THE ECONOMIC IMPACT OF SKY BETTING & GAMING ON YORKSHIRE & THE HUMBER

THE ECONOMIC IMPACT OF SKY BETTING & GAMING ON YORKSHIRE & THE HUMBER A REPORT FOR SKY BETTING & GAMING JUNE 2016

Oxford Economics Oxford Economics was founded in 1981 as a commercial venture with Oxford University s business college to provide economic forecasting and modelling to UK companies and financial institutions expanding abroad. Since then, we have become one of the world s foremost independent global advisory firms, providing reports, forecasts and analytical tools on 200 countries, 100 industrial sectors and over 3,000 cities. Our best-of-class global economic and industry models and analytical tools give us an unparalleled ability to forecast external market trends and assess their economic, social and business impact. Headquartered in Oxford, England, with regional centres in London, New York, and Singapore, Oxford Economics has offices across the globe in Belfast, Chicago, Dubai, Miami, Milan, Paris, Philadelphia, San Francisco, and Washington DC. We employ over 230 full-time people, including more than 150 professional economists, industry experts and business editors one of the largest teams of macroeconomists and thought leadership specialists. Our global team is highly skilled in a full range of research techniques and thought leadership capabilities, from econometric modelling, scenario framing, and economic impact analysis to market surveys, case studies, expert panels, and web analytics. Underpinning our in-house expertise is a contributor network of over 500 economists, analysts and journalists around the world and our heritage with Oxford University and the academic community. Oxford Economics is a key adviser to corporate, financial and government decision-makers and thought leaders. Our worldwide client base now comprises over 1000 international organisations, including leading multinational companies and financial institutions; key government bodies and trade associations; and top universities, consultancies, and think tanks. June 2016 All data shown in tables and charts is Oxford Economics own data, except where otherwise stated and cited in footnotes, and is copyright Oxford Economics Ltd. This report is confidential to Sky Betting & Gaming and may not be published or distributed without their prior written permission. The modelling and results presented here are based on information provided by third parties, upon which Oxford Economics has relied in producing its report and forecasts in good faith. Any subsequent revision or update of those data will affect the assessments and projections shown. Oxford Economics Broadwall House, 21 Broadwall, London, SE1 9PL, UK Tel: +44 207 803 1400

TABLE OF CONTENTS Executive summary... 1 1. Introduction... 3 2. The economic impact of Sky Betting & Gaming... 6 2.1 Employment contribution... 6 2.2 GDP contribution... 14 2.3 Tax contribution... 16 3. Sky Betting & Gaming s contribution to Leeds and Sheffield... 19 3.1 Sky Betting & Gaming in Leeds... 19 3.2 Sky Betting & Gaming in Sheffield... 21 4. Conclusion... 23 5. Appendix A: Methodology... 24 6. Appendix B: Digital industries... 26

EXECUTIVE SUMMARY The contribution of digital to the UK economy is increasingly important with growth in digital businesses outpacing most other sectors over the past decade. This trend looks set to continue in the coming years, driving economic growth and expanding employment. Significantly, digital clusters exist in regions throughout the UK, with important concentrations in the north of the country. In Yorkshire & The Humber, employment in the digital sector has increased by 32 percent since 2008 with digital jobs growth outpacing overall and retail trade employment growth in the region by some distance. 1 This report focuses on the contribution that Sky Betting & Gaming made to the Yorkshire & The Humber economy in 2014/15, and in particular to the cities of Leeds and Sheffield. Sky Betting & Gaming is a British online betting and gaming firm headquartered in Leeds. It is at the forefront of the region s digital revolution, stimulating its growth over the past few years. The UK s digital companies are creating huge revenues and employment opportunities across the country. This report explores the value that Sky Betting & Gaming brought to its local economies in 2014/15, in terms of the jobs and the GDP it generated but also in the considerable contribution that it made to public finances through the taxes that accrued to government as a result of its activities. In 2014/15, the company supported nearly 1,000 jobs in Yorkshire & The Humber. The company s own workforce in the region numbered 637 people, more than employed at Leeds-Bradford Airport. Of these, an estimated 250 employees worked in IT roles, constituting about one in every 200 digital jobs in Yorkshire & The Humber. In 2014/15, some 300 jobs were supported in the company s supply chain and through the wage-financed expenditure of its staff and those in its supply chain. This suggests that Sky Betting & Gaming had an employment multiplier of 1.47; for every 100 jobs at the company itself, it supported 47 elsewhere in the regional economy. In total, Sky Betting & Gaming supported a 142.8 million gross value added contribution to Yorkshire & The Humber s GDