Following the postponement of Brexit to at least 31 October followed by UK Prime Minister Theresa May announcing her resignation last week, the future of Britain has been thrown into uncertainty. Three years after the initial vote to leave, no one is any the wiser just how this will impact businesses and in particular the UK gaming industry.
The online gaming sector contributes around GBP 1.8 billion to the GDP of the UK, a figure that has been on an upwards trajectory over the last decade. This includes not just iGaming operations located on mainland Britain, but also on the Isle of Mann, Gibraltar, and Alderney as well. All of these jurisdictions are a part of the UK and their respective gambling commissions enjoy sterling reputations and lucrative business in the world of online gambling.
But what will happen if and when the UK leave the European Union? The majority of gambling businesses registered in the UK and its Crown Dependencies chose to do so because of the benefits associated with licensing in an EU state. Also considerations over tax, trade, and EU wide laws featured heavily in the decision making of most. Now, no one knows that will happen, let alone whether these benefits will be retained or removed completely. The one good thing that has come out of the delay of the decision is the fact that it has given operators a bit of time to catch their breath and consider what may, or may not happen.
The iGaming industry is multinational in its very essence and personnel that work in the sector come from all over Europe and the world. At the moment, EU citizens can come and work in the UK with little issue, but after Brexit it is likely that this policy of free movement will be abolished or significantly restricted. This means there could be significant drop in the amount of available labour, or the ability to bring in people from abroad to fill roles. This labour shortage could be a big burden to businesses and result in a loss of business, clients, and money.
The EU currently grants a lot of money to startups and SMEs across the bloc. These amounts can be as high as seven figures and provide a vital source of income to businesses looking to get off the ground. By leaving the EU, businesses operating or looking to operate in the UK will lose access to these, thus rendering some unable to survive. Some of the world’s best games and concepts have come from UK start ups that relied on funding, and without these, the market may struggle to compete.
Currently, the UK and EU enjoy free movement of goods and services without the need to pay any tariffs or custom duties on goods. Depending on the kind of deal that the UK strikes with the EU, Brexit could lead to an increase in tariffs or even trigger new ones. This will make it much more expensive for businesses to meet their contractual obligations and could result in disputes over who is liable to pay the fees. In addition to this, there is a chance that taxation rates could be higher and new fees could apply to cross-border UK/EU transactions.
Many of the largest iGaming operators are registered on one of the three Crown Dependencies- Gibraltar, Isle of Man, or Alderney. Here they enjoy access to both the EU and UK markets, as well as very low tax rates. What will happen to these businesses and their employees after Brexit remains to be seen but it is likely that many will migrate, or at least open other EU-based operations to enable them to continue working.
Gibraltar is a particular concern as 98% of the population want to be ruled by the UK, yet almost the same number voted ‘remain’ in the EU referendum. In addition to this, many iGaming employees live in Spain and commute back and forth over the border each day for work. For those that need to keep a British base, a Crown Dependency could be a good option, but depending on how things go, it could also be a disaster. So what are the options?
A former British colony, the small island of Malta is well known in the world of iGaming. Home to some of the biggest and best iGaming operators in the world, its favourable business regime and access to the EU makes it a super popular choice. For businesses looking for a gateway to the EU after Brexit, it is a logical choice. With English as one of the official languages and a very favourable tax regime, it is likely that a number of companies previously based in the UK will consider the country as a replacement, or at least an additional base. Many companies have already taken action- completely relocating or just setting up additional offices there to be sure that whichever way Brexit goes, they are prepared.
Malta is set to become the biggest gaming hub in the whole European Union in a post-Brexit iGaming business landscape.
But there is another option- whereas the UK was once a good place for iGaming startups, after Brexit this is unlikely to still be the case. Insead, startups and SMEs might consider Curacao as a viable option. It was one of the first jurisdiction in the world to legislate for online gambling, way back in 1993 and in 1996 it launched the Curacao e-gaming license and sublicense. The license is low cost and fast in terms of acquisition and there are very few restrictions on target markets and where services can be offered. It is the perfect place for new businesses to set up and test their concept, before considering a move to a jurisdiction such as Malta.
Fast Offshore have over 21 years of experience in iGaming and corporate services and we are experienced in helping our clients in the UK, Crown Dependencies, Malta and Curacao. As such, we are able to provide you with valuable advice on what might be the best option for you and your iGaming business. Even if you are not sure what you will do just yet, and of course as Brexit itself hangs in the balance, please do just reach out to explore your options- we are happy to help.