebeen required, hence the cashflowshould be regarded as illustrative only,but nonetheless it provides a valuableinsight into Racing’s cashflows.

2. Movements in working capital havebeen assumed to be cash neutral.

3. All flows exclude VAT except racedayadmissions and catering, with theimplicit assumption that all otherparticipants can reclaim VAT.


Figure 4: Racing’s key cash flows

BRIT

ISH RACING INDUSTRY

NetMovement

(£1m)

Owners’ operatingspend

£369mOwners’

horse purchases£189m

Raceday£138m

Media£153m

Levy Receipts£75m

Catering£138m

Othercommercial

£90m

Prize money£98m

Wages (take home)£225m

Other operatingexpenditure

£416m

Horse costs£90m

Net repaymentto Financiers

£13m

Dividends£12m Caterers

£77m

Taxation£151m

Capex£45m

Interest (net)£26m

Total inflow£1,152m

Total outflow£1,153m

SECTION 1: OVERALL ECONOMIC IMPACT


trainers’ profits, of £324m were paidto approximately 16,800 employees(FTEs). Of this, an estimated £225mwas taken home by the employeesafter £99m of PAYE and NationalInsurance was deducted.

• Horse costs consist of veterinary,feed, transport, farriery and othersincurred by trainers and breeders.

• Other operating expenses of £416m(2008 restated: £350m) includeracecourse raceday expenditure andoperating expenses (£207m),trainers’ costs (£103m) and variousracing organisation overheads.

• Taxation paid of £151m (2008:£144m) comprises the VAT elementof raceday admissions and catering,and employment taxes for the entitiesincluded – see page 18 for a fullerdiscussion of Racing’s taxcontribution.

• Racecourse spending makes up thelargest element of the £45m (2008:£88m) capital expenditure, which

also includes estimated amounts tocover other Racing sectors’ 2012capital expenditure – see page 16 forfurther discussion of this point.

• The movement to the £13m netrepayments to financers from the2008 net injection of £23m in partreflects the impact of tightening creditmarkets since the banking crisis.Racing industry entities, primarilyracecourses, are now making netrepayments to external financeproviders.

• Net interest paid of £26m (2008:£20m) is relatively low given the sizeof the industry, although it hasincreased markedly in the last tenyears as racecourses have increasedtheir borrowings to fund capitalexpenditure.

• Dividends and share buy-backs of£12m were paid in 2012, primarily the£6.5m share buy-back by TheRacecourse, Newbury in connectionto the sale of land for developmentand a £4.5m dividend to Timeweave

PLC (Turf TV’s 50% joint venturepartner) with the remainder made upby Tattersalls and Weatherbys. Netinterest and dividends in totalrepresented just over 3% of operatingcash inflows of the industry.

OverallThe total inflows of £1,152m, comparedwith outflows of £1,153m, resulted in anotional decrease in cash of £1m.The primary aim of many parts of theindustry is not a financial return oninvestment (hence the low dividendsseen) and cash inflows are generallyreinvested in Racing for the benefit ofthe sport.

The large majority of racing entitiesoperate with very limited cash reservesand the availability of external finance islimited. A continuation of the closebalance between cash inflows andoutflows is therefore expected. Indeed itis likely that if there were any cashsurpluses the majority would beretained in the industry to strengthenrespective entities’ balance sheets.

The largemajority ofracing entitiesoperate withvery limitedcash reservesand theavailability ofexternal financeis limited.


The extensive and complex natureof Racing means it supportssignificant levels of employmentin a range of economic sectors,ranging from racehorse productionin the breeding industry to thestaging of c.1,450 fixtures and thefacilitation of betting on racing.

Racing’s core industry, comprisingthose directly involved in the day-to-dayrunning of the sport, employed 17,400FTEs in 2012 – made up of over 20,000full time and part time positions,together with many thousands ofraceday staff.

Levels have fallen across most sectorsas might be expected due to the overalleconomic downturn. It is worth notingthat total employment levels over thisperiod in the UK dropped from 29.3min 2008 to a low of 28.9m in 2009,before picking up to 29.7m in 2012.

One particular aspect of employment inthe Racing industry is the highproportion of staff employed in part-time roles – particularly in the training,breeding and betting sectors. This fitswith the Government’s aim of providingemployment opportunities for certain

population groups traditionally less likelyto engage with the labour market in afull-time role. In the UK, whilst full timeemployment declined by 0.6% from2008 to 2012, part time employmentrose by over 7% in this period.

Significant numbers of jobs also flowfrom British Racing’s core activities intosecondary employment. These includethose serving Racing directly such asvets and those working in the broaderequine industry (estimated at 2,600), toother roles that emerge from the ‘rippleeffect’ of the Racing industry throughthe wider economy.

There has always been a symbioticrelationship between Racing and theBetting industry, and the workforceemployed in Britain’s c.8,700 LicensedBetting Offices and firms’ head officesnumbers over 35,800 FTE roles. Whilstthese staff will take bets on a number ofsports and provide numerous othergaming offerings, Racing still remains acore product to the High Streetbookmaker. Retail employment inBritish Betting was estimated at 36,700in 2008, so the 2012 equivalentrepresents a c.3% reduction of 900, inpart due to betting operators drivinggreater staffing efficiencies but also thecontinual shift to online and mobilechannels which has had a negativeimpact on the retail sector.

In addition to the retail figures areanother 3,000 UK based employeesresponsible for remote gambling. Thesefigures have dropped by 32% since2008 based on Gambling Commissionfigures, mainly due to the relocation ofmany firms’ remote gambling arms tooffshore territories, in particular Gibraltar.

Analysis of core racing industry• The core racing industry is estimatedto support c.17,400 FTE jobs inBritain. This figure is composed ofover 13,000 full time posts and 4,000FTE jobs when part-time and racedaystaff (over 9,500) are included in thecalculations.

• The majority of this figure (over10,000) are employed in either thetraining or breeding sectors. Trainingbusinesses account for over 6,300jobs (2008: 6,800), including 557licensed trainers (2008: 592) andtheir staff in 2012, whilst the breedingindustry numbers over 3,800 FTEroles (2008: 4,500). The breedingindustry has a particularly highproportion of part-time roles due tothe number of breeders who carryout the role in their spare time. Inaddition to the core breeding industryroles are the bloodstock auctioneers(notably Tattersalls and DoncasterBloodstock Sales) and agents whichadd over 180 further jobs.

EMPLOYMENT

Note: Secondary employment is calculated by dividing total secondaryexpenditure generated within the economy as a result of racingactivity by the national average productivity (revenue) per employee.Source: Deloitte analysis.

Figure 5: Direct, indirect andassociated employment of BritishRacing

Betting Directly related Racingemployment

Secondaryemployment

Total 85,200

Core industry17,400

38,800

26,400

2,600

Significantnumbers of jobsflow fromRacing’s coreactivities intosecondaryemployment.These includethose servingRacing directlysuch as vetsand thoseworking in thebroader equineindustry.

SECTION 2: ECONOMIC FACTORS

Trainers(including stable staff)

6,325(6,772)

Breeders (Studs)3,893(4,500)

Racecourses2,225(2,583)

Administration(including regulation)

and governance324 (371)

Weatherbys368 (333)

Jockeys563

(527)

On-coursebookmakers420 (420)

Media883(794)

Caterers1,850(1,900)

Tote (on-course)354 (394)

Bloodstock Auctioneersand agents186 (215)

Total17,391(18,809)


• Britain’s racecourses wereresponsible for over 2,200 FTE roles(2008: 2,500+), comprising of over1,400 permanent staff and 800 FTEraceday roles. Over half of these rolesfall under the remit of the two largestracecourse groups, Jockey ClubRacecourses (14 racecourses in2012) and Arena Racing Company(‘ARC’) (17 racecourses in 2012). Theremaining roles are distributed overthe remaining 29 British racecourses.Both these groups have significantlyrestructured since 2008, Jockey ClubRacecourses taking on a moreregionalised approach and ARCrepresenting a newly formed entityfollowing the merger of Arena LeisurePLC and Northern Racing. Suchrestructuring has led to an overalldecline in employment levels asefficiencies are implemented in bothgroups. Other racecourses have alsoreduced headcount.

• In addition to the centrally employedracecourse staff are those working incatering, representing a key role inthe hospitality offerings provided byracecourses. Although the cateringfunction is often subcontracted out tothird parties it still represents asizeable number of employees,c.1,850 FTEs in 2012 – consisting ofmany thousands of individuals.

• The administration (includingregulation) and governance of Racing(excluding Weatherbys) is responsiblefor over 300 staff in Britain. Inaddition to the BHA as the governingand regulatory body of the sport, thisincludes the employees of theassociations responsible for differentsectors of the Racing industry. Thisfigure has fallen by c.10% since 2008as cost efficiencies have been found.While it is possible falls inemployment levels may occur in the

short term, these will always be in thecontext of ensuring the higheststandards of integrity in the sport aremaintained.

• Weatherbys plays a vital role in BritishRacing as the central administrator ofthe sport, acting as its bank andmaintaining the Thoroughbred breedregister (stud book), together withother commercial activities. It istherefore one of the single biggestemployers with over 350 staff.

• Whilst owners obviously play anintegral part in British Racing they arenot directly employed in the industryso are not included in the calculations.Those who could be considered towork for owners (notably trainers andjockeys) have been included inemployment figures elsewhere.

• There were 463 licensed professionaljockeys in 2012 (2008: 427), with afurther 100 jobs being representedby the valets and agents thatsupport them.

• The media represents anothersizeable employment group,comprising those staff directlyinvolved in the racing press,broadcasters and those enabling theprovision of live pictures tobookmakers and broadcasters.Employment in this area has grownsignificantly since 2008.

• Whilst employees within the Bettingindustry have been categorisedelsewhere, those specifically involvedin on-course betting have beenincluded in the core racing figures.Totalling over 750 FTE roles, theseinclude on-course bookmakers andTote staff that are present at themajority of meetings.

Note: The figures in thediagram above represent FullTime Equivalent (FTE)employment numbers.However three sectors(Trainers, Breeders andCaterers) have over 7,000 PartTime positions. Raceday FTE(including Racecourseson-course caterers) areestimated to be c.2,300.Figures in brackets indicate2008 estimates.

Source: BHA, Deloitte analysis.

Figure 6: Employment within the core Racing industry in Britain – 2012

Britain’sracecourseswereresponsiblefor over2,200 FTEs,composed ofover 1,400permanent staffand 800 FTEraceday roles.


The last decade has seenunprecedented investment of over£950m in facilities throughoutBritish Racing. While the largestinvestment has been atracecourses, significantinvestments have also been madeby breeders, trainers, the mediaand other racing bodies.

The economic downturn hasunderstandably had an impact on levelsof spending, with the amount ofinvestment that has taken place since2009 markedly lower than in thepreceding five years.

Racecourses invested just over £100mbetween 2009 and 2012, compared to£556m in the previous five years.There was always going to be a majordecline in investment due to theunusually high number of planned majorprojects being completed in the priorperiod – including Ascot’sredevelopment, Doncaster (phase one),Aintree, Epsom, Cheltenham’s Centaurfacility, and new racecourses at FfosLas and Great Leighs, but thechallenging economic climate certainlyexacerbated this reduction.

The investments that did occur tendedto be on the smaller scale, focused onenhancing the racegoer experience,improving equine facilities or, in somecases, expanding non racedayoperations to complement the coreracing activity.

Investments included:

• ARC’s £29m development atLingfield Park incorporating aredesigned stable complex and newhotel and country club which openedin 2010. This was followed by thereplacement of the All Weather racingsurface at a cost of over £2m. AllWeather Racing provides c.20% ofthe fixture list and plays a vital role,especially in the winter months whenabandonments are most frequent;

• ARC also invested in a new £6.5mpremier grandstand at Fontwell Parkwhich came into operation in 2010,enhancing the racegoer experienceand improving the venue’s hospitalityoffering;

• Jockey Club Racecourses continuedtheir programme of investment in theirfacilities including the creation of newturf tracks at Haydock and Carlisleand a number of improvements tothe watering facilities and

modifications to the Grand Nationalfences at Aintree;

• Chester Race Company, the legalentity for Chester and Bangorracecourses, has spent over £4m inthe four year period on developmentsto the paddock area, internal controlsystems, catering and hospitalityinfrastructure at Chester togetherwith overall improvements to facilitiesat both racecourses;

• £2.9m of investment at Musselburgh,including a new stable yard and AllWeather Track bend.

While the needs of Britain’s diverseracecourses will vary significantly therewill always be the need for smaller scaleimprovements to complement largerprojects in order to keep racecoursefacilities competitive with rival sportsand leisure activities.

As has been used extensively by othersports in Britain, a valuable and logicalapproach to help fund future racecourseredevelopments is the sale of excessland. This is often referred to as enablingdevelopment, provided safeguards arein place that such sales do notcompromise the core sporting activity.The Racecourse, Newbury is the largestcurrent such example, with the sale of

CAPITAL INVESTMENT

Source: Company/group financial statements; Deloitte analysis.

Figure 8: Capital expenditure by British racecourses: 2004-2012

02004-2008

Average2009 2010 2011 2012

20

40

60

110

120

£m

112

40

30

1520

Note: Capital expenditure by other bodies includes spending byWeatherbys and Tattersalls. Source: Deloitte analysis.

Figure 7: Racing industry capitalexpenditure: Four years 2009-2012

Racecourses

Total£203m

Trainers BreedersMedia Others

£105m52%£15m

7%

£39m19%

£11m6%

£33m16%



land for at least £42m to David WilsonHomes (DWH) to build 1,500 homes. Aspart of this development DWH is fundinga number of projects including newstable staff accommodation, refurbishedstables and car parks.

The next envisaged major racecoursedevelopment is at the home of Jumpracing, Cheltenham, with the projectaiming to improve facilities for ownersand trainers, and an overall focus onupgrading the customer experience atthe racecourse. The £45mredevelopment is, subject to planning,due to start in 2014 and be completedby 2016. It involves replacing a viewingarea built in the 1920s with a state-of-the-art new grandstand including newannual members’ facilities, generalpublic viewing areas, private boxes andRoyal Box facilities.

In order to help finance Cheltenham’sredevelopment, The Jockey Clublaunched a retail bond scheme in April2013, the first of its kind in British sport.This innovative financing tool offers acompetitive interest rate for investorswhich will be paid part in cash, and partas reward points that can be redeemedat any of the group’s racecourses. Thescheme has proved very successfulwith the Jockey Club raising close to£25m from the bond.

The reintroduction of Levy Board loansto racecourses in 2013 will also helpfund future investments. Indeed, the factthat a number of loans have alreadybeen taken out demonstrates thatracecourses are keen to invest wherecommercially feasible. For example,

significant redevelopments are in thepipeline for York, which has announcedplans for a new pre-parade ring,saddling boxes and weighing room.

Equine facilitiesThe training and breeding sectors, whilstincurring lower capital expenditure since2008, have also continued to invest intheir infrastructure where possible.Investment in new or improved trainingfacilities has occurred at a number ofyards, for example at Manor HouseStables, which were developed byfootballer Michael Owen and Betfairfounder Andrew Black for TomDascombe to train from. Over £30m isestimated to have been spent on trainingfacilities in the four years to 2012.

Jockey Club Estates, which owns andmanages the Newmarket andLambourn gallops, has continued toinvest in its facilities. There are alsodiscussions in progress over a newmulti-million pound gallop beingdeveloped at Newmarket to meet theincreasing demand of the town’sracehorse population which hascontinued to grow despite an overall fallin the number of horses in training. Thismove may be due to trainersconsolidating their approach to trainingfacilities, finding it more cost-efficient touse the high quality communal gallopsprovided by Jockey Club Estates ratherthan invest in their own private facilities.

The level of capital expenditure in thebreeding sector is difficult to estimateaccurately given limited financial databut investment in improving facilities

continues, despite UK economicconditions, often funded by majoroverseas investors in the sport. A primeexample of this is the Pearl Bloodstockfacility at Tweenhills Farm & Stud,funded by the same Qatari investorswhich, through QIPCO, are suchimportant contributors to British Racingvia their sponsorship of BritishChampions Series. Based on thefinancial information available capitalexpenditure of £15m has beenconservatively estimated in thebreeding sector (excluding purchase ofstud farms which is a transfer of valuebetween the buyer and seller).

Tattersalls and Doncaster BloodstockSales have also continued to invest intheir world-class facilities over the lastfour years. In 2013 Tattersalls will embarkon a £1m investment programme attheir Newmarket headquarters.

Other investmentThere has been significant investment inthe broadcast of Racing in the last fouryears. RMG, RaceTech, At The Races,Satellite Information Services andChannel 4 Racing have between theminvested close to £40m since 2008 intechnology to improve the quality ofracing coverage, and build multi-channel and international capabilities.

Other organisations which havecontributed towards the overall capitalexpenditure of British Racing includeWeatherbys – who have invested over£4.5m, the majority on upgrading thetechnology which is central to theeffective administration of the sport.

Thereintroductionof Levy Boardloans toracecoursesin 2013 willalso helpfund futureinvestments.


British Racing contributed £276min tax in 2012, with just over a thirdfrom tax on British bettingoperators’ gross win on the sportand the remainder generated fromRacing’s varied constituent parts.Over the five years to 2012, it isestimated that Racing hasgenerated approximately£1.4 billion in tax receipts for theGovernment. Racing’s taxpayments have declined by 19%since 2008, due to a shrinkage inemployment and expenditure insome sectors, but mainly due togross profits betting tax receiptsfalling by a third – in part due to themove offshore of virtually all phoneand internet sportsbook betting.

Betting duty represents the largestelement of tax paid to Government fromRacing activity, with an estimated£100m payable by bookmakers on theirgross win on British Racing in 2012,but this is down £55m compared to2008. One of the main drivers for thisfall has been the now offshore location,notably to Gibraltar, of all but one of thetop 20 remote betting operatorsaccepting bets from British punters.Offshore operators do not pay the 15%tax on gross win nor the 10.75% Levypaid to Racing.

The Government is intending tointroduce a ‘Point of Consumption’ taxfrom December 2014, meaning bettingoperators based offshore will be liableto pay gross profits tax based on wherebets are struck (i.e. the UK) rather thanwhere the betting operator is located.

The Betting industry’s total gross winwill generate corporation tax onbookmakers’ profits, irrecoverableVAT and employment taxes on theindustry’s estimated 38,500 employees.The Association of British Bookmakersestimates that, including gross profittax on betting, the sector currentlycontributes over £1 billion a year tothe Exchequer.

Racing’s 17,400 core employeesgenerated total employee taxes of£120m in 2012 (PAYE andemployee/employers’ NIC).

Racing’s VAT contribution has beenestimated primarily on racecourses’admissions and catering revenue, as itis these sources of income from whichthe ultimate payer, the racegoer, isunable to recover VAT.

The corporation tax payable by BritishRacing is relatively low as profits arelimited in most sectors, in part as manyentities are not profit maximising intheir work.

The tax estimates do not include anumber of other taxes (including dutyon fuel and alcohol) which, while inisolation will be relatively small, inaggregate will be more significant.

Racecourses’ estimated £69m taxcontribution comprised over £40m inVAT (charged on admissions andcatering) and £23m employment taxesfrom the estimated 1,400 full timeemployees and additional raceday staff.The employees of the racecourses’catering operations, which are oftenoutsourced, are also included inthis sum.

For breeders and trainers the figuresrepresent the PAYE and NICs on staffwages. The rates are modest owing tothe relatively low wages in the industry,and a large number of part-timeemployees.

In 2012, an estimated 88% ofregistered owners were members of theVAT Scheme for Racehorse Ownership,which by generating business income,often sponsorship, from their racingactivity enables them to recover VATincurred on the costs of purchasing andkeeping horses in training. This cantotal up to £4,000 p.a. and therebymakes ownership more affordablehence, the scheme plays a significantrole in supporting ownership levelswithin British Racing. It is likely thescheme has contributed to the numberof horses in training experiencing amore modest decline than might havebeen expected, given the severity of theeconomic contraction.

RACING’S TAX CONTRIBUTION

Over the fiveyears to 2012,it is estimatedthat Racing hasgeneratedapproximately£1.4 billionin tax receiptsfor theGovernment.

Figure 9: Total tax contribution by type – 2012

Figure 10: Total tax contribution bycontributor – 2012

VAT

46

0Gross profiton betting

20

40

60

80

100

155

NationalInsurance

PAYE CorporationTax

£m100

65

55

10

71 63 42 8

2008 values

Total £276m2008: £339m

Total£276m

£100m37%£43m

15%

£28m10%

£4m1%

£3m1%

£69m25%

£29m11%

BookmakersRacecoursesBreedersOther Racing Bodies

TrainersJockeysOwners


Note: Racecourses includes employment taxes in relation toracecourse and catering employees and VAT on admission andcatering revenues.





In 2012 Britain had 60 licensedracecourses which staged racing,but two racecourses – Folkestoneand Hereford – closed at the end of2012 and will not stagethoroughbred racing in 2013. Thissection discusses the estimatedrevenues generated by racecoursesin 2012, together with their costs,cashflows and profits. The analysisfocuses on cash flows rather thanon accounting profit, as this is morerepresentative of the financialposition of the racecourses.

Compared to 2008, Britain’s 60racecourses have seen limited growthin overall revenues. Racecourses’profits are modest due to this subduedrevenue growth and increases in costs.

Business ModelsBritain’s racecourses operate a varietyof racing activities and business models,ranging across various parameters from:

• Those hosting Jump or Flat racingexclusively as well as mixed-useracecourses;

• All-Weather Tracks (enabling a highervolume of fixtures than traditionalturf); and

• Those racecourses (such as Aintreeand Epsom) with a dominant meetingeach year to those with a more evenspread of fixtures.

Britain’s two major racecourse groups,Jockey Club Racecourses and ARC,between them own and/or operate29 racecourses with fixtures in 2013(31 in 2012), with the other 29 beingindependently owned and operated –largely by private companies but somethrough race clubs or local trusts.Commercial profit maximisation, in thetrue sense of the term, is often not themain objective of racecourse owners.Indeed, many racecourses do not allowfor the payment of dividends to owners,with all profits being reinvested intothe sport.

Racecourse revenues are generatedthrough a combination of centrally-generated Levy Board distributions,which are largely outside the directcontrol of the racecourses, andindividual racecourses’ revenuestreams. The quantum of Levydistributions is dependent on the levelof British betting operators’ gross winand the Levy Board’s distributionpolicies. The 2012 Levy distributions toracecourses of £56m consisted of£34m in prize money grants, a £17mcontribution to racecourse integrityservices, £3m in fixture incentivepayments (to encourage racecourses torace in non racegoer friendly times ofthe year and week to assist off coursebetting turnover) and £2m in otherpayments.

Individual racecourses’ remainingrevenues have been split into the sevencategories illustrated in Figure 11, andare discussed separately below. Wehave grossed up catering revenuewhere racecourses outsource cateringoperations, in order to reflect the “real”spend by racegoers on food and drink.

Overall revenuesTotal racecourse revenue in 2012 was£478m, compared with £473m in 2008.This small increase in revenues masksthe two main contrasting oppositemovements:

1. A marked fall in Levy distributions– down to £56m in 2012, a £33m(37%) fall from 2008 levels;

2. Growth in racecourses otherrevenues (including grossed upcatering) to £422m, a £38m (8% )increase from 2008 – with mediarights growth the dominant factor.

Jockey Club Racecourses and ARCtogether accounted for c.60% ofrevenues with the other 29 racecoursesgenerating the remaining c.40%,representing an average of c.£6m each,but with significant variation rangingfrom Ascot’s £40m+ revenue to themajority of racecourses with revenuestypically in the £3-4m range.

Racecourses earned c.£150m fromdirect (on-course betting, proportion ofsponsorship and the majority of mediaincome) and indirect (Levy Boarddistributions) betting sources, broadlysimilar to 2008 but composeddifferently with higher media income setagainst lower Levy Board distributions.The betting orientated income istherefore around a third of total revenuebut has a much higher margin attachedthan other revenue sources.

RACECOURSES

Note: 2008 equivalent in brackets where possible. Source: BHA; RCA; Deloitte analysis.

Compared to2008, Britain’s60 racecourseshave seenlimited growthin revenues,driven largelyby increases inmedia rights,with othersources ofrevenue eitherremaining flat orreducing slightly.

Entry fees£16m(£17m)General Admission

£114m(£120m)

Raceday catering£100m(£100m)

On-course betting£8m(£9m)

Media rights£88m(£57m)

Sponsorship£31m(£25m)

Othercommercial

£65m(£56m)

LevyReceipts£56m(£89m) Prize money

£97mRaceday costs

£96m

Racedaycatering£77m

Other staffcosts£37m

Otheroverheads£110m

Interestpaid (net)

£26m

Capitalexpenditure

£20m

Financing£14m

Dividends/share purchase

£7m

Inflows Total £478m

Net movement (£6.4m)

60Racecourses

1,369Fixtures

5.6mAttendances

c.2,200FTEs

Outflows Total £484m

Figure 11: Racecourse cashflows – 2012

SECTION 3: RACECOURSES


Admission revenuesRacecourses generated total admissionrevenue of £114m in 2012, a smalldecrease of £6m (5%) since 2008.

As discussed in more detail in theAttendances section of this report, totalattendances of 5.6 million in 2012 weredown from 5.7m in 2008, with over 50fewer fixtures (many of which would betraditionally well-attended) in 2012 than2008 due to bad weather andsubsequent abandonments. 2011 sawrecord racecourse attendances of 6.15m.

The UK economic climate has resultedin squeezed disposable income for thegeneral admission racegoer, andagainst this backdrop, racecourseshave generally implemented limitedprice increases over the last four yearsto support attendance levels.

The on-going difficult economic climatehas also affected corporate hospitalityrevenues across all sports, withbusinesses less able or willing to spendon client or staff entertaining than theywere in 2008. Due to the higher price ofhospitality packages, a reduction incorporate hospitality numbers will causea disproportionately large fall in overalladmission revenue.

The average revenue per admissionwas £20 in 2012, which after addingVAT means the average racegoer spentc.£24 on their ticket. However, thisaverage reflects the diverse nature ofracing across racecourses and fixtures.High profile fixtures continue to chargepremium ticket prices, and haveremained among Britain’s best attendedsporting events in 2012.

Beyond this relatively small number offixtures, prices are typically much lowerand the large majority of racecourseattendees will have paid substantiallyless than £24 – aided by initiatives suchas free entry at some fixtures, low-costfamily passes, and the fact that childrenunder 16 gain free admission for theoverwhelming majority of fixtures.

CateringBritish racecourses operate differentcatering models, with many outsourcingoperations in return for commissionpayments. Several racecourses operatetheir own “in-house” catering function,whilst Jockey Club Racecoursesoperate a joint venture – Jockey ClubCatering – with Compass Group.

Total gross catering revenue in 2012was £100m the same as in 2008(representing a real fall given costinflation). This represents an average of£18 revenue on food and drink perattendee (£22 including VAT) but againthis spend varies considerably betweenpremium fixtures and the bulk of thefixture list.

The reduction in overall attendanceshas affected overall catering spend, ashas the fall in high spending corporatehospitality numbers. The abandonmentof, or lower than expected attendanceat, traditionally high-grossing summerfixtures due to the unusually wetweather, also had a significant impacton catering revenue.

MediaRacecourses’ media rights revenuesgrew to £88m in 2012, up £31m (54%)compared to 2008, with substantialgrowth across all platforms contributingto the success. This is discussed inmore detail in the Broadcastingsection of this report, but the keyfactors have been as follows:

• The introduction of Turf TV to theLBO market has increasedcompetition and driven revenuegrowth. Licence fees paid to race-courses in 2012 totalled £67m, anincrease of over 50% from 2008; and

• Increased licensing fee paymentsfrom Racecourse Media Group andAt The Races, estimated to havebeen around £20m in 2012.

Further increases in licence fees derivedfrom picture sales to LBOs, along withthe new and exclusive deal signed withChannel 4 for terrestrial broadcasting of88 days of live racing, will see furthergrowth in media revenues in 2013.

The introductionof Turf TV to theLBO markethas increasedcompetition anddriven revenuegrowth.


SponsorshipSponsorship is discussed in detail inthe Sponsorship section, but keycharacteristics and movements are:

• Racecourses generated an estimated£31m in 2012 from sponsorship, anincrease of £6m from 2008. The largemajority of the sponsorship is forspecific races and/or series of races,and the majority of such sponsorshipmoney is paid out by racecourses inprize money.

• Racecourses are also increasinglypursuing other sponsorshipopportunities such as stand namingrights and official supplierarrangements, including with bettingcompanies.

On-course bettingTotal on-course betting revenue of £8mrepresents a £1m fall against 2008. On-course betting revenue is comprised ofthe commission payable to racecoursesfrom on-course Tote operations andbookmaker shops plus bookmakerbadges. The actual amounts staked,and left behind (i.e. lost) by racegoers,does not flow to racecourses, and istherefore not included in our racecourserevenue analysis.

The significant increase in remote(i.e. mobile and on-line) betting isthought to have contributed to the

reduction in on-course bettingrevenues, whilst the negative impact ofthe general economic climate onindividuals’ discretionary betting spendis also likely to have played a part.

In 2012, Chester and Bangor-on-Deeset up their own on-course bettingoperations to replace the Tote, andRipon has followed suit in 2013. Theracecourses have stated these newoperations have brought a greaterdegree of control over on-coursebetting activities and resulted in higherreturns to the respective racecourses,which in turn will help support prizemoney levels.

Other commercialOther commercial revenues comprise awide range of revenue streams. Thesecan include:

• Raceday activities such as retailincome from on-course merchandiseoutlets at larger fixtures;

• Non-raceday activities such asconferences, concerts and numerousother events;

• Hotels at some racecourses.

These streams deliver an average ofjust over £1m in annual revenue perracecourse (but with wide variations),and make a significant contribution

towards many racecourses’ financialwellbeing.

Total other commercial income of £65mhas increased by £9m (up 16%) since2008 despite tough trading conditionsin many markets, notably in theconference and banqueting andexhibitions markets.

The ability to grow non-racedayrevenue has been an important part ofmany of the racecourse developmentsthat have occurred in the last ten years.While racing remains the central activityof a racecourse, if an improvedracegoer facility can also be designedsuch that it generates revenue for theother c.340 days of the year on whichracing is not taking place, then it canhelp with the funding of the overalldevelopment.

Operating costsThe costs associated with stagingprofessional sport have experiencedmarked increases in the UK in the lastdecade, which is reflected inracecourses’ results. The main costs,and where applicable their movements,being:

• Prize money – racecourses’ largestsingle cost which totalled £97m in2012 (compared with £106m in2008). The reduction in prize moneyis explained in more detail in the

RACECOURSES

The ability togrow non-racedayrevenue hasbeen animportant partof many of theracecoursedevelopmentsthat haveoccurred in thelast ten years.



Owners section but the net cost toracecourses after reduced industryfunding has markedly increased inthe last four years, being £46m in2012 (£30m in 2008).

• Direct raceday costs - these totalledan estimated £173m in 2012 (anaverage of £125,000 per fixture,although this will vary greatly).Raceday costs included an estimated£77m catering costs (whether thecost of sales of in-house catering orthe amount of gross spend retainedby outsourced caterers), integrity andmedical/welfare payments of £25m,raceday staff and security costs of£16m and a wide variety of othercosts of £55m – including hospitalitycosts, power, cleaning etc.

• Wages and staff costs – excludingraceday staff, an estimated £37mwas paid to the c.1,400 full-timeracecourse employees in 2012. Thiscost has been tightly controlled asmany racecourses have reducedtheir headcount in the face ofincreasing external pressures on theirfinances. This is discussed in greaterdetail in the Employment section.

• Other overheads/operating costs – thisestimated £110m cost includes on-going maintenance and utility costs,marketing and promotion etc. Manyof these costs, notably utilities, haveexperienced marked cost inflation.

Other costs and cash outflowsIn addition to operating costs,racecourses have a variety of othercosts and/or cash flows, notably:

• Interest paid (net) – racecourses paidan estimated £26m in net interest in2012, the large majority beingpayable on the external fundingelement of the c.£700m of capitalexpenditure undertaken by theracecourses since 2003.

• Net financing outflows of £14m havebeen estimated. These are acombination of repayments ofexternal loans and in some cases anadjustment to reflect lower receiptsfrom certain revenue streams givenprevious up-front advances.

• Capital expenditure – the racecoursesincurred an estimated £20m of capitalexpenditure in 2012. Note thatdepreciation and amortisation of£28m have not been shown as thesedo not represent cash flows, althoughthey do illustrate the level of capitalinvestment made by the racecoursesin the last ten years.

• Dividends – there was an insignificantamount of dividends paid byracecourses in 2012, as there hasbeen for the last ten years, althoughthe Racecourse, Newbury’sexceptional profit from the sale ofland to David Wilson Homes forhouse building did result in a £6.5mbuy-back of shares.

• The low level of profitability meansthat less than £4m of corporation taxwas paid by the racecourses in 2012but as the Racing’s tax contributionsection discusses, racecoursesgenerated other taxes of over £66m.

Profits and cash levelsThe analysis estimates that despiterecord cash inflows in 2012 after takinginto account capital expenditure andfinancing flows, in aggregate theracecourses experienced a net reduction

in cash levels of £6m in 2012.The aggregate accounting post taxprofit (including depreciation) of the 60racecourses in 2012 is estimated tohave been £5m, excluding TheRacecourse, Newbury’s exceptional£10m profit from disposal of land.

Such profit levels equate to a very smallreturn to racecourse owners whencompared to a net asset base that is,on a historic accounting basis, likely tobe in excess of £300m, and significantlymore if land is revalued to currentmarket prices. This further illustratesthat “pure” profit maximising is often nota core racecourse objective. Profits arenecessary, however, in order to providefunds for continued investment infacilities.

Looking forwardRacecourses will benefit from furtherincreases in media rights in 2013, withtotal receipts likely to exceed £100m. Asignificant proportion of these increaseshave already been committed by theracecourses to help fund higher prizemoney, with the final amount to beinfluenced by discussions betweenhorsemen and racecourses.

It is evident that the low growth ratesand declines experienced by theBritish economy are unlikely to improvesignificantly for the remainder of 2013,and potentially not until much later.Racecourses will therefore continue tooperate in highly competitive andchallenging markets with only modestrevenue growth expected outside ofmedia rights. A continuing focus onreducing costs, or at worst limitingincreases, will also play a key role instrengthening racecourses’ financialstanding. The racecourses have alreadyshown themselves to be resilient in theface of the prolonged economicheadwinds which will stand them ingood stead to cope with furtherbuffeting.

Despite recordcash inflows in2012, aftertaking intoaccount capitalexpenditure andfinancing flows,in aggregatethe racecoursesexperienced anet reduction incash levels of£6m in 2012.


Racing is the second bestattended sport in Britain afterfootball, and in 2012 accounted forfour of the top ten highestattended sporting events (outsideof the London 2012 Olympic andParalympic Games).

The 60 racecourses staged 1,369fixtures across 360 days in 2012,attracting total attendances of 5.6m,equating to an average attendance of4,077 (but with a huge variation acrossfixtures). In addition over 600,000people are estimated to have attendedPoint-to-point fixtures

Figure 12 shows the total Jump andFlat fixtures since 2003, together withaverage attendances.

Total attendance experienced a gradualdecline to 5.7m between 2003 and2009, but then recovered andincreased to a modern era record of6.15m in 2011. Part of the reason forthe recovery was the activities ofRacing For Change (now Great BritishRacing), which worked closely with theracecourses on a large range ofinitiatives to promote and encourageracegoing, including to new racegoers.

Free Racing Week was staged in 2010and, across nine fixtures, attracted over40,000 racegoers, over 60% who wereeither novice, infrequent or lapsed. Thiswas built on with Free Racing Month inApril 2011, with the 26 participatingracecourses boosting their monthlyattendance by 63,000 across the 29fixtures in comparison to 2010.

Going into 2012, Britain’s racecoursesfaced the not inconsiderable challengeof competing with the EuropeanFootball Championships and theLondon 2012 Olympic and ParalympicGames, and although total attendancedropped to 5.6m this can beconsidered a creditable performance insuch unique circumstances.

ATTENDANCES

Racecourses were additionallyhampered by the 2012 summer beingthe second wettest on record which ledto a high level of abandonments,including a significant number oftraditionally well attended fixtures.

Furthermore, attendances at manyfixtures that did proceed were hit by theinclement weather which reduced thenumber of people deciding to attendon the day (being those withoutadvance tickets).

Over the four year period from 2009 to2012 average attendances rose for threeconsecutive years to nearly 4,200 in2011 before dropping to 4,077 in 2012.

The broadly two thirds/one third splitbetween the number of peopleattending Flat and Jump racing hasremained steady over the last ten yearswith Flat attendances averaging 3.75mover the period compared to just over2m for Jump fixtures. The difference isprimarily due to the respective levels offixtures as average attendances in 2012were only moderately higher for Flat(4,203) than Jump (3,867). However,when the 313 All-Weather Track fixturesare excluded, given these are primarilyfor the benefit of the Betting industryand in unattractive slots for mostracegoers, the average attendance ofFlat fixtures rises to 6,088 in 2012.

Note: Total attendances for Flatracing in each year include avery small proportion ofattendances for mixedmeetings of both Flat andJump.

Source: BHA; Deloitte analysis.

5.77

5.87

6.05

Number of fixtures

5.002003

5.25

5.50

5.75

6.00

6.25

m

2004 2005 2006 2007 2008 2009 2010 2011 2012

Total attendance Average attendance per fixture

6.02

6.15

5.90

5.82

5.71

5.58

3.9 3.9 3.7 3.7 3.6 3.6 3.7 3.9 3.9 3.6

4,934 4,656

4,536

4,3774,376

4,0294,049

4,1454,187

4,077

5,000

4,000

4,250

4,500

4,7505.72

5,250

2.1 2.1 2.2 2.2 2.2 2.1 2.0 1.9 2.2 2.0

1,220 1,299 1,300 1,342 1,330 1,423 1,426 1,392 1,469 1,369

Flat total

Jump total

Figure 12: Total and average attendances in Britain: 2003-2012

Going into2012, Britain’sracecoursesfaced the notinconsiderablechallenge ofcompeting withthe EuropeanFootballChampionshipsand the London2012 Olympicand ParalympicGames.



Day by day attendancecomparisonSaturday remains by some way thebest attended day’s racing of the weekin terms of both total and averageattendance. As shown in Figure 13,total attendances increase steadily fromMonday through to Saturday beforereturning to midweek levels onSundays. Although total annualattendances were over 124,000 lowerthan 2008, in 2012 total Saturdayattendances increased by over177,000. This reinforces the importanceof Saturdays as the most popular dayof the week for people to go racing andemphasises the need for racecoursesto continue to stage good qualityfixtures on these days.

Friday is by a healthy margin thesecond best attended day of the weekwith around 1m people attending yearon year, averaging over 4,500 in 2012.Several racecourses have multi-daymeetings starting on a Friday whichthen leads into the feature Saturday, forexample the Investec Oaks on theFriday before the Investec Derby at

Epsom. The Betfred Cheltenham GoldCup has also been run on a Fridaysince 2005 and is always one of thebest attended days of the year.

When taken together Fridays,Saturdays and Sundays comprisenearly two thirds of the total attendanceat British race meetings so it remainsimperative that racecourses continue tofocus on attracting high weekendcrowds.

The strength of the weekend should notpreclude midweek fixtures beingtargeted to social groups with moreleisure time such as the growing ‘grey’market – and already over 10m peoplein the UK are over 65 years old. Indeed,some social groups actively avoid thebusiest Saturday fixtures which canattract a more boisterous crowd.

Attendances by racecourseand regionThe highest total racecourseattendance in 2012 was at Ascot with570,331 attendees, nearly half of thisnumber (280,268) derived from the fivedays of the Royal meeting. Cheltenhamattracted the next highest number ofracegoers and was the best attendedJump racecourse with 445,772 whilstYork (342,120) pipped Newmarket(339,972) to being the best attendedFlat only racecourse.

Cheltenham had the highest averagedaily attendance of 27,861 in 2012,emerging ahead of Ascot, Aintree, Yorkand Chester who make up the rest ofthe top five. The geographic spread ofthese five racecourses illustrates howRacing is a great draw across thelength and breadth of the country.

• Figure 14 shows the regional spreadof attendances for 2012.

• The five Scottish racecourses,assisted by the promotion of ScottishRacing, also attracted a total of over270,000 racegoers.

Source: BHA; RCA; Deloitte analysis.

Source: RCA; Deloitte analysis.

0Monday

500

1,000

1,500

2,000

2,500

‘000s

593

Tuesday Wednesday Thursday Friday Saturday Sunday

20082005

459626 699

985

623 542 497

2,1271,949

1,913

1,032

1,232

711 652483

579405 370385 325

Average attendance

3,137

2,211

1,935

2,848

2,367

2,124

3,497

2,298

2,719

3,757

3,232

3,061

5,269

5,244

4,588

7,033

7,191

8,179

4,942

4,013

4,320

2012

Figure 13: Day by day comparison of racing attendances: 2005, 2008 and 2012

South West572

Wales123

Scotland271

North894

Yorkshire938 Midlands and

East Anglia969

London andSouth East1,812

Figure 14: Attendances by region: 2012(to nearest ‘000)

The strength ofthe weekendshould notprecludemidweekfixtures beingtargeted tosocial groupswith moreleisure timesuch as thegrowing ‘grey’market.


meeting of over 237,000, a 26,000increase since 2009, and the InvestecDerby attracted over 130,000 people toEpsom Downs. Despite GloriousGoodwood coinciding with the firstweek of the Olympic Games it recordedan increase on 2011’s attendances,illustrating that, with sufficientlycompelling content, Racing need notfear competition from other sports.

QIPCO British Champions Day, in itssecond year in 2012, sold out its32,000 capacity – an increase of over5,000 attendees on 2011 – and is now

• The opening of Ffos Las in 2009 hashelped bring Racing to anotherregion of the country, and Welshracecourse attendances totalled over123,000 in 2012.

• Attendances in Yorkshire exceeded938,000, with the Yorkshire SummerFestival in late July promoted byGo Racing in Yorkshire attracting83,000 of these over a nine-dayperiod. Indeed, on a visits per capitabasis, Yorkshire is the best attendedregion with 0.2 racecourse visits permember of the population.

• The six racecourses within a radiusof 30 miles of central London meanthere is typically at least oneconvenient high quality fixture forLondon-based racegoers eachweekend.

Racing festivalsBritish Racing benefits from iconicfixtures which are firmly established inthe nation’s sporting and socialcalendar. Figure 15 shows the top tenattendances in 2012. In total, thesefixtures attracted over 1.25m people,22% of the total attendances.

The 2012 Cheltenham Festival drew inrecord attendances for the four day

firmly established as a fitting finale to theFlat season. Fixtures with QIPCO BritishChampions Series races attracted over680,000 racegoers in 2012.

While the list of the top ten attendedmeetings is drawn from highlights atthe larger capacity racecourses, thereare many festivals and centrepiecefixtures at smaller racecourses that aremajor annual attractions in theirrespective local communities. Forexample, Cartmel typically attracts over40,000 racegoers in total to its threefamily friendly fixtures around the Mayand August Bank Holidays.

Attracting new racegoersRacing benefits from a loyal butrelatively small core of high frequencyracegoers who make up a sizeableproportion of total attendances. Forthese racegoers, the racing is a centralpart of the experience, henceracecourses’ focus should be onensuring ‘purists’ can fully enjoy theexcitement and drama of the racingthrough high quality customer service.

However, the sport appeals to, andneeds, other less frequent racegoers forwhom racing is only a part of theraceday experience – with other factorsas, or indeed more, important.

Racing benefitsfrom a loyal butrelatively smallcore of highfrequencyracegoers whomake up asizeableproportionof totalattendances.

Figure 15: Top ten meetingattendances – 2012

Rank Event (days) Total

1 Royal Ascot (5) 280,2682 Cheltenham Festival (4) 237,3693 Epsom Derby (2) A 157,3474 Aintree Grand National (3) 150,2685 Glorious Goodwood (5) 102,4756 York – Ebor (4) 91,3397 Cheltenham Open (3) 70,7718 Doncaster St Leger (4) 57,2699 Ascot – King George (3) 54,18010 York – Music Showcase (2) 53,370

Note A: Includes an estimated 100,000 attendees on the Hill whopay limited admission fees.

Source: RCA, Deloitte analysis.


Racecourses have for a number ofyears therefore promoted initiativessuch as Music Nights and Ladies’ Daysto attract such racegoers. Theimportance of such additionalentertainment or themes has arguablybeen amplified since 2008, as with thesqueeze on disposable income thepublic have searched for activitieswhich they perceive as being the bestvalue for money and/or the unmissableevent in the local social calendar. Over350,000 people attended the 35+fixtures at which there was a significantmusic aspect in 2012, well up from the250,000 in 2008.

Other innovative racecourse initiativesinclude Carlisle’s twist on the traditionalLadies’ Day with all races restricted toLady riders; the Chester Rocks Festival,which extended the traditional musicnight into a two day event; Goodwood’sseries of DJ nights and Beverley’sFashion Week which launched at anevening fixture. The development of theRacecourse Association’s ShowcaseAwards in 2011, which has an Eventscategory for such schemes, is helpingrecognise, and facilitate the sharing of,best practice in these initiatives.

“He constitutes a new benchmarkfor equine excellence on theracecourse”

IFHA World Rankings Supervisory Committee

The QIPCO Champion Stakes at Ascotin October 2012 saw the finalracecourse appearance of the equinesuperstar Frankel, now officiallydeclared the highest rated racehorsesince international rankingscommenced. Frankel’s performanceson the racecourse led to a recalibrationof the World Thoroughbred Rankings,which he tops on 140, two poundsahead of Dancing Brave. He alsobecame the first racehorse to beofficially a champion at two, three andfour years of age respectively.

The publicity generatedby Frankel on and offthe racecourse wasenormous as hecrossed from theracing press tosports pages andultimately to thefront pages. Thisprovided British

Racing with anunprecedented amount

of exposure over thecourse of his racing career – the

media value from his final appearancealone on QIPCO British ChampionsDay being estimated at over £2m(according to a QIPCO BritishChampions Series media evaluation).

Racecourses also benefitted directlyfrom the “Frankel effect” through theboost to attendances and henceracecourse revenues wherever he ran,by illustration:

• Close to an additional 11,000attendees (55% up from 2011) werepresent for Frankel’s run at York’sEbor meeting in August 2012;

• In a survey of racegoers at QIPCOBritish Champions Day at Ascot82% of attendees gave ‘Frankel’ asa reason for their attendance,comprising over 26,000 people onthat one raceday alone.

It is probable that Frankel generatedover £1m in additional racegoers’spend in 2012.

After 14 straight wins, including 10 atGroup 1 level, Frankel was retired andnow resides at the Banstead ManorStud of his owner/breeder PrinceKhalid Abdullah of Juddmonte Farms.Having Frankel standing at stud inBritain, at a reported fee of £125,000,will undoubtedly strengthen thereputation of the British breedingindustry as the owners of many of theglobe’s top broodmares compete for amatch with the great horse.

Frankel should therefore continue toexert a positive economic impact onBritish Racing for many years to come.

FACTFILE: FRANKEL (GB)

FRANKEL

14/14Races won/run(10 Group 1s)

£2,998,302Total prize money won

£125,000Fee at stud (reported)

145,000Total attendance atthe five meetings

where he ran in 2012

£2m+Media valueof last run


OWNERS

Racehorse owners are the singlelargest contributors to the fundingof British Racing through boththeir purchase of horses frombreeders and on-going trainingand racing expenditure paid totrainers, jockeys and supportingindustries such as vets, farriersand horse transport companies.

British Racing benefits from a hugevariety of owners – ranging from majorinternational investors largely focusingon Flat racing, to a large number ofracing syndicates and clubs which allowthousands of people to get involved inhorse ownership at a lower cost.

This section first considers thecontribution of owners by examiningthe numbers of owners and horses intraining. Both these headings areconsidered key barometers of the healthof the Racing industry, and central tounderstanding how Racing has faredduring the economic downturn. Later, itconsiders the level of prize money paidby British Racing as, while financialreturn is generally not the main driver ofhorse ownership, the possibility of areasonable return on an owner’s outlayfor a successful horse, together with aneed to avoid them feeling unfairlytreated, is nonetheless important.

The expenditure of racehorse ownerson training and keeping their horses,both gross expenditure and net ofincome (mainly prize money) thatoffsets some of the costs, hasincreased in recent years. Such grossexpenditure is estimated to have been£369m in 2012 (excluding expenditureon keeping Point-to-point horses),£22m higher than in 2008 – despitefewer horses being in training owing, atleast in part, to an increase in theaverage cost of training and keep.

After prize money and ownersponsorship, the net expenditure isestimated to have been £284m, up£29m from 2008, with the net increasebeing greater than the gross amountdue to a decline in the amount of prizemoney (British only) paid to owners in2012 compared to 2008.

Figure 16 shows how the averagenumber of horses in training hasdeclined from a peak of 15,349 in2008 to 13,716 in 2012 (down 11%).This is still a greater number in trainingthan in 2003, and, considering theeconomic challenges since 2008 in theUK and elsewhere, is perhapssurprisingly resilient for what is adiscretionary spend.

The 13,716 horses in training representthe average number across the year,based on the returns submitted bytrainers to the BHA. The total numberof horses that were in training at somepoint in the year will therefore besignificantly higher than this due to thenatural flow of horses in and out of thesport for reasons such as retirement,injury and young horses at the start oftheir careers in training not yet ready torun. In 2012, c.24,000 horses(excluding the 3,000 registered asprivately trained hunters and Point-to-point runners) were in training at somepoint, down slightly from c.25,000 in2008. Of this number, there were17,500 individual runners in 2012(18,500 in 2008).

Possible explanations for the disparitybetween the 11% drop in the averagenumber of horses in training and thelesser 4% decrease in horses in trainingat some point during the year are thatsome owners are not persevering withlower quality horses in training for aslong as in previous years and/or eventhose horses retained are spending lesstime in trainers’ yards.

Figure 16: Horses in training and number of owners: 2003-2012

Note: Horses in training and owners represent the monthly average during the year. Source: BHA; Deloitte analysis.

Note: Percentage change shown in brackets.Source: BHA; Deloitte analysis.

6,0002003

8,000

10,000

12,000

14,000

16,000

2004 2005 2006 2007 2008 2009 2010 2011 2012

JumpFlat Total number of owners with a horse in trainingMix

8,949

9,266

8,000

8,500

9,500

10,000

7,6838,225 8,461 8,228 8,557

8,784 8,917 8,848 8,636 8,471647670

7621,075

2,2932,133

1,8541,7301,505

1,333

4,2764,399

4,377 4,4194,393 4,272

4,867 4,9394,750

4,598

9,403 9,3299,551 9,537

9,014

8,774

8,425 8,215

9,000

10,500

13,292

14,12914,568 14,501

15,08315,349

14,85914,549

14,05613,716

Figure 17: Number of owners by type– 2008 v 2012

0

2,000

4,000

6,000

2008 2012

Joint owners only

2,830

1,017

5,690

2,376

915

4,924

9,537

8,215

(13%)

(14%)

(10%)

(16%)

8,000

10,000

Sole, company orbusiness partnersand joint owners

Sole, company soleand businesspartnership soleowners

Owners haveinjected over£470m intoBritish Racingin 2012.

SECTION 4: HORSEMEN


Figure 16 shows that the number ofowners has declined to 8,215 in 2012,14% down from the peak in 2008.There are a variety of different modelsof horse ownership in Britain, as shownin Figure 17, with only 2,376 (29%) ofowners exclusively owning horsesindividually in 2012. The number ofannually newly registered ownershas declined from 1,950 in 2008 to1,462 in 2012 – and accordingly theindustry is placing increasing focus onattracting new owners.

In addition to the 2,376 Sole Owners,915 were involved both as Sole and Jointowners. Joint Ownership remains themost common type in Britain, with over4,900 owners (60% of all owners) beinginvolved in a joint ownership only, whichreduces costs by sharing expenditureacross a number of individuals.

Whilst total numbers of owners havefallen by 14% since 2008 the mostrapid drop has been among SoleOwners, which have decreased by 16%over the period.

It is estimated that around 35,000individuals are involved in horseownership in some way when

syndicates and racing clubs areaccounted for – Elite Racing Club hasover 11,000 members for example.As Figure 18 shows it is owners with aninterest in one or two horses that havedecreased most between 2008 and2012. There are 16% fewer ownerswith an interest in one horse and thenumber of owners of two horsesdropped by 15%, whereas those withthree or more was down only 7%.Indeed, there are only seven fewerowners of eleven or more horses in2012 than 2008 – suggesting that theupper end of the ownership scale hasbeen more resilient to the economicchallenges of the period.

Overseas investmentBritain’s high quality global reputationmeans it benefits from a number ofsignificant owners from around theworld. This continuing ability to attractoverseas investment has beenparticularly important to the industry inrecent years as the economic downturnthroughout the UK and Europe tookhold. In the 2012 Flat season, of the 22owners which had 50 or more runnersin Britain nine were from overseas orwere overseas nationals. This includedfour of the owners with the mostrunners – Godolphin, Sheikh HamdanBin Mohammed Al Maktoum, SheikhHamdan Al Maktoum and the owner of

Frankel, Prince Khalid Abdulla.Being able to attract a mix of well-established major investors, such asthe Godolphin stable from Dubai, andalso new entrants such as PearlBloodstock and Qatar Racing (with over140 different runners between them inthe 2012 Flat season) is a greatattribute of British Racing. Whilstinternational investment is particularlyfocussed on Flat racing, Jump racingalso benefits from major patrons.The biggest international Jump owner isJP McManus from Ireland, who hadover 500 runners in Britain in the2011/12 season.

Owners’ costsThe average cost of keeping a horse intraining in 2012 was estimated to beover £21,500 for a Flat horse, with theequivalent Jump figure being over£17,500. These sums include keepcosts for those periods when horsesmay not necessarily be registered intraining, and have increased from 2008for both codes.

The figures represent the average costsfor horses in training taken from asurvey performed by the RacehorseOwners Association (ROA). Most of thehorses in the survey ran in that year, thevast majority more than once, howeverthere will also be a large number of


01

500

1,000

1,500

2008 2012

2 3-5 6-10 11-20 21+

-900

-279

-120

-17

-1-6

2,000

5,000

6,000

0

Figure 18: Owners by number of horses in training– 2008 v 2012


The expanding fixture list has meantthat the average prize money per racehas declined by 14% since 2003 to£10,100 in 2012. Average prize moneyper runner has also fallen although by asmaller amount as average field sizeshave declined by 10% over the sameperiod.

Once the substantial impact of inflationis taken into account, with cumulativeinflation of 34% between 2003 and2012 based on the Retail Price Index,prize money has fallen very markedlyover the last decade.

Prize money comes from three mainsources – the Levy Board, Racecourses(including sponsor contributions) andOwners (via entry fees). There havebeen much greater movements in thesources of funding than in total prizemoney, particularly in the three yearsfrom 2010-2012. This has largely beendue to marked falls in Levy receipts,

horses which, although in training atsome point, did not run. The owners’costs will therefore be considerablylower for these horses.

The total amount of expenditureincurred by owners (see Figure 20) hasincreased from £347m in 2008 to£369m in 2012. Whilst this £22m rise isa result of increases in most costs, thelargest came in transport expenseswhich are outside of the control oftrainers. Diesel costs alone have risenby over 20% since 2008.

In general, trainers have been trying tolimit increases in training fees wherepossible but nonetheless, when alltraining and associated cost increasesare considered cumulatively, they resultin the average cost per day of eachhorse in training rising from £54 to £62over the four year period.

The gross cost per run was c.£4,000 in2012 (reduced by c.20% when prizemoney is taken into account) which ismore than it costs in many other majorracing nations. One notable explanationfor this is due to the fact that in Britainhorses are often trained at locationshundreds of miles away from theracecourse, unlike many otherjurisdictions where the vast majority oftrainers are racecourse-based. Whilstthis alternative has some costadvantages, notably as trainers have allthe facilities they need on hand ratherthan having to provide thesethemselves, it lacks the diversity andrichness of British Racing with its manyvaried racecourses, training centres andyards. It is this variety which appeals toa significant number of owners who areprepared to pay higher costs for theexperience.

There are notable disparities betweentraining costs depending on the relativesize and reputation of the trainers inquestion and their geographicallocation. Flat training costs p.a. variedby nearly £7,000 between larger, wellestablished yards and their smaller,often less well known counterparts.Average training costs for Newmarket,widely acknowledged as Flat racing’sheadquarters, were, at over £20,000,more than double those from someother areas. Similarly, for Jump trainers,the Lambourn and West Countryregions were found to be the mostexpensive, although the difference fromother areas was less pronounced.

Prize moneyTotal prize money has varied within arelatively narrow band of between£94m and £110m over the pastdecade. A new record level of prizemoney of £110m was set in 2009,before two years of decline which sawthe total fall to £94m by 2011. Prizemoney recovered marginally to £98m in2012. 2013 is predicted to see a muchlarger increase, probably to around£110m.

OWNERS

Figure 20: Total owners’ expenditure 2008, 2012

2012 2008 changetotal total %

expend expend£m £m

Basic training fees 246 238 3%(including gallops)Vets, medical and farriers 33 30 10%Transport & racing expenses 28 20 41%Sub total 307 288 7%

Registration fees 8 6 31%Jockey fees 11 11 0%Race entry 16 17 (6%)Insurance 10 10 0%Total owners’ expenditure 352 332 6%on horses in training

Keep costs 17 15 12%Total owners’ expenditure 369 347 6%

IncomeOwners’ prize money 78 85 (8%)Sponsorship 7 7 0%

Net owners’ expenditure 284 255 11%

Note: Income does not includeprize money won abroad byGB trained horses. In 2008,this totalled £5.6m, in 2012 ittotalled £25.1m.

Source: BHA; ROA Ownerssurvey; Deloitte estimates.

Figure 19: Average owners operatingexpenditure per horse 2012

Flat Jump£ £

Basic training fees 14,585 11,179(including gallops)Vets, medical and farriers 2,082 1,783Transport and racing expenses 1,868 1,392Sub total 18,535 14,354

Registration fees 581 590Jockey fees 641 644Race entry 1011 745Insurance 332 377Total owners’ expenditure 21,100 16,710on horses in training

Keep costs 670 800Total owners’ expenditure 21,770 17,510

2008 equivalent expenditure 18,501 16,717

Note: Majority of dual code horses included under Jump.Adjustments have been made to several cost categories from theROA survey results to reflect available 2012 industry data. Costinflation of 5% assumed from 2010 survey following 2012 researchcarried out by ROA.

Source: BHA; ROA Owners Survey 2010, Jockey Club owners survey2012; Deloitte estimates.

SECTION 4: HORSEMEN


leading to Levy Board contributions toprize money falling by 45% between thepeak of £63m in 2009 to £34m in 2012.Racecourses (including sponsorship)have gone some way to compensatingfor a large proportion of this Levy Boardreduction, with contributions increasingby over 50% from £30m in 2010 to£46m in 2012, aided by growing mediarevenues.

Based on the total amount ofexpenditure incurred by owners in2012, prize money enabled them torecoup approximately 21% of theirexpenditure. If racehorse sponsorshippayments are also included this rises to23%. It must be remembered thatwhilst more than 17,500 horses ranonce or more in 2012, over 11,000 ofthese did not win a race. The majorityof owners with a runner in 2012 wouldtherefore not have had a winner and therecovery of their expenditure would beconsiderably lower.

Approximately 80% of prize money ispaid to owners, with the remaindergoing to trainers (7-8%), jockeys (7-8%)and stable staff (5%). A small amountalso goes to fund industry training,jockeys’ valets attendance, the

Professional Jockeys Associationpension fund and the NationalAssociation of Stable Staff. The exactdistribution formula depends largely onthe number of placed runners awardedprize money.

Horse purchasesThe cost of bloodstock purchases hasbeen excluded from the analysis due toan insufficient amount of robustinformation on the buying and selling ofhorses. Nonetheless, this cost doesrepresent a significant further injection offunds into Racing by owners. By way ofillustration, the average cost of horsessold at Tattersalls and DoncasterBloodstock Sales, the two leadingauction houses in Britain, was c.£38,000in 2012. Owners may recoup some ofthis expenditure from subsequent sales.As in the 2009 version of this report, theexpenditure related to the purchase ofhorses is incorporated in the Breedingsection. As such, owners can be said tohave injected over £470m into BritishRacing in 2012 once the £189m ofbreeders’ expenditure and public auctioncommission is added to the £284mpreviously discussed in this section.

Looking forwardIndications are that total prize money in2013 will be around £110m, back tothe level reached in 2009 but stillrepresenting a real terms decline sincelevels in the early part of the lastdecade. Improvements in prize moneywill play an important part in retainingexisting owners and aiding therecruitment of new owners (given therewill always be a natural churn of ownersleaving the sport who must bereplaced), and the industry’s leaders areworking hard to deliver the necessaryconditions to allow that to happen.

However, this is only one part of thesolution, with many other parties inRacing having key roles to play including:

• Trainers – typically owners’ mostprominent link to the sport, and shouldbe a valuable “sales force” for Racing;

• Racecourses – by ensuring theowners’ contribution is recognisedincluding through the provision ofappropriate quality facilities forowners and their horses.

The newly formed Great British Racing– as the sport’s central promotional arm– will also play a role in attracting futureowners into the sport by variousmeans. Current examples include thenew OWN1 website, which acts as aresource for individuals to find out moreabout becoming a racehorse owner;introducing new audiences to horseownership via social media (People’sHorse project on Twitter); partnershipswith sports broadcasters such as theSky Sports News owned horse; orGreat British Racing International’sfocus on attracting new high net worthindividuals from overseas as ownerswithin British Racing.

Figure 21: Prize money by source 2003-2013

02003

30

60

90

120

2004 2005 2006 2007 2008 2009 2010 2011 2012

OwnersBHB/BHAHBLB Racecourses (incl. Sponsorship)

2013Forecast

Projected

£m

Average prize money per race (£’000s)

43

11.7 11.4 11.5 11.5 11.1 11.2 11.5 10.3 9.2 10.1

Average prize money per runner (£)1,132 1,078 1,046 1,090 1,053 1,084 1,151 1,075 995 1,084

5560 62

53 5663

51

32 34

12

12 12 1213

1717

16

15 16

3426 25 27 30

30 2830

45 4694

100 99 103 99106 110

99 9894

c.110


Improvementsin prize moneywill play animportant partin retainingexisting ownersand aiding therecruitment ofnew owners.


There were 557 licensed trainers inBritain in 2012, with a further 119permit holders. Whilst licensedtrainers carry out the training ofracehorses as their primaryoccupation, permit holders areessentially amateur – often familyrun operations which train horsesto compete in Point-to-point andhunter chase contests.

The number of licensed trainers inBritain has decreased by 35 (6%) since2008, as illustrated by Figure 22.

The smallest c.300 yards trainedc.2,000-2,500 horses in 2012, meaningthe remaining c.11,000-11,500 of theaverage number of horses in trainingcame from the other c.250 yards.

Whilst the total number of licensedtrainers increased steadily in the fouryear period to 2008, the decline in thenumber of owners and horses intraining in the years since hascontributed to a reduction in 2012. Thelargest decline in 2012 compared to2008 (in percentage terms) has been inthe number of yards training between31 to 40 and 41 to 100 horsesrespectively, which have decreased by23% (29 yards).

The number of yards training 21 to 30horses has increased over the sameperiod however, so it is likely that anumber of trainers with 31 or morehorses in 2008 have been forced tooperate with fewer horses in theintervening four years.

Effect of economic downturnAs would be expected, there have beenmovements of trainers both enteringand leaving the profession since 2008,although on-going economicchallenges have meant the latter haveexceeded the former over this period.The decline in the numbers of bothowners and horses in training hasundoubtedly had some effect.

Trainers at the top end of thechampionship tables have maintained,and in many cases increased, theirnumber of horses, resulting in morerevenues from training fees. Thenumber of yards with, on average, over100 horses in training over the courseof the year has therefore remainedlargely unchanged from 2008 (17 yards)to 2012 (18 yards). However, it appearsto be the ‘mid-ranking’ yards that havefelt the squeeze more than most. Thesmaller operations will often have other

forms of income to supplement therevenue generated by training, such asfarming, but the mid-tier trainers will bewholly reliant on training as their mainsource of income. Declines in thenumber of horses in training and prizemoney will therefore hit this grouphardest. One result of this has been thecombination of some yards, withtrainers seeking to minimise costs.

In spite of this there have been severalnew yards appearing with, for example,a number of former trainers’ assistantshaving started up their own businessesin this period despite the recession.

Overall the fact that the number oflicensed trainers has not dramaticallydecreased over the period of economicdecline is testament to the dedicationand passion of the individuals involved,who have managed to maintain theirbusinesses in trying financialcircumstances.

TRAINERS

01-10

50

100

150

200

250

210

2005: 570

232218

Total number of licensed trainers

11-20 21-30 31-40 41-100 101+

158151 150

70 6573

42 4230

7685

68

14 17 18

2008: 592 2012: 557

Horses in training

Lice

nsed

train

ers

Figure 22: Licensed trainers’ yards by number of horses in training – 2005,2008 and 2012

Note: Licensed trainer numbers based on an average of the monthly returns to the BHA. Source: BHA; Deloitte analysis.

Around a thirdof Britain’slicensed trainersare based atone of the fivemain trainingcentres.

SECTION 4: HORSEMEN


Geographic spreadMany yards are concentrated aroundthe largest training centres in Britain –Newmarket, Lambourn, Epsom,Middleham and Malton – with around athird of Britain’s licensed trainers basedat one of these centres. These areasare heavily reliant on Racing in terms ofemployment and revenue generation,and the sport is deeply ingrained in thelocal community. Facilities at thesetraining centres have developedconsiderably over the past decade andnow represent some of the finest in theworld, both in trainers’ private facilitiesand on the public gallops, administeredand maintained by Jockey Club Estatesin Newmarket and Lambourn.

Nonetheless, two-thirds of yards arelocated outside of these main trainingcentres, and most rural areas in Britainwill be represented by licensed trainersor permit holders – large and small – asdemonstrated by the spread around theregions in Figure 23. The West Country,for example, contains a strongcontingent of Jump trainers.


South West14%

East18%

Midlands19%

Scotland4%

North8%

Yorkshire14%

Wales3%

South East20%

MALTON

MIDDLEHAM

NEWMARKET

LAMBOURN

EPSOM

Figure 23: Percentage of trainersbased in each region

Trainers’ revenuesThe fees paid by owners represent theprimary income stream for trainers andthese vary depending on the reputationand size of yard, and location of thetrainer in question. As set out in theOwners section, basic training fees areestimated to have been c.£250m in2012, with only a 3% increase from2008, as the 7% increase in averagebasic training costs (excluding costs

such as vets and transport which arepassed on), was largely cancelled outby the fall in the average number ofhorses in training. Trainers have soughtto restrict increases in training feesgiven financial pressure on many, if notall, of their owners by tightly controllingcosts, evidenced by the 7% fall inheadcount at stables and lower levelsof investment than seen in the middle ofthe last decade.

It has been suggested that, in recentyears, the majority of prize money has

become concentratedamongst only the top few

trainers in both Flat andJump racing. In orderto determinewhether the toptrainers havebecome moredominant, thisanalysis examineshow the proportion of

prize money won bythe top 30 in the 2012

season’s trainers’championship, and within that the

top five trainers, has moved since2004 in both codes.

In Jump racing, whilst theproportion of prizemoney won by thetop 30 trainers inthe 2011/12season is greaterthan in the2003/04 season,this increase issolely attributable to

the success of the topfive trainers. Indeed the

dominance of the top twotrainers in the 2011/12 season,

Paul Nicholls and Nicky Henderson, isa significant factor in this shift, with the

two yards winning over 19% of totalprize money that season.

When the 2012 and 2004 Flat seasonsare compared, the top 30 trainers inthe championship have increased theirpercentage of prize money won bysix percentage points – with thisincrease split evenly between the topfive and the remainder of the top 30.

These movements do show a slightshift towards the top 30, and indeedtop five, trainers in each codebecoming more successful, which is tobe expected in a time of recession as anumber of the smaller and mediumsized trainers have fewer horses towork with in their yards.

This movement mirrors that seen morewidely in sport, as there has been atrend towards further concentration ofwealth with top sport teams andoperations becoming more successful.However, sport is such that therealways remains the potential for wellfunded new entrants to challenge thestatus quo, such as Manchester City’semergence to win the 2011/12Premier League and Red Bull’s recentdominance in Formula 1. The sameopportunities exist within racing, and‘small’ owners and trainers can ofcourse still win big prizes.

Remainder42% (48%)

Top 3058% (52%)

Top 523% (20%)

R

Remainder38% (41%)

Top 3062% (59%)

Top 530% (27%)

Figure 24: Flatprize money2012 (2004)

Figure 25: Jumpprize money2012 (2004)


PRIZE MONEY DISTRIBUTION


TRAINERS

Around 7-8% of prize money isgenerally paid to trainers under theRules of Racing, which in 2012 equatedto £7.8m – c.3% of training fees.It is therefore a less important, and alsoless predictable, direct revenue sourcebut does nonetheless provide themeans for some yards to improveprofits and provide funds for futureinvestment in facilities. Prize moneylevels also indirectly impact upontrainers’ businesses as, if ownersconsider levels inadequate, some maywithdraw from, or reduce theirexposure to, Racing hence dentingtrainers’ core training revenues. Stablestaff also receive around 5% of prizemoney – with trainers and their staffdeciding on how this pool is distributedamongst each yard.

Many trainers also buy and sell horses,but no reliable data is available toaccurately estimate the scale and valueof this trading. Like prize moneythough, this can be an importantsource of revenue for trainers tosupplement their basic training fees.

Trainers’ expenditureAlthough the initial expenditure ofpurchasing and training horses isultimately incurred by owners, trainersstill play an important part in distributingthis revenue around the industry andthe British economy as a whole.The largest expenditure incurred bytrainers is on staff costs. The vastmajority of trainers employ fewer than50 staff, but there are a small number ofmuch larger yards each employing over100 people. The 557 licensed trainersand 119 permit holders employ over7,000 people in total, in a mixture of fulland part-time roles.

The annual wages and salaries of yardemployees and trainers, includingNational Insurance payments, wereestimated to be c.£100m in 2012,generating an estimated £28m inemployment taxes. Substantialadditional expenditure will flow fromthese wages with significant amountsbeing reinvested in the local economy,generally in rural locations.Like jockeys, stable staff are dedicatedand often work long hours. TheNational Association of Stable Staff(NASS) is the Independent CertificatedTrade Union representing stable staffemployed by licensed racehorse

Prize moneylevels alsoindirectlyimpact trainers’businesses,as if ownersconsider levelsinadequatesome maywithdraw from,or reduce theirexposure to,racing.

trainers, and annually agrees aframework of minimum wages andgeneral working conditions with theNational Trainers Federation (NTF). In2009, NASS agreed to forego animmediate increase in the minimumrates of pay in exchange for a review ofthe pay and conditions system, andeach year since has seen a c.2% p.a.increase and latterly a new frameworkon travelling expenses as a result.

Other expenditure incurred by trainers,but in the most part ultimately fundedby owners, includes the cost of farriers,vets, transport and keep fees. Suchexpenditure will flow through togenerate revenue for the ruralbusinesses and communities in whichmost trainers’ yards are based.

Whilst the recent economic downturnhas reduced spending on facilitiescompared to previous years, there hasstill been significant capital expenditureincurred in training facilities. JockeyClub Estates have continued theirinvestment in the training facilities atNewmarket and Lambourn in the lastfour years, and there has been notableinvestment at several, often up andcoming, yards.

SECTION 4: HORSEMEN


Jockeys are amongst the hardestworking and toughest sportspeople inBritain – working long hours, travellinglong distances and risking injury on a

daily basis for comparativelylimited financial reward.

For the vast majorityof jockeys, theriding fee willrepresent theirmain source ofincome. From 1January 2013 theriding fee per race

has been £116 for Flatjockeys and £158 for

Jump jockeys.

The only other substantial incomemost jockeys earn is a percentage ofprize money as set out in the Rules ofRacing. A Flat jockey gets about 7% ofany win fund and less than 3.5% ofany place fund (Jump jockeys getc.1% more of win funds than theircounterparts on the Flat), much lessthan the often assumed 10%. Thisincome is inherently unpredictable.Whereas those jockeys riding for thelarger, more successful yards can tosome extent assume they will beregularly earning a sum of prize money,jockeys perhaps with just one or tworides a day for smaller yards may gofor months without receiving anymeaningful prize money.

A limited number of retainers exist,whereby an agreement is in place for ajockey to ride all of a trainer or owner’sstring, but only a handful of these willinvolve payment. Jockeys receive no

THE ECONOMICS OF BEING A JOCKEY

pay for riding out each morning, just thebenefit of keeping the rides on certainhorses or for certain yards.

Some jockeys benefit from sponsorshipbut these are limited both in numberand amount. Aside from theProfessional Jockeys Association’scentral sponsorship arrangement withStobart Group, there are over 180individual sponsorship arrangements inplace totalling just over £450,000 p.a.

Jockeys pay a variety of direct costs,such as insurance and valet fees, fromtheir riding fee and prize moneyearnings. On top of these costs, theyalso incur significant travel expenseswhich will vary greatly depending on thefixtures they have rides at and howmany fixtures they attend each day.

The table above estimates the grossand net earnings, after direct costs, ofthe top 100 Jump and Flat jockeys inBritish Racing in 2012.

Jockeys’ Championship A FLAT 2012 season JUMP 2011/12 seasonposition average earnings (£’000s) average earnings (£’000s)

Riding fees B Earnings after Riding fees A Earnings afterand prize direct expenses and prize direct expensesmoney (pre travel) money (pre travel)

Top three 217 187 202 1764th-20th 156 135 110 9221st-100th 65 51 40 28

Note A: Flat positions determined by total wins in 2012 calendar year.Note B: Direct expenses consist of insurance, licences, PJA subscriptions, valet fees, physiotherapy and agent fees.Source: PJA; BHA; Deloitte analysis

While estimating travel expenses isdifficult, the geographically diversenature of Britain’s racecourses meansthey are significant for all jockeys andwill represent a substantial proportionof their earnings – especially for thosewith a small number of rides.

Overall total riding fees and prizemoney paid to jockeys in 2012 fromBritish Racing is estimated to havebeen c.£16m, an average of c.£35,000across the 453 professional jockeys.

When compared to the earnings ofother top sportspeople in Britain it isevident that jockeys work extremelyhard for comparatively little financialreward.

By way of contrast, the averageChampionship footballer earnedc.£350,000 in 2012 and Premiershiprugby union players in excess of£100,000, although county cricketplayers are more comparable withearnings of c.£40,000.


The thoroughbred breeding industryis the first link in Racing’s manychains. As such, the British breedingindustry is a major contributor tothe current, and future, overallhealth of British Racing.

The British breeding industry operatesacross a wide range of scales, from thec.3,500 breeders who exclusively ownbroodmares to the estimated 300 full-time stud farms which typically standboth stallions and broodmares.

The global reputation of British Racing –across breeding, training and racing –means it has become the destination ofchoice for an increasingly diverseinternational set of investors inbloodstock. The British industry wasthe seventh largest producer ofthoroughbred foals in 2011 (the latestyear for which data was available) andinvestment in British-bred bloodstock isa major direct injection not just into theRacing industry but the wider economy.In addition, a large number of Irish-bredhorses are sold at British publicauctions which, although having a lesssignificant impact on British Racing,strengthens Britain’s reputation as theplace to trade in thoroughbredracehorses.

The breeding sector was among thefirst to experience the impact of theglobal economic slowdown in manycountries through major falls in thevalue of bloodstock sales, and in turnsubstantial reductions in foalproduction. The main challenge for theindustry was to readjust the supply tomeet the demand for foals andyearlings after a decade of growth fromthe mid-1990s.

Foal crops were at an all-time high, andthere were effectively three years ofpeak production available but with amuch reduced demand due to the timelag of the breeding process. By 2011,the number of foals had declined suchthat the supply and demand was betterbalanced, although further adjustmentsare still likely to be required. TheInternational Federation of HorseracingAuthorities (IFHA) estimate thatbetween 2008 and 2011, globalthoroughbred foal production droppedby over 13%, so Britain’s 22%reduction over that time was evensharper.

Figure 26 shows the number ofstallions, broodmares and foals born inBritain in 2005, and each year between

2008 and 2012. It illustrates the scaleof the cut in production by 2012 with afall of over 26% in foals from the peak in2008 to 2012. The majority of thisoccurred between 2009 and 2010, withnumbers stabilising thereafter. Thedecrease in the number of stallions iseven more dramatic with a 43% dropbetween 2008 and 2012.

The scale of these reductions is suchthat they have clearly had an impact onthe economic footprint of the breedingindustry. However, the impact has notbeen as dramatic as the simplepercentages suggest, given that thebiggest adjustment has occurred at thelower quality, often part-time orrecreational, end of the sector. Thedownturn accelerated what had alreadystarted in the mid-2000s, namely theconcentration of mares and bloodstockstallions at a relatively small number ofprofessionally organised and focusedstuds. By removing large numbers oflower quality broodmares and stallionsfrom the industry, it is generallyaccepted that the standard of British-bred horses will improve, as well asensuring the highest standards ofwelfare are maintained.

BREEDERS

The globalreputation ofBritish Racing– acrossbreeding,training andracing – meansit has becomethe destinationof choice foran increasinglydiverseinternational setof investors inbloodstock.

SECTION 4: HORSEMEN


Breeding industry revenueThe primary external income for theBritish breeding industry comes fromthe sale of horses. Individual breederswill have other revenue streamsincluding stallion nomination fees andother charges such as keep fees, butas these costs are internal, (i.e. chargedto other stakeholders in the breedingindustry), they do not derive a directadditional economic benefit to BritishRacing.

Sales do, however, generate directeconomic benefit, and in Britain mosthorses are sold through publicauctions. The two largest auctionhouses are Tattersalls and DoncasterBloodstock Sales, and the majority offoals and yearlings sold in Britain (orIreland) will pass through their salesrings at some stage.

A small number of private sales will alsooccur, but due to the confidential natureof these there are no reliableinformation sources by which theirvolume and value can be estimated. Ona larger scale, there are a number ofhome breeder operations, whereby thewhole breeding operation (broodmares,stallions, foals and yearlings) are keptin-house. Most of the yearlings

produced by these operations will betransferred to the respective ownersand trainers, with only those deemedsurplus to requirements (typically lowerquality horses) sold. Frankel is a notableexample of a British home-bred, havingbeen bred at the Juddmonte Farmsoperation of his owner Prince KhalidAbdullah.

The volume and average price of horsessold at public auctions are considered akey indicator not just of the health of thebreeding sector, but of the wider Racingindustry. Figure 27 shows bothmeasures, total value and average saleprice, for horses sold at Britain’s largestsales houses, Tattersalls and Doncaster,from 2005 to 2012.

Total sales and average price peaked in2007 before the economic downturnbegan in 2008, resulting in threeconsecutive years of significantlyreduced sales values. 2011 saw a slightupturn in fortunes with the volume ofsales increasing by over £20m, but2012 exceeded all expectationsfollowing the previous three years with

Tattersalls sales increasing by 15% toover £220m, the third highest total everfor the auction house. The average saleprice of £47,000 reached in 2012 wasalso close to the levels recorded in the‘boom’ era of 2006-07.

The demand for quality at the top endof the bloodstock market was strongwith six horses sold for over £1m each.This included the highest yearling pricein the world in 2012, when Hydrogenwas sold at Tattersalls for £2.6m.

The lower end of the market remainsmore challenging. Clearance rates (% ofhorses sold) have improved though,with 76% of horses offered for sale in2012 by the four major sales companiesin Britain and Ireland changing hands.This compares to 73% in 2011 and67.5% in 2010, demonstrating howoverproduction in previous yearsperhaps led to too many moderatehorses being bred and offered for sale.

Although the majority of horses passingthrough Britain’s sales rings are Flat-bred, there is still a sizeable market for

02005

2,500

5,000

7,500

10,000 210

Active broodmares

232

British foals born

326

Stallions

12,500

2008 2009 2010 2011 2012

345 306 285 259 197

11,9

47

10,7

40

10,6

24

9,82

6

9,31

7

8,76

6

5,72

7

5,92

0

5,59

5

4,66

5

4,63

5

4,36

6

Figure 26: Number of stallions, active broodmares andBritish foals born 2005 and 2008-2012

Source: BHA; Deloitte analysis; Weatherbys.

0

50

100

150

200

250

£m

300

2005

Doncaster Bloodstock SalesTattersalls

Tattersalls average

10

0

20

30

40

50

60

£’000s

2006 2007 2008 2009 2010 2011 2012

195

245257

176 178170

192

221

26

28

282736

4541

34

Doncaster Bloodstock Sales average

Tota

lsal

es

Aver

age

pric

epe

rlot

229

286302

212205 198

220247

Figure 27: Value and average price of horses sold at Tattersalls andDoncaster Bloodstock Sales British public auctions: 2005-2012

Note: Sales comprise all horses, not just yearlings. Source: Tattersalls, Doncaster Bloodstock Sales


Jump horses. Doncaster BloodstockSales plays a leading role in this sectorand the 2012 Spring sale, their largestJump sale in terms of lots offered, sawover £5m of sales, with an average saleprice of over £13,400. Brightwells,specialist auctioneers for the sale ofJump horses, achieved new records forturnover and average sales price for thethird consecutive year in 2012. Despiteselling fewer horses than in 2011,turnover exceeded £12.6m and theaverage sales price reached £15,000, anear £5,000 (50%) increase.

Overseas investmentThe attractiveness of British (and Irish)bloodstock to an increasingly diverseset of international buyers has been thesingle biggest driver for the recovery inauction values since 2010. It isestimated that, of Tattersalls sales of£221m from British public auctions in2012 (the vast majority being Britishand Irish-bred horses), around £150m(70%) was made to non-British buyersfrom over 50 countries. This £150mcovered c.60% of the total c.4,800horses sold, the lower percentagecompared to value illustrating thatinternational buyers are particularlyfocussed at the upper end of themarket.

The biggest source of financeoutside of Ireland comesfrom the long-standinginvestors in British Racingfrom the Middle East. Thishas traditionally been the UAEstates and Saudi Arabia butmore recently others have enteredthe market, notably Qatar, who have ina relatively short period of time becomevery significant investors in BritishRacing. Indeed, it was Qatari investorswho in 2012 paid the highest priceanywhere in the world for a yearling,Hydrogen.

While it is natural that some of thehorses bought by international buyerswill leave Britain to race and/or improvebreeding stock elsewhere, the majorityremain in Britain or Ireland to be trainedand race, and after their racing careermany will stay for breeding purposes.Top class sport is increasingly fundedby wealthy individuals andorganisations drawn from outside the“host” country, and British Racing is noexception. Great British RacingInternational has also been establishedto develop this further by focusing onthe world’s wealthiest individuals with amessage of: “Buy in Britain, Train inBritain, Race in Britain, Breed in Britain,Invest in Britain”.

Breeding industry expenditureAs Figure 28 sets out, total expenditureby breeders was estimated at £170m,down 16% from 2008 due to lowerproduction levels and consequent fallsin employment and generalexpenditure.

Due to the labour intensive nature of thebreeding process, wages and salariesare the largest cost incurred by theBritish breeding industry – an estimated£98m in 2012 – driven primarily fromthe 3,640 full time employees in theindustry. The biggest studs will employaround 100 people but the majority ofstuds are significantly smaller.

The 4,325 part time employees includethe owners of broodmares who often fittheir breeding activities round their mainjob. This area is understood to haveexperienced some of the most markedfalls in production since 2008 given itsgeneral lower quality stock, whichexperienced a dramatic fall in demandafter the recession took hold.

Other costs incurred by breeders will beon overheads similar to those oftrainers, such as feed, keep costs, vets,farriers and, to a lesser extent,transport.

Figure 28: Breeders’ expenditure andemployment (£m)

2012 2008

Wage costs 98 113Transport 7 7Vets, medical & farriers 22 27Other operating costs 28 35

Annual maintenance/ 15 20capital spend

Total annual expenditure 170 202

EmploymentFull time 3,640 4,000Part time 4,325 5,000Total (FTE) 3,893 4,500

Note: Part-time breeders on average spend only a small proportionof their time on breeding. Source: Thoroughbred BreedersAssociation; Deloitte analysis.

A relatively high level of capitalinvestment is necessary in the breedingindustry in order to maintain thestandard of facilities. The £15m annualmaintenance/capital spend reflects thecost of building and maintaining thehigh quality facilities required to breedand rear top quality racehorses. It doesnot reflect the bloodstock investment orthe sale of stud farms.

The auction houses also spendconsiderable amounts maintaining theirfacilities. For example, from 2009-2012Tattersalls has invested over £5m onmaintaining and redeveloping its landand buildings, boxes and other plantand equipment in order that they meetthe exacting requirements necessary toshowcase the top quality bloodstockthat will pass through its sales ring.

BREEDERS

The biggestsource offinance outsideof Irelandcomes from thelong standinginvestors inBritish Racingfrom theMiddle East.

£150mTATTERSALLSSALES TONON-BRITISHBUYERS

SECTION 4: HORSEMEN


The British betting industry is themost diverse in the world, with amix of fixed odds, pool and spreadbetting, together with bettingexchanges. While British Racing isa core product for the bettingindustry, it must increasinglycompete with a huge range ofsports and other betting products.

The following major trends areparticularly relevant to betting on Racing:

• Shifting patterns in the channelsthrough which people bet – theproportion of total sports betting thattakes place remotely via onlineoperations continues to increasemarkedly, largely driven by the activityof younger people. While betting onsports in Britain’s 8,700 LicencedBetting Offices (“LBOs”) remains thelargest market, and offers customersa social environment to bet notreplicated online, it is likely tocontinue to decline – certainly inrelative terms and potentially inabsolute levels.

• Growth of mobile phone betting – theincreasing smartphone penetration,delivering significant computingpower, has acted as a further boostto growth in online betting. Thispresents significant opportunities forBritish Racing as a race can be easilywatched, and bet upon, on themove. There were an estimated 70mlive race streams of British Racing in2012 with further growth expected.The challenge for British Racing is toensure it obtains a fair share ofbetting revenue via this channel.

• The explosion of sports bettingproducts, notably in-play betting,which are particularly prevalent online– whilst racing does permit in-playbetting, much of it currently throughbetting exchanges, the relativelyshort duration of races limits itspotential compared to other sports,such as football.

• Consolidation in the retail market –following Betfred’s purchase of theTote’s 500+ LBOs in 2011, four firms

(Betfred, Coral, Ladbrokes andWilliam Hill) now make up over 85%of the industry retail gross win.Ensuring productive relationshipswith these firms is therefore critical toBritish Racing. The Tote’s exclusivepool betting operation was alsoacquired by Betfred, on a seven yearlicence.

• The competitive nature of the BritishBetting industry results in the highestreturn to stakes bet by Racingpunters of any major betting country.The ability of punters to compareprices online, the low marginexchange betting model and theaggressive offers and marketingcampaigns run by many bettingoperators on British Racing are allfactors in narrowing margins on thesport. Whilst good for the punter, thiscan lower the returns to BritishRacing from the Levy, currentlybased on a percentage of operators’gross win on the sport.

The competitivenature of theBritish Bettingindustry resultsin the highestreturn to stakesbet by Racingpunters of anymajor bettingcountry.

BETTING

SECTION 5: COMMERCIAL PARTNERS

Gross Win from British Betting andposition in British Betting marketFigure 29 sets out, from 2002/03, theestimated total gross win of onshorebetting operators from betting on BritishRacing (plus Betfair’s commission fromBritish Racing), the total gross win fromFixed Odds Betting Terminals (“FOBTs”)and the total gross win from all otherbetting.

In 2012/13 the gross win from BritishRacing is estimated to have been£710m, based primarily on forecastLevy receipts. It therefore represents amarked fall from the £1 billion plus perannum that was generated until 2008/09.The main reasons for the fall are:

• A marked drop in gross win from thetraditional LBO customers – retailgross win was estimated to bec.£570m in 2011/12, down from ashigh as £800-900m p.a. in the mid2000s. Part of this shop gross winhas migrated online. The scale of themigration of sports betting to online isillustrated by the fact that WilliamHill’s Online sports book bettingturnover was 110% of Over TheCounter (OTC) in their c.2,375 LBOsfor the first quarter of 2013. Onlineturnover on the 2013 CheltenhamFestival exceeded LBO volumes.

• All but Bet365 of the top twenty onlineoperators with a British focus arelocated offshore and hence are notincluded in the gross win figures – nordo they pay the Levy as discussedbelow. While accurate estimates ofthe gross win from offshore operatorsis very difficult due to a lack ofpublically available information, it isprobable that it is now well in excessof £100m. This will almost certainlyincrease as more people migrateonline and betting operatorsaggressively market remote/mobilebetting, including through competitiveprice-related offers compared tothose available in LBOs.

FOBTs were introduced to LBOs in 2002and now generate over £1.5 billion ofgross win each year, in 2011 becomingbigger than all OTC gross in LBOs. Theyare highly profitable and have predictablereturns in the region of 2%.

The majority of other sports/activitiesbetting consists of OTC betting inLBOs, including on overseas racing.This is estimated to have beenc.£850m in 2012/13, with theremainder of this category consisting ofother online betting activity.

While football and, to a lesser extent,some other sports continue toexperience growth in LBOs, this growthhas slowed and British Racing remainsthe single biggest sports bettingproduct of bookmakers. Theestimated £570m gross winrepresented 41% of the total £1,375mOTC gross win in 2011 (calendar year).

Despite recent falls, the onshore Bettingindustry generated close to £4 billion ingross win from British Racing in the lastfive years, of which £375m was paidback to the sport through the Levy.

The British Betting industry has beenrelatively resilient to the worst of theeconomic downturn. While somedeclines in total onshore gross win didoccur in 2008-10, levels havesubsequently reached new records,exceeding £4 billion in 2012/13, despitethe movement of several hundreds ofmillions of sportsbook gross winoffshore.

The LevyRacing generates a significant part of itsrevenue from betting via the 10.75%(with some exceptions) statutory Levyon British betting operators’ gross winfrom British Racing. The majority ofLevy receipts are allocated to fundeither prize money or integrity services.

The Levy is a legislative product of the1960s – when LBOs were legalised inthe UK – and has been a regular sourceof disagreement between the Racing andBetting industries since. The 50thScheme (2010/11) required aDetermination by the Secretary of Statefor Culture, Media and Sport, who madeseveral amendments to the previousscheme, including an increase in theheadline rate to 10.75% from theprevious 10%.

Levy receipts have declined from the£100m+ average in the middle of thelast decade (the £115m yield in 2007/08is understood to have been inflated byexceptional losses of big staking


BETTING

02002/03

1,000

2,000

3,000

4,000

5,000

£m

Other bettingBritish Racing

British Racing’s share of gross win excluding FOBTs42%

FOBTs

2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13

0

50% 44% 42% 43% 44% 39% 37% 33% 32% 28%

2,0262,551

2,9533,135

3,2353,626

3,700

3,3003,523

3,6794,049

79.9

110.7105.6

99.3 99.2

115.3

93

75.3 59.5

74.9 73.9

25

0

50

75

100

125

Levy receipts

8581,153 1,119 1,076 1,077 1,230

1,010785 730 710 710

1,1681,148

1,434 1,508 1,4081,594

1,590

1,365 1,502 1,5361,793

250

400550 750

801 1,100 1,150 1,2921,433

1,546

1 2

£m

Figure 29: British Betting Industry Gross Win by type

Notes:1 British Racing gross win

includes betting exchangecommission, typically1.5-5% on winning bets forall years.

2 Includes all British basedonline sportsbook grosswin, a significant proportionof which is from non Britishcustomers, but excludesonline casino and poker.

3 2012/13 representestimates.

Source: HM Revenue andCustoms; Company/groupfinancial staements; Deloitteanalysis.



The onshoreBetting industrygenerated closeto £4 billion ingross win fromBritish Racing inthe last fiveyears, of which£375m waspaid to Racingvia the Levy.

telephone “high rollers”) to the current£75m for much the same reasons as themovement in gross win explained above.

The Levy does not apply to bets placedwith offshore betting operators even ifstaked by British-based punters. Giventhe migration of betting from retail toonline this has resulted in an increasingamount of “lost” Levy to British Racing.When Betfair moved offshore in 2011, itcontinued to pay amounts equivalent toits Levy liability to the Levy Board, andin 2012 entered into a landmark five-year agreement whereby the exchangewill pay 10.75% of gross win fromBritish punters betting on British Racingunderwritten by substantial guaranteedminimum payments back to the sport.

Patterns in betting onBritish RacingThe Racing and Betting industries areworking increasingly closely together todevelop a Fixture List that serves theneeds of punters amongst other,sometimes competing, demands,including the constraints of the horsepopulation as detailed in the Ownerssection. This has been evident for manyyears through the development of theLevy Board fixture criteria which setsout the slots where fixtures will becentrally funded and which is nowinformed by detailed market informationon the betting patterns of punters onBritish Racing. The following featuresare particularly pertinent:

• Excluding the impact of majorfestivals, betting levels are relativelysteady between Monday andThursday but then increaseprogressively from Friday to Saturday.A typical Saturday can generateclose to 50% more turnover than aweekday. Turnover drops markedlyon Sunday and is currently the worstperforming day in terms of racingbetting turnover. The number offixtures staged on each day reflectsthese factors, along with thepresence of terrestial TV coverage onSaturdays.

• The top fixtures generate the highestturnover and hence funding for thesport but, given the relatively smallnumber of these, the large majority ofracing betting turnover, and henceLevy, is generated from the core day-to-day fixtures.

• On average, evening fixturesgenerate 30-40% less turnover thanafternoon fixtures.

• There is a strong positive correlationbetween the number of runners in arace and the level of turnover,particularly at the lower end, whereturnover drops substantially for racesof fewer than six runners, and at theupper end where turnover for 16+runner races can be two to threetimes higher than more typical fieldsizes of 8-12.

Looking forwardBritish Racing continually investigates,trials and, when appropriate,implements new initiatives to deal withbetting-related issues. These includemeasures to increase field sizes, andthe staging of replacement fixtures atshort notice following abandonments.Such co-operation acts for the mutualbenefit of both industries.

At a strategic level, British Racingcontinues to seek a commercialreplacement to the Levy Board, withdiscussions between Racing, theBetting industry and Government on-going. The capture of the increasingamount of online, mostly offshore,betting turnover is central to thesediscussions and is critical in enablingthe Racing industry to formulate itsfinancial plans.


Broadcast coverage is a crucial‘shop window’ for the sport, as itallows access to a greaterproportion of the population thanthose attending race meetings. Italso plays a key role in supportingbetting levels on British Racing.

The way sports fans view sport isconstantly evolving, with a wide rangeof options now demanded as standard.Sport at its best needs to be“consumed” live and rights holders,broadcasters and media companieshave adapted to satisfy this demand.British Racing has been at the forefrontof these developments with the resultbeing its fans and punters can accesslive pictures from virtually whereverthey wish.

Traditional coverage in LBOs and onterrestrial television is complemented byextensive coverage through twodedicated digital racing channels –Racing UK and At The Races – and vialive online pictures accessed throughlaptops, tablets or mobile phones. Assuch, Racing has the most broadcasttime of any sport in Britain.

Terrestrial television coverageas cornerstoneUp until the end of 2012, the BBC andChannel 4 both covered British Racing,with Channel 4 holding the lion’s shareand the BBC an increasingly smallnumber of fixtures but whichencompassed some of the sport’s‘crown jewels’, notably the GrandNational and Royal Ascot.

Following a competitive bidding processBritish Racing took the decision to grantall its rights to Channel 4, making thechannel the sole terrestrial broadcastingpartner of the sport from 2013. Thenew deal represented a significantincrease in media rights payments, andalso confirmed Channel 4’scommitment to the sport – helped bybeing able to tell the whole Racing storyin any given year.

2013 will see 88 days coverage onChannel 4, representing over 300 hoursof live programming. Early analysis of2013 viewing figures indicate there aremore 16-34 year old, female and ABC1viewers than in previous years, bringingthe sport to new demographics.

Average terrestrial viewing figures in2012 for Channel 4 were 516,000, butwere significantly higher for the biggestmeetings – with over 0.9m watching theCheltenham Gold Cup and 1.6m theEpsom Derby on the BBC. In 2012 over16m people watched Channel 4 Racingat some point, and on average 1.2meach Saturday.

The Grand National is consistentlyplaced in the top 10 most viewedsports events in any given year.Channel 4’s first Grand National in 2013attracted a peak audience of 8.9 million(10.9m on BBC in 2012) – strongfigures when considering the usualmarked fall when coverage of a sportsevent moves from the BBC to any otherterrestrial channel.

Dedicated racing coverageBritish Racing’s two dedicated digitaltelevision channels have very differentbusiness models.

At The Races is a free satellite/cablechannel which has over 1.5m individualviewers per month from a potentialbase of 13m homes. It broadcasted livefrom 27 racecourses in Britain as wellas from Ireland and overseas.

Racing UK is a subscription-basedchannel and is part of the RacecourseMedia Group (‘RMG’), which in 2013 is

owned by 33 racecourses. The channelhad over 44,000 residential subscribersin 2012 (up from 37,000 in 2009). Manycommercial premises – particularlypubs – also regularly show Racing UKwith over 3,600 such subscribers (up

from 1,900 in 2008).

Betting on the goPunters can nowaccess live picturesof a specific race byplacing a bet with thevast majority of Britishfocused online betting

companies. The picturesare then viewed for free

through the Bet2View network

BROADCASTING

42

The way sportsfans view sportis constantlyevolving, with awide range ofoptions nowdemanded asstandard.

70mStreams


8.9mPeak Channel 4audience for 2013Grand National


operated by bothAt The Races andRMG on their PCor tablet devices.

Most bettingoperators alsooffer this servicefor betting viasmartphone. This isexperiencing rapid growth,and in total an estimated70m video streams across allplatforms were watched in2012 (up by over 30% comparedto 2011).

Growing revenuesWhile pursuing different businessmodels both media groups haveexperienced steady growth, enablingthem to pass on substantial revenue totheir respective racecourseowners/partners. Including £17m fromGBI Racing – a joint venture between AtThe Races and RMG which sellspictures of British Racing internationally(see the International comparisonssection for details) – the two groupsincreased revenue to £60m in 2012compared to only £33m in 2008.

£33m2008

Looking forwardChanges in technology and viewerbehaviour (including the advent of IPTV,4G, second screen/tablet viewing etc.)are likely to provide further opportunitiesto enhance racing fans’ viewingexperience, and in turn drive furtherrevenue growth for the broadcastersand their racing partners.

Racing is an extremely “data rich” sporthence an ideal candidate to benefitfrom such technological advancements.

£60m2012

Sponsorship represents animportant revenue stream for BritishRacing. A variety of sponsorshipopportunities exist within the sportincluding those for an individualrace, series of races, and forjockeys or racehorse owners.

While British Racing has markedly moresponsorship than the majority of otherracing nations, the absolute and/orrelative size of revenue earned is stilllower than that for many other majorBritish professional sports.

Racecourse sponsorship is the largestrevenue stream, totalling c.£31m in2012, an estimated 20% increase since2008. The large majority of this incomeis paid over directly in prize money, orindirectly by helping racecourses fundadditional executive contributions toprize money.

Long-standing racecourse sponsorshipdeals include the John Smith’s Cup atYork, which at 53 years represents thelongest running Flat race sponsorship,and the Hennessy Gold Cup atNewbury which celebrates its 56th yearof sponsorship in 2013 and is the oldestrace sponsorship in British Racing.

Series of races will often also have acommon sponsor, for examplePertemps sponsor a series of handicaphurdles which culminate in a Final at theCheltenham Festival. QIPCO is themost prominent series sponsor in Flatracing with the British ChampionsSeries. QIPCO also sponsors the 2,000and 1,000 Guineas, the Yorkshire Cup,the Sussex Stakes and all races at theseries finale, British Champions Day.

Other features of the racecoursesponsorship landscape are:

• Over 75% of all races were sponsoredin 2012 with the summer monthsattracting the higher proportion ofrace sponsorship – in August over80% of races were sponsored.

• As would be expected, the bettingindustry sponsors the largest numberof races due to the close ties it haswith Racing. 41% of sponsored racesin 2012 were sponsored by bettingfirms (up from 37% in 2005).

• Racecourses are increasingly lookingbeyond traditional race sponsorshipto agreements such as stand namingrights and building a range of officialpartners as is seen already in manyother sports. Arena RacingCompany’s four-year deal withHeineken, starting in 2013, underwhich the brewer will provide the 15ARC courses with a range of beersand ciders, is a recent example ofsuch an agreement.

• Investec have taken an innovativeapproach to their sponsorship of theDerby Festival at Epsom Downs. Aspart of their long term partnershipthrough to 2022, Investec has built itsprofile alongside the Derby viaspecific branding, PR strategies andsponsorship of Epsom’s Derby Trial.

While it is natural for betting companies tobe prominent, there are some industrieswhich are arguably underrepresented inRacing when compared to sponsorshipin other sports, such as financialservices and food and drink.


Rights holders greatly benefit fromsponsorship of their top events, and assuch will build a programme around thecore product for the mutual benefit ofthe sponsor and rights holderthemselves. Racing has some suchsponsors but it would benefit fromothers. There is a balance to be reachedbetween core Betting and internalindustry sponsorship, and attractingmore blue chip and aspirational brandsfrom other industries.

Owners’ sponsorshipIn the four year period to 2012, around£7.6m was received per annum asowners’ sponsorship, which hascontinued its steady growth from levelsof less than £3m in 1999.

Racehorse sponsorship enablesowners to register for the VAT Schemefor Racehorse Owners, which allowsowners to reclaim their VAT on racingrelated expenses. Some yards haveblanket sponsorship agreements inplace covering all horses, although asignificant number of privatesponsorship arrangements also exist.The ROA also helps to providesponsorship via the Satellite InformationServices Owner-Sponsorship Scheme.

SPONSORSHIP

Figure 31: Top race sponsors by economic sector – 2012

Economic Total prize money Races % of totalsector of sponsored races sponsored sponsored

(£m) races

Betting 31.8 3,018 41%Other 25.2 1,977 27%Bloodstock 6.9 642 9%Food & Drink 6.5 502 7%Finance 4.3 113 1%Private/Individual 2.4 436 6%Construction 1.7 235 3%Racing Authorities/bodies 1.5 70 1%Press/publication 1.2 138 2%Charity 0.4 137 2%Broadcaster 0.3 58 1%

TOTAL 82.2 7,326

Racecoursesare increasinglylooking beyondtraditional racesponsorship toagreementssuch as standnaming rightsand buildinga range ofofficial partners.

Jockeys£0.6m2%

Racecourses£31m 80%

Owners£7m 18%

Figure 30: Sponsorship values – 2012





Jockeys’ sponsorshipAs a key public face of Racing, jockeysare also commonly sponsored(generally via branding of clothing) butfor modest amounts. These totalled£450,000 across over 180 individualsponsorships in 2012 (less than £3,000per agreement and often involving‘payment in kind’). The PJA also has acentral sponsorship agreement in placewith Stobart Group, covering 500jockeys in 2012.

Looking forwardA key challenge faced by Racing togrow sponsorship revenues ismitigating against the inherentdisadvantage it faces of a relativelyshort period of time for the actualevent(s) taking place, particularly if asingle race, when compared to othersports. Racecourses and other bodiesare seeking to address this throughinitiatives such as:

• Greater aggregation of rights – asused in other sports, which providesboth more inventory for sponsors tobuild an activation programmebeyond the simple “badgingelement”. The QIPCO sponsorship ofthe British Champions Series is thehighest value example of this and isanticipated to grow further. Greateraggregation is used in other sports toseek to reduce ‘clutter’ of multiplebrands and remove low cost entrypoints which can drag down overallsponsorship value.

• More segmentation of sponsorshipopportunities to fit prospective local,national and international sponsors’desired target audiences.

• Increased coverage of Racingoutside of the core Racing mediawhich in turn should providesponsors with greater value.

• Ensuring new technology, includingCustomer Relationship Management,in the sports sponsorship market isfully harnessed.

Whilst the best Flat races in Britainhave for decades formed the traditional‘Pattern’, in 2011 the QIPCO BritishChampions Series was introduced toshowcase the top 35 races andprovide more of a narrative to theseason. The series is composed of fivecategories – Sprint, Mile, Middle

Distance, Long Distance andFillies & Mares – witheach categorycomprising the sevenhighest rated races.

Opening with the2,000 Guineas inMay andconcluding onBritish Champions

Day in October, theseries is staged at 10

racecourses and includesall the key meetings of the

British Flat season. Following initiativesin other sports to clearly signpost theirprime assets to attract more‘non-core’ fans, the creation of theseason-long series aims to drawfurther interest and investment inBritish Racing by clearly flagging thetop 35 races as a ‘premium product’,balanced against maintaining thetradition of the Flat racing season.

The subsequent generation of mediavalue via enhanced broadcastingarrangements and other promotionalactivities has helped create a nowvisibly distinguishable brand. The

second year of the series in 2012 sawboth a 14% annual increase incumulative race audience and a 17%rise in its total media value.

The series climaxes on QIPCO BritishChampions Day at Ascot in October,which showcases the last races in eachof the five British Champions Seriescategories and in 2013 offers total prizemoney of £3.35m, making it Britain’srichest raceday. In both 2011 and 2012it has been the best day’s Flat racinganywhere in the world – challengingthe Arc de Triomphe and Breeders’Cup as the end-of-season finale. Infact, based on World ThoroughbredRankings, the 2012 running of theQIPCO Champion Stakes was the bestrace in the world since 1997.

Looking forward, British ChampionsDay in 2013 has been strengthened bythe upgrade of the Fillies & MaresStakes to Group 1 which, togetherwith an increase in prize money of£350,000, should reinforce its growingstatus as the end-of-season finale.

The metrics shown illustrate thesuccess of the first two years of theseries, with marked increases acrossattendances, prize money andaudience viewing figures.

Further efforts will be focused at raisingthe profile of the ‘series’ element of theinitiative, creating an absorbing storyfor fans new and old to follow.

QIPCO BRITISH CHAMPIONS SERIES

2010 2011 2012 % change(pre BCS) 2010 to

2012Aggregate attendance at British Champions Series races (‘000s) 658 715 1 713 8%Attendance at British Champions Day (‘000s) 2 12.5 26.7 32.3 158%Total prize money for British Champions Series £11.1m £12.9m £13m 17%Total prize money for British Champions Day 3 £0.9m £3m £3m 233%Cumulative terrestrial TV audience for British Champions Series 4 20.3m 28.4m 32.3m 59%Peak viewing audience for British Champions Day n/a 1.4m 2.4m n/aNotes: 1 Total attendances at British racecourses in 2012 declined by 8%; 2 Champion Stakes fixture at Newmarket; 3 Includes prize moneyof equivalent races; 4 Excludes three additional races now staged on Champions Day.


British Racing is highly regarded onthe international stage and, helpedby standout performers such asFrankel, the highest rated horsesince world rankings began, Britainhas been more resilient to theglobal economic challenges thanmany other major racing nations.This section compares andcontrasts British Racing with itsmain international competitors byexamining the quality and quantityof racehorses, attendances, andbetting turnover. It then looks at thevarious – and varied – fundingmodels that exist worldwide.

Quality of racehorses and racesOf the 341 horses listed as the best inthe world in the 2012 WorldThoroughbred Rankings (WTR), 48(14%) were trained in Britain, includingstandout performer Frankel. This is asimilar proportion to 2008 when 15% ofhorses in the WTR were based inBritain, illustrating that – amongst otherthings – Britain remains a prestigiouslocation for owners to train their horses.

In the four years to 2012 some £82mwas won overseas by British trainedhorses, compared to £30m byoverseas horses (including Irish-trained)in Britain. Whilst this is in part due tohigher prize money levels abroad (seefunding model comments later) it doesdemonstrate that horses trained inBritain are extremely competitive on theinternational stage, as exemplified bythe fact that 16 overseas Group 1 raceswere won by British-trained (or beingtrained in Britain at time of racing)horses in 2012.

Attracting the bestBritain has continued to stage many ofthe world’s leading races by quality. Inthe increasingly global world of Flatracing, from 2010 to 2012 seven of the15 top Flat races were staged in Britainincluding the top-rated race in theworld, the QIPCO Champion Stakes(see Figure 32). The high standard of

these races is boosted by theappearance of many top overseashorses in Britain, with 16 of the 32British Group 1 races in 2012 won bysuch runners.

Britain also remains the global hub forJump racing, with over 220,000 peopleflocking to the Cheltenham Festivalevery year to witness the clash of thebest jumpers in Britain and Ireland, andthe Grand National meeting at Aintreewith its centrepiece as the world’sgreatest steeplechase.

The list of top Flat races demonstratesthe enduring appeal Britain has inattracting the owners of the world’sleading thoroughbreds to compete.Royal Ascot hosts runners not onlyfrom all over Europe but also muchfurther afield including Australia, theUSA, Hong Kong, Japan and SouthAfrica amongst others.

Part of this international pull is the‘aspirational’ status that racehorseownership commands in Britain, asseen by its high social standing andrelationship with the Monarchy – insharp contrast to some other racingnations. This image of British Racinghas been a factor in the growing

number of overseas investorspurchasing British (and Irish) bloodstockat British auction houses. In 2012,purchasers from over 50 territoriesbought foals or yearlings at Tattersalls.

Bet BritishBritish Racing’s reputation for thehighest quality and standards ofintegrity has enabled it to develop anextensive and growing globalbroadcasting reach to support bettingon its races. Britain now has a singlebody, GBI Racing, selling the pictures ofBritish Racing to global bettingoperators. Nearly 40 countries nowtake content from GBI Racing, rangingfrom established racing nations such asthe USA and Australia to moreemerging nations in terms ofhorseracing betting. One such exampleis Israel, who in a competitive tenderselected British Racing as the bestpartner as they opened up their sportsbetting market in 2013 beyond existingfootball and basketball offerings.

Broadcast coverage has helped drivelevels of international betting on BritishRacing which in 2012 saw over £386mof international tote turnover, up fromaround £200m in 2008.

INTERNATIONAL COMPARISONS

Ireland5%

USA26% Japan

10%

Britain14%

Australia15%

France8%

Hong Kong5%

Other 5%

Top 15 Flat races in the world 2010-2012

Champion, Ascot, BritainBreeders’ Cup Mile, Various, USAArc de Triomphe, Longchamp, FranceJacques Le Marois, Deauville, FranceBreeders’ Cup Classic, Various, USAQueen Elizabeth II, Ascot, BritainKing George VI & QE Diamond, Ascot, BritainSussex, Goodwood, BritainQueen Anne, Ascot, BritainJapan Cup, Tokyo, JapanPrince of Wales, Ascot, BritainInternational, York, BritainIrish Champion, Leopardstown, IrelandIspahan, Longchamp, FranceDubai Word Cup, Meydan, UAE

123 =3 =56789101112 =12 =12 =15

UAE4%

3%

Germany

3%Singapore

2% South Africa

Figure 32: Top international classified Flat thoroughbred racehorses by training location – 2012

Source: 2012 World Thoroughbred Rankings; IFHA; Deloitte analysis.

The list of topracesdemonstratesthe enduringappealBritain has inattracting theowners ofthe world’sleadingthoroughbredsto compete.

SECTION 6: INTERNATIONAL, RURAL, SPORTING AND LEISURE CONTEXT

Ireland

Japan

Britain

France

05,000

5,000

10,000

15,000

20,000

25,000

£m

Individual runners15,000 25,000 35,000 45,000 55,000 65,000 75,000 85,000

Australia

Shaded colour = 2007Solid colour = 2011/12

USA

Size of bubble equates to attendances

Betti

ngTu

rnov

er


Resisting the economic headwindsWhilst Britain has suffered considerablyfrom the difficult economic conditionssince 2008 the downturn has also beenfelt globally, with most Racing nationsbeing affected to some degree asillustrated by the following globalhorseracing statistics.

• Overall foal production decreased by13% in the three years from 2008-2011.

• Total betting turnover from 2003-2011, despite increasing nominally by1.9%, has actually decreased by1.2% when foreign exchangevariations are taken into account andafter considering inflation representsa marked real decrease.

• The relative economic decline of largeparts of Europe and Americacompared to other parts of the world

Figure 33: Leading horseracing nations – betting, horses and attendances

Note: For 2011/12 data 2012 have been used where available, 2011 where not. 2007 and 2011 betting turnover data shown at 2012exchange rates.

Source: IFHA, Racing Authorities; Deloitte analysis.

Britain appearsto haveweathered theeconomicdownturn betterthan most otherracing nations.


notably in Japan. There are particularchallenges faced by Britain asdiscussed in the Betting section ofthe report, but globally racing facescommon problems of intensecompetition from the ever expandingrange of other betting products.

• Attendances in Britain have also beenmaintained at around 2007 levelsunlike the other leading racingnations which have all experienceddeclines over the period.

Another factor which strengthensBritain’s position is that there is aninherent interest in racing as a sportamongst the general population, ratherthan just as a betting medium. Thisbroader interest base, which covers allsocial classes and geographic areas,will have helped British Racing provemore resilient to the economic strain ofthe last four years.

INTERNATIONAL COMPARISONS

British Racing’s alternativefundingBritish Racing’s resilience is perhapsperversely aided by the fact that, due tothe lower proportion of betting profitsreturned to racing in Britain comparedto other nations, it is not as dependenton betting related income, forcing amore diverse revenue mix (seeRacecourses section).

Other countries which have oftenlucrative pool betting monopolies inplace, whilst receiving a fairerproportion of betting revenue, have nothad the same imperative to developother income sources, so struggle toadjust when this dominant revenuestream experiences declines.

Putting that aside, the much lowerlevels of funding from betting receivedby British Racing are stark. The racingindustries in those countries with a poolbetting monopoly typically receive6-10% of betting turnover on racing.

is mirrored in the global racingindustry. The proportion of totalthoroughbred horse numbers, prizemoney and betting turnover have alldecreased in Europe and Americaand increased in Asia between 2007to 2011.

Figure 33 shows how British Racingcompares on the international stage bythree key metrics – betting turnover, thenumber of different runners andracecourse attendances. Britain doesappear to have weathered theeconomic downturn better than mostother racing nations:

• The number of different runners hasremained at a similar level to 2007,unlike the USA and Ireland whichhave both seen sizeable decreases.

• Betting turnover on Racing in Britainhas decreased from 2007 but this isalso the case in the USA, Ireland and

There is aninherent interestin racing inBritain as asport amongstthe generalpopulation,rather than justas a bettingmedium.



“Just as Frankel has set thestandard for overall equineexcellence, so Black Caviar hasset the new benchmark for equinedistaff excellence.”

IFHA World Rankings Supervisory Committee

Royal Ascot regularly sees a number ofnon-European challengers competingin its sprints. Since the Global SprintChallenge began in 2005, 45 horsesfrom outside Europe have competed

in the two Group 1 RoyalAscot sprints and therehave now been fourAustralian winnersand two fromHong Kong.

However, thefervoursurrounding theAustralian challenge

in 2012 exceededanything seen before

due to the participation of“the Wonder from Down

Under”, Black Caviar. At the timeunbeaten in 21 races, Black Caviar’sfan base had reached globalproportions and the internationalracing world eagerly anticipated herfirst run outside Australia at the mostprestigious meeting in the world.

Running in the Group 1 DiamondJubilee Stakes on the Saturday of theRoyal meeting, large crowds wereanticipated due to her travellingsupport. Whilst the Saturday of RoyalAscot usually sells out its 77,000capacity, Ascot officials stated thatmore than 5,000 tickets had been soldto customers with Australianaddresses, and this would be perhapsdoubled by ex-pat Australians

attending. Despite the race takingplace at 1.00am in Black Caviar’s homecity of Melbourne it was still shown ona big screen in Federation Square asthe climax to a civic celebration, andpictures were also broadcast live onAmerica’s TVG racing channel. Thepresence of Black Caviar played a keyrole in helping to boost the overallAustralian Tote betting turnover on themeeting by over £2.6m.

The ‘supermare’ managed to delighther legions of fans and won by thenarrow margin of a head. Her run atRoyal Ascot was to be her onlyracecourse appearance outside ofAustralia.

Black Caviar’s offspring are also likelyto be record breakers at the salesbased on her exemplary racing career.Indeed, her half-brother was sold inApril 2013 for an Australian yearlingrecord of £3.25m.

Whilst is unlikely we will see the like ofBlack Caviar again, the draw of BritishRacing means global racing superstarswill continue to regularly be seen atBritish racecourses.

FACTFILE: BLACK CAVIAR (AUS)

BLACK CAVIAR

25/25(15 Group 1s)Races won/run

£4,652,092Total prize money won in Australia and Britain

Est 10,000Australian attendeesfor her appearance atRoyal Ascot 2012

By illustration the PMU in France, whichalong with Ireland is arguably Britain’sbiggest competitor, returned over£760m to racing (including trotting) in2011, over 9% of the £7.9 billionbetting turnover on French racing.Even those countries with a morediverse betting market return a greaterproportion of betting turnover to thesport. In Australia, which has a mix ofestablished pool betting and growingfixed odds betting (mainly online),racing received more than £340m frombetting operators in 2011 – c.4% ofturnover.

In contrast, in 2012 British Racingreceived significantly less than 2% ofonshore betting turnover on BritishRacing through those mechanismsdirectly related to gross win, being theLevy and commission from on-courseTote betting. Even allowing for themedia rights payments generatedthrough different markets (seeRacecourses section) the return toRacing is far lower than overseas.

Looking forwardHealthy competition between the majorracing nations for the best horses andlargest owners already takes place, withBritain more than holding its own.

The establishment of QIPCO BritishChampions Day as an end of Flatseason finale to challenge the Arcmeeting in Paris and the Breeders Cupin the USA is a continuation of thattrend. At the same time there isincreasing co-operation between racingnations, most notably in enabling andpromoting greater betting on eachother’s product.

The potential emergence of a significantRacing industry in mainland China willsee further competition betweenestablished nations as they seek to helpthe relevant authorities to develop theindustry there. The reputation of BritishRacing should stand it in good stead toplay a key role.


Due to the significant landrequirements and specialistfacilities required to train or breedracehorses Racing has alwaysbeen a rurally-based industry atheart, and as such plays animportant role in the ruraleconomy and communities.

Racing is particularly important to areaswhere a high proportion of itsparticipants are directly employed in thesport such as the training centres ofNewmarket, Lambourn and Middleham,but, with trainers and breeders spreadacross the whole of the British Isles,most rural areas benefit from theindustry to some extent. Racing’s coreindustry employs 17,400 FTEs and themajority of these will be based in ruralareas. The only notable exceptions areRacing’s governance, administrators,media organisations and the moreurban-based racecourses.

Rural businesses, mainly small andmedium-sized enterprises, continue tomake a substantial contribution to theBritish economy. Over the past decadethe population of rural areas in Englandactually grew 10% faster than theirurban counterparts.

The table below compares employmentpatterns in the core Racing sector withthe wider Agriculture, Forestry andFishing industry sector (that mostclosely aligned to Racing in theStandard Industrial Classifications).

Figure 34: Agriculture, Forestry andFishing industry sector comparison– 2012

Total Full Partjobs time time

Agriculture, forestry 375,000 80% 20%and fishing

Core racing sector 1 17,400 77% 23%

Note:1 FTE – Includes all full time, part time and raceday roles.

Source: Office for National Statistics, UK Commission forEmployment & Skills.

The broader equine industryAs is the case for the Racing sector, thelarger equine industry is predominantlyrurally located and fulfills a vital role inthe rural economy in terms ofemployment and revenue generation.The National Equestrian Survey, mostrecently carried out by the BritishEquestrian Trade Association in 2011,found that, like the majority of industriesin Britain, the equestrian industry hassuffered as a result of the economicdownturn. The survey found that thenumber of people riding had declinedfrom the previous survey carried out in2006 mostly due to expense, withanother significant reason being theloss of access to a horse. Asconsumers’ disposable income levelshave decreased during the period ofrecession people have been less ableto afford to ride or keep a horse as aresult. This has been exacerbated bythe rising costs of the upkeep and careof horses, largely due to increases inraw material prices, notably feed.

Figure 35: Horse Owners and Riders

2006 2011

Number of horses 1.4m 1.0mNumber of owners 0.7m 0.5mPopulation that rides 2.1m 1.6monce a monthPopulation that rides 2.2m 1.9mat least once a year

Total riders p.a. 4.3m 3.5m

Land dedicated to horses 0.5m ha n/a

Direct expenditure on £2.6bn £2.8bnupkeep and care of horses

Equestrian sector gross £4.3bn £3.8bnoutput (excluding racing andmajor equestrian events)

Source: British Equestrian Trade AssociationNational Equestrian Survey.

There are obvious parallels between theRacing and equestrian industries, withthe numbers of horses in training andowners also declining over the sameperiod, albeit not as significantly as thebroader equestrian sector. Perhaps themost obvious areas of overlap in ruralareas between the equestrian andRacing industries occur via themanufacturers and retailers whichprovide supplies to trainers, breedingestablishments and riders (both jockeysand work riders). A wide variety of itemssuch as feed and nutrition, bedding,riding and safety equipment will beused in both the Racing and equestriansectors so an increase in costs willnaturally have repercussions for both.

Point-to-point racingPoint-to-point racing provides animportant link between the grass rootsand professional Jump racing. Point-to-point meetings, and the amateurjockeys, trainers and permit holders thatcompete at them, are very much rurallybased, often affiliated to local hunts, andthe amateur sport plays a significant rolein these communities. Running fromNovember to June, Point-to-pointdelivers economic benefits to rural areasand also acts as a ‘feeder system’ tothe professional racing industry withmany of the leading professional jockeysand some horses having graduatedfrom the Point-to point ranks.

RURAL CONTEXT

Point-to-pointracing providesan importantlink betweenthe grass rootsandprofessionalJump racing.



Figure 36: Point-to-point 2011/12season key statistics

Annual racedays 189 of 209scheduled

Hunter certificates registered 3,377

Riders certificates issued 722

Number of courses 109

Total raceday attendance 630,000

Source: BHA.

Whilst there has been a modest declinein the number of riders and horsessince 2008, mirroring the trends in thewider equestrian sector, the enduringpopularity of Point-to-point isdemonstrated by the number of peopleattending racedays which has remainedat a similar level to four years ago.

Whilst not exclusively a ruralphenomenon, Pony racing has alsodeveloped in recent years toaccompany Point-to-point as animportant source of new riding talent.46 races took place on Britishracecourses in 2011 and a number ofPony racing graduates are now wellestablished on the professional circuitincluding Sam Twiston-Davies andRhys Flint.

The welfare of its equine participantscontinues to be an utmost priority forall stakeholders in British racing.This message has been reinforced by‘The Horse Comes First’ campaign,funded by the DCMS BritishHorseracing Grant Scheme, in whichthe BHA, Racecourse Association,ROA, PJA, NTF and The JockeyClub have all collaborated to highlightthe high standards of equine welfarein the sport and to improveunderstanding of the care given toracehorses in Britain before, duringand after their racing careers.

Racing in Britain is among the world’sbest regulated animal activities and thelevel of care and quality of life of the20,000+ horses in training is among

the highest for any domesticatedanimal. The welfarestandards within BritishRacing are setsignificantly higher thanexisting national animalwelfare legislation.

British Racingcontinues to play a

leading role in theadvancement of equine

veterinary research andtechniques which brings benefits for

the wider horse population in Britain,not just racehorses. A key role isplayed by the Levy Board VeterinaryAdvisory Committee, which advises onmatters related to the advancement ofveterinary science and education byrecommending investment in priorityareas, identified in consultation withthe racing and breeding industries.The Levy Board awards funding grantsfor equine veterinary research projectsbased on these recommendations.In the last decade the Levy Board hasinvested over £20m in veterinaryactivities, including research andeducation.

Racecourses also contribute significantresources to horse welfare, and in thelast four years it is estimated that over£14m of investment has been made inthis area. An example of this has beenat Aintree Racecourse, which since2011 has spent c.£1m onimprovements to the welfare provisionsof horses. Working in conjunction withthe BHA measures put in place for the2012 renewal included enhancedwatering facilities, improvements towash-down and unsaddling areas anda number of other procedural changes.These were complemented by furthermodifications to the Grand Nationalfences at the 2013 meeting, whichhelped contribute to there being nosignificant horse or jockey injuries inthe 2013 race. The work undertaken tothe racing surface at Musselburgh,Haydock, Carlisle and York (asmentioned in the Capital Investmentsection) also represents notableexpenditure on horse welfare.

Due to both advances in veterinarycare and welfare measures taken byracecourses, over the last 15 years theequine fatality rate in British Racing hasfallen to just 0.2% of all runners.

Nor does the end of a horse’s racingcareer mean an end to an active andproductive life. Over 7,500 formerracehorses are currently registered asbeing active in other equine disciplinesincluding polo and eventing, as well allthose retired to exercise and hacking.Dressage is another post-racing careerfor a number of retired racehorses –two high profile competitors in recentyears being 2012 Grand Nationalwinner Neptune Collonges and thelegendary Steeplechaser Kauto Star.Organisations such as Retraining ofRacehorses play a part in helping toprovide facilities, support and advicefor the care, retraining and rehoming offormer racehorses.

HORSE WELFARE


The British appetite for sport, inabsolute terms and relative to itspopulation size, remainsunmatched anywhere in the world.

Boosted by the 11m people whoattended the London 2012 Olympicand Paralympic Games, an estimated75m people attended paid sportingevents in the UK in 2012 in what was agolden year for sport.

Racing continues to occupy a keyposition in the British sportinglandscape, and in this section wecompare the sport to its majorcompetitors in terms of attendees,revenues and employee numbers.

AttendancesRacing is Britain’s second most popularsport in terms of attendees behindfootball, as shown in Figure 37.

Total attendances at Racing fixtures in2012 were 5.6m – down from 6.1m in2011, largely due to poor weather, butstill almost a million more than Britain’sthird most popular spectator sport,Rugby Union. This gap has closedsince 2008, with Rugby Union’s totalattendances increasing by an estimated900,000 (24%) to 4.7m, boosted by theestablishment of showcase fixtures atTwickenham and Wembley in theannual domestic club calendar.

Racing’s high total attendances weredriven by the number of fixtures.In 2012, the total of 1,369 fixturesgenerated an average attendance perfixture of 4,077. This compares to RugbyUnion’s average attendance per fixtureof c.11,000 (from around 420 fixtures).

In common with Racing, cricket sufferedbadly from Britain’s second-wettestsummer on record, with estimatedattendances in 2012 of 1.8m, downfrom 2.2m in 2008. Domestic cricket inBritain benefitted greatly from thedevelopment of Twenty20 with itsmixture of spectator-friendly timings,exciting action and other entertainment.

This combination of top class sport withother leisure attractions, is also seen inBritish Racing through initiatives such asmusic nights.

The most prestigious events in theRacing calendar are among the mostpopular sporting events in Britain,making up four of the top ten highestattendances in 2012 (excluding theLondon Olympic and ParalympicGames), as shown in Figure 38. TheEpsom Derby is Britain’s best attendedsingle sporting day.

The stellar success of the ATP WorldTour Finals at the O2 Arena, which wasfirst staged in London in 2009, is anexample of how a competition boastinga sport’s elite players – backed byinnovative marketing and expertpresentation – is capable of appealingbeyond a sport’s core market. Thereare certainly parallels with QIPCOBritish Champions Day at Ascot asBritish Racing looks to build on thesuccessful first two years of the newfinale to the Flat season.

RevenuesRacing remains the second-highestrevenue-generating sport in Britain,behind football. The fact thatracecourse revenues have onlymarginally increased to £386m in 2012,for the reasons previously discussed inthe Racecourses section, hascontributed to Rugby Union narrowingthe gap. That sport’s £334m revenuemeans it is now the clear third biggestrevenue generating sport in the country.Football remains the country’s highestrevenue-generating sport, with totalrevenues of c.£3.5 billion in 2012. Thisis 19% up on total revenue of around£2.9 billion four years ago.

New broadcasting deals mean PremierLeague revenues alone look set to passthe £3 billion mark in the 2013/14season, highlighting football’s continueddominance over the British sportinglandscape. However, the British public’sappetite for sports other than football,

as demonstrated by the attendancefigures highlighted above, illustratehow football’s appeal need not eclipseother sports.

The last five years have seen limitedgrowth in football clubs’ matchdayrevenue, as clubs have recognised thepressure being put on fans’ finances byhigher ticket prices. This mirrors BritishRacing’s experience as racecourseshave resisted price increases despitecost inflation in the economy.

Rugby Union revenues have grown byan estimated £52m (18%) since 2008,with growth through all three revenuesources. Event day (£123m) andcommercial revenues (£122m)contributed similar proportions of totalrevenue in 2011/12, at 37% each.Investment in stadium facilities hashelped drive attendances, increaseticket yields, and develop non-

RACING’S POSITIONWITHINTHE SPORTS MARKET

Rank Sport Event (duration in days) Aggregateattendance

1 Tennis Wimbledon (13) 485,0002 Motorsport Formula One (Silverstone) (3) 297,0003 Racing Royal Ascot (5) 280,0004 Tennis ATP World Tour Finals (8) 263,0005 Racing Cheltenham Festival (4) 237,0006 Golf The Open (4) 181,0007 Equestrian Burghley Horse Trials (4) 178,0008 Racing Epsom Derby (2) 160,0009 Racing Aintree Grand National (3) 150,00010 Motorsport MotoGP at Silverstone (3) 146,000

Figure 38: Top ten attended sporting events inBritain in 2012

Figure 37: Total attendances in Britain for selectedsports in 2012

Note A: Includes an estimated100,000 attendees on the Hillwho pay limited admissionfees.


Note: Figures in brackets indicate 2008 equivalents. Source: BHA; Deloitte analysis.

Olympic &Paralympic

Games11m (n/a)

Racing5.6m

(5.7m)

Rugby Union4.7m

(3.8m)

Rugby League2.3m(1.9m)

Cricket1.8m(2.2m)

Other7.6m(n/a)

Football42.2m(39m)



matchday opportunities which havebeen key in underpinning growthacross these two revenue streams.As a relatively young professional sport,Rugby Union continues to increase thequality and sophistication of its offeringto supporters, broadcast andcommercial partners.

Cricket revenues have grown to £200min 2012 from £166m in 2007 largelydriven by a substantial uplift inbroadcasting revenues. Event dayrevenues were only marginally up, withthe wet 2012 summer having a negativeimpact – mirroring Racing’s experience.

It is estimated that Rugby Leaguerevenues have grown by c. £20m (33%)over the last four years, due largely to a£14m (117%) increase in broadcastrevenues, from £12m to £26m. RugbyLeague works extremely closely with itsbroadcast partners in scheduling andpresentation matters, which has greatlycontributed to creating value for allparties. British Racing’s new five yearexclusive broadcast partnership withChannel 4 is also an example of suchcooperation.

The substantial increases in mediarevenue of British Racing now meanthat, together with Rugby Union andcricket, it generates higher mediarevenue that any sport in Britain withthe obvious exception of football.

The analysis in Figure 39 furtherdemonstrates how British sport hasproved remarkably resilient to the worstof the economic downturn over the lastfive years, with all sports enjoying atleast some growth. Sport’s customersare typically passionate about theirchosen sports and hence will oftenmake sacrifices in other areas of theirlives before giving up their season ticket,satellite TV subscription and otherassociations. Racing’s revenue growthhas been markedly lower than thecomparative sports but that is in largepart due to the steep decline in Levyreceipts for a variety of reasons, manyunconnected to economic pressures.

While Racing has seen some recentgrowth in sponsorship and othercommercial revenues, it still lags behindother sports in both the relative andabsolute amount it generates from thisarea. The sports sponsorship market ischallenging, with much of the value andgrowth focussed on a few premiumproperties, often with global appeal.Nonetheless, there are opportunities forall sports, including Racing, to growsuch revenues by effective targetingand adopting a partnership approachwith sponsors.

The ability of a sport to grow, or evenmaintain their event day revenues, isdependent on having venues which aresafe and attractive places for sportsfans to visit. Over the last ten yearsBritish Racing, particularly itsracecourses, have seen levels ofinvestment in facilities and infrastructurerivalled only by football within Britishsport. All successful sports haveinvested, and will continue to invest,large sums of money in their facilities –whether the c.£200m that has been

invested to date in Test Match venuessince 2000, or the addition of a roofover show courts at Wimbledon. Failureto maintain the quality of a sport’svenues risks losing spectators andground to rival sports. As a warning ofthe dangers of this, Italian football’srecent steep falls in attendance arelargely due to the poorly maintainedand out-dated stadia even many of theirtop clubs play in.

EmployeesIn 2012, Racing employed c.13,000full-time employees, with a further4,000 FTE posts when including part-time and raceday employees. This issecond only to football in Britain, whoseclubs and administrative bodies employapproximately 21,000 full-time staff.Racing’s estimated FTE total issubstantially greater than Rugby Union(2,800), Cricket (1,700), and RugbyLeague (1,300).

Looking aheadRacing has maintained its positionbehind football as the nation’s secondmost popular sport, but the gapbetween Racing and its closestchallengers has closed in the last fouryears. Rugby Union in particular hasenjoyed an increase in popularity, interms of attendances and ability toattract corporate sponsorship.

Like all sports in Britain, Racing mustcontinue to find new ways to deepenits engagement with its currentcustomers, and also attract newentrants.

Showcasing the sport’s top assetsthrough initiatives such as the QIPCOBritish Champions Series, bringing newracegoers to the sport through racemeetings with entertainment to supportthe core racing, and promoting theimage of the sport beyond the racingand even sports media all have animportant part to play.

Figure 39: Revenue breakdowns for selected sportsin Britain – 2012

Note: To aid comparability, racecourse revenues do not gross cateringrevenues and exclude entry fees and will therefore differ from the figuresshown in Racecourses section. Football, Rugby Union, Cricket and RugbyLeague revenues include income from international matches.1. 2007 figures.


0

1,000

2,000

3,000

4,000

£m

Football

100

0

200

300

400

£m

Racing

3,479

RugbyUnion

Cricket RugbyLeague

386

334

200

80

976

1,467

1,036

138

88

64

96

123

89

12285

60

5533

2226

2,900 376 282 166 60

2008 figures (total revenue)

Commercial Broadcast Event day Betting

(1)

Over the lastten years BritishRacing,particularly itsracecourses,have seenlevels ofinvestment infacilities andinfrastructurerivalled only byfootball withinBritish sport.


The pure sporting side ofhorseracing is at the heart of theRacing industry, the driver of horseownership and breeding, and themain reason many people goracing. However, a day “at theraces” combines many of thenation’s favourite leisure activities– which is both a strength but alsothe source of evolving andwidespread competition from otherleisure offerings.

This section first positions Racingagainst other relevant leisure activities. Itthen sets out how the sport is the driverfor significant off-course expenditure inthe leisure and transport industries.

Size and diversity of theleisure marketLeisure expenditure is discretionary andnaturally becomes more vulnerableduring periods of economic decline anduncertainty. Following two years ofdecline in 2008 and 2009, the UKleisure market is generally onlyconsidered to have recovered to 2007levels of expenditure in 2012, and eventhen this is based on current prices –meaning it has experienced a sizeable

real contraction. The fact thatexpenditure on Racing has increasedbetween 2008 and 2012 illustrates thatit has withstood the economicconstraints better than many otherparts of the leisure industry.

Figure 40 below shows the relativepopularity of various leisure activities inBritain in 2012, and highlights how manyof them are regularly combined withRacing – whether directly at theracecourse or as part of a wider day out.

‘Intertainment’ (leisure time at home)has gained popularity in recent years asconsumers are increasingly demandingvalue for money for their leisure spend.

The current economic climateencourages consumers to be price andvalue conscious but a sole reliance onprice to drive/protect demand isunsustainable in the medium term.

Online surveys into racegoer behavioursand preferences illustrate this point, aswhen asked what prevents them fromgoing racing more often typicallyaround a third cite the cost of goingracing, but lack of available leisure timeis consistently the most quoted reason

(usually over 40%). Around a quarter ofracegoers say they go racing as oftenas they wish.

There are other levers that leisureoperators must employ to competesuccessfully in the market. Arguably thetwo most important are investment innew facilities and a focus on improvingcustomer service levels. It is nocoincidence that racecourses havefocused on both in the last decade.

Initiatives include:

• VisitEngland Quality AssuredRacecourse Scheme – 54racecourses in England and Waleshave been accredited by VisitEnglandwith an assessment team providingvisitor experience feedback. Thescheme is in its third year and is afirst for sports venues in England andWales. Racecourses in Scotland arecovered by a similar VisitScotlandscheme.

• The RCA Showcase and Awards– established by the RacecourseAssociation to recognise and rewardhow racecourses are innovating toimprove the customer experience.

• Great British Racing Advisory Panel– the establishment of a panel ofsenior operators from consumerbrands and wider media who will actas an independent forum to discussand recommend innovativeopportunities for British Racing.

RACING’S POSITION INTHE LEISURE INDUSTRY

Figure 40: Activities performed in free time

20

Applicable to racing

Watching TV

0 40 60 80 100

90

Time with friends/family 87

Listening to music 79

Shopping 76

Eating in restaurants 73

Read 70

Days out 68

Internet/emailing 66

Sport/exercise 55

Go to cinema 54

Pubs/bars/clubs 51

Gardening 50

Theatre/concerts 46

DIY 42

Museums/galleries 37

% of respondents

28Computer games

The fact thatexpenditure onRacing hasincreasedbetween 2008and 2012illustrates that ithas withstoodthe economicconditionsbetter thanmany otherparts of theleisure industry.

Note: Dark green shading hasbeen used to highlight leisureactivities that could becombined with Racing.Percentages do not sum to 100per cent as respondents couldgive more than one answer.

Source: Taking Part: TheNational Survey of Culture,Leisure and Sport, Departmentfor Culture, Media and Sport,2011/12.



• Making it simpler for new racegoersto understand the sport’s terminologythrough a variety of central andindividual racecourse actions.These include improved signage andconsistent branding to explain thedifferent enclosures at racecourses,and distribution of literature toexplain the sport’s terminology, bothof which can be confusing tonewcomers to Racing.

• Introduction of customer loyaltyschemes, notably the Jockey Club’sRewards4Racing, under whichcustomers earn points from variousRacing activities/spending which areredeemed against Racing productsor with the scheme’s commercialpartners.

These initiatives are in addition to theracecourses’ existing focus oncombining racing with otherentertainment as discussed in theAttendances section.

Off-course expenditureGiven that racegoers often combineother activities with going racing thesport generates substantial additionalexpenditure, comparatively more thanmany other sports, in part as manyracegoers go racing relativelyinfrequently, so may make a majoroccasion of the day.

The areas surrounding racecoursesbenefit from a large proportion of thissecondary raceday expenditure, whichincludes transport to and from themeeting, accommodation, food anddrink and entertainment for thosestaying in the area overnight. For manyleisure-focussed businesses theirtakings on racedays are amongst thehighest in the year.

The level of off-course expenditurenaturally varies across the fixture list,with Racing’s flagship festivalsattracting the largest crowds andgenerating the greatest expenditure.

A substantial proportion of thisexpenditure is derived from major multi-day events such as the CheltenhamFestival (aided by an estimated 5,000+Irish racegoers per day) to a very lowproportion of racegoers for a single day

midweek fixture. It has been estimatedthat, on average, one in 20 racegoersinclude an overnight stay (althoughmuch lower for many fixtures) and in2012 these racegoers incurred totalexpenditure of £47m onaccommodation, transport and foodand drink.

The remaining racegoers are daytrippers and are estimated to haveincurred expenditure of £167m ontransport, off-course food and drinksand other spending – an average of£31 per attendee (again with verysignificant variation).

British Racing benefits from the mediacoverage of extensive specialist racingpapers, primarily the Racing Post, theonly daily specialist sports paper in theUK. In 2012 the average dailycirculation of the Racing Post was over47,000, and significantly more on aSaturday. In common with virtually allnewspapers circulation has fallen inrecent years, however the Racing Posthas developed an extensive range ofdigital services as customers migrateonline. Once spending on other racingpublications is added it is estimatedaround £35m was spent on Racingpapers in 2012.

Once racegoers’ off-course expenditureis added to trade paper spending, totaloff-course expenditure is estimated tohave been c.£250m.

Figure 41: Estimated off-courseexpenditure in Britain – 2012

Accommodation and entertainment

0Overnightvisitors

50

100

150

200

Travel Trade paper sales

Day visitors Trade papersales

47

167

35

35

99

68

Given racegoersoften combineother activitieswith goingracing the sportgeneratessubstantialadditionalexpenditure,comparativelymore that manyother sports.



INTRODUCTION AND SCOPE OF OUR REVIEWThe BHA commissioned Deloitte LLP (“Deloitte”) toproduce this Report, which has been prepared inaccordance with the contract dated 16 November2012. The Report sets out the results of researchand analysis of the Economic Impact of the BritishRacing Industry, and sets this in the context of othersports, leisure activities and the rural economy inBritain and major overseas racing nations.

USE OF THIS REPORT AND LEGALRESPONSIBILITYSome of the matters discussed in this Report areby their nature technical. The intended recipient ofthe report, the BHA, is familiar with the issues,facts and other matters addressed and the Reportwas written with that in mind.

This Report is prepared for the sole and confidentialuse of the BHA and for the purposes set out in theterms of engagement. In preparing this report ouronly responsibility and duty of care is to the BHA.We did not, and do not by consenting to publicationof this Report, assume or accept or owe anyresponsibility or duty of care to any other person.

The BHA has asked for our consent to making thisreport publicly available by posting it on BHA or otherRacing websites, and other appropriate distributionmethods as agreed with Deloitte.We have agreed toprovide such consent on the following conditions:

· This report may not be suitable for the use ofany person other than the BHA. Accordingly,publication of this report to persons other thanthe BHA is for information purposes only andno person other than the BHA should place anyreliance on this Report; and

· We do not assume or accept or owe anyresponsibility or duty of care to any personother than the BHA. Accordingly, any personother than the BHA who, contrary to the above,chooses to rely on this Report, does so at theirown risk and we will not be responsible for anylosses of any such person caused by theirreliance on this Report.

ECONOMIC MODEL METHODOLOGYThe methodology applied can be simplified intothree broad stages described below:

1. Collation of direct and indirect expenditure datafrom available information.

2. Translation of expenditure data into expenditureby industry type to facilitate modelling.

3. Development and use of an input-output modelto estimate the wider effects of the industry onthe economy as a whole.

1. Collating industry expenditureThe methodology used in estimating direct andindirect expenditure within the industry isdiscussed in the main body of the document.

The collation of this information serves two purposes.First and foremost as an end in itself, but also as theinput to the model which generates estimates ofmultiplier impact activity in the rest of the economy.An example of this is the need to source servicesthat are not related to the core industry, such as atrainer using the services of an accountant.

The method used to assess this type of knock-onbenefit is outlined below.

2. Translating expenditureThe horseracing industry does not neatlycorrespond directly to one of the 108industry/product groups used for modellingpurposes as defined by the Office for NationalStatistics in relevant 2005 Input-Output Analyses(“ONS”). For this reason it is necessary to relateindustry expenditure to the appropriateindustry/product.

This means that the direct expenditure is treatedas a sporting activity, which comes underindustry/product group 121 – Recreational,Cultural and Sporting Activities.

Indirect off-site expenditure such as on retail andtravel is distributed accordingly to the relevantindustry/product group.

3. ModellingThe multiplier methodology described below isused extensively by Deloitte in assessing both theimpact of a given sector or industry on the nationaleconomy or the economic impact of newdevelopments in a given location.

The model is based upon the 2005 Domestic Useinput-output table for the United Kingdom,produced by the ONS.

Specifically the model is based upon the publiclyavailable Input-Output Analyses, which have beenmodified to differentiate between types of impactthat are not published by the ONS. The modeldetails what proportion of inputs each industrialsector sources from other sectors when producingan extra unit of output.

The principle behind a multiplier effect is that achange in economic activity will have knock-oneffects for the rest of the economy. These effects canbe assumed to take place through two channels:

· Supply-chain linkages (Business to Businesseffects) – if industry demand increases it canbe assumed that production will increase.This expansion requires more raw materialsand associated services from other industries.In turn these other industries may need toincrease production to meet the demand andthey too will increase levels of economicactivity (the indirect effect); and

· Consumer or wage effects – an increase in anorganisation’s activity level will mean a higherwage bill. This money will be spent partly in theeconomy. This rise in consumer demand requiresincreasing production of goods and services,hence increasing expenditure (the induced effect).

The multipliers used in this Report, give both theindirect and induced effects of expenditure in thehorseracing industry.

The indirect and induced effects are estimated byType I and Type II multipliers in the model. Type Imultiplier data allows us to calculate the indirecteffects as a result of the initial expenditure. Type IImultipliers enable us to calculate the indirect andinduced effects generated by the initialexpenditure. By taking the differences betweenType I and Type II effects, it is possible to isolatethe consumer spending effects of the expenditure.

It should be pointed out that in interpreting theresults from the model, the hypothetical removal ofthe horseracing industry from the UK economywould not result in a drop in national economicoutput of the magnitude that the industry currentlycontributes. This is simply because businesses andpeople would spend their money elsewhere.

The model is intended to show the extent to whichthe industry is linked with the rest of the economyand what the contribution of the industry currentlyis, rather than suggesting what would happen tothe UK economy if the industry did not exist.

CONSULTATIONSWe have consulted with individuals from over 30organisations from every sector, including:

· Racecourses – Racecourse Association, ArenaRacing Company, Jockey Club Racecourses,Ascot, Goodwood, Newbury, York, Salisbury,Ludlow.

· Other racing organisations – Great BritishRacing, Jockey Club, Levy Board, Weatherbys,Professional Jockeys Association;

· Ownership and training – Racehorse OwnersAssociation, National Association of StableStaff, National Trainers Federation, Jockey ClubEstates;

· Breeding – Tattersalls, Thoroughbred BreedersAssociation;

· Betting industry – Association of BritishBookmakers, Betfair;

· Broadcasting – At The Races, Channel 4,Racecourse Media Group, Racing Post, SatelliteInformation Services;

· International – Various international horseracinggoverning authorities and IFHA; and

· Other – British Equine Trade Association.

OUR RELIANCE ON INFORMATIONIn preparing this Report, we have used informationand data extracted from various published surveys,which we assume to be reliable, to obtain theinputs into the economic model which we used toestimate the economic impact of the RacingIndustry. In addition, we have used information anddata which have been provided to us by a widevariety of organisations including the BHA, otherBritish racing organisations, overseas Racingbodies, the betting industry and Governmentsources. In all cases (and including informationfrom organisations not listed), we have relied uponsuch information and data as being true, correctand complete and have not audited, tested orchecked any such information or data.

SPECIFIC LIMITATIONS OF OUR REVIEWIn accordance with our terms of engagement, ordue to our findings when performing our work, thefollowing specific limitations should be noted:

· The economic impact of those elements of the“Horse Industry” outside of the British Racingand Industry (“British Racing”) – other than the

indirect expenditure which arises in theseelements as a result of British Racing – hasbeen excluded.

· The British breeding industry is complex andconsists of a number of sub-sectors withdistinct, often very different, characteristics. Inpreparing this Report we have considered thebreeding industry in aggregate, and at a highlevel, only. The amount and robustness ofinformation available for the breeding sector iscurrently less than for other aspects of BritishRacing addressed in this Report.

· The economic impacts in this Report do notspecifically include the likely economiccontribution made by off-course BritishBookmakers from profits made on BritishRacing other than that generated through theLevy payments and tax paid on bettingoperators’ gross win on British Racing.

· As a simplification of any industry an economicmodel of this type can only ever be expected torepresent an approximation of a real-lifeoutcome. The model relies upon informationprovided by stakeholders as well as datapublished by the Office of National Statistics(“ONS”). It is possible that industry linkageshave changed since the publication of the2005 Domestic Use Matrix, but as the latestavailable data on which to base our analysisthe ONS data used is the most appropriate.

GLOSSARY OF TERMSBHA British Horseracing Authority

British Racing British Racing and Breeding

or Racing Industries

FOBT Fixed Odds Betting Terminal

FTE Full Time Equivalent

GDP Gross Domestic Product

GPT Gross Profits Tax being 15% of

Gross win

Gross win Amount staked by bettors less

prizes paid out

GVA Gross Value Added

Horsemen’s A collective representing

Group owners, trainers, jockeys,

breeders and stable staff

HBLB or Horserace Betting Levy Board

Levy BoardIFHA International Federation of

Horseracing Authorities

LBO Licensed Betting Office

NTF National Trainers Federation

PAYE Pay As You Earn

PJA Professional Jockeys Association

RCA Racecourse Association

REL Racing Enterprises Limited

ROA Racehorse Owners Association

RMG Racecourse Media Group

SIS Satellite Information Services Ltd

TBA Thoroughbred Breeders Association

VAT Value Added Tax

REPORT PREPARATION, METHODOLOGYAND LIMITATIONS

BRITISH HORSERACING AUTHORITY75 HIGH HOLBORN · LONDON · WC1V 6LS

T 020 7152 0000F 020 7152 0001E [email protected]

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Economic Impact of British Racing 2013 /8.19 MB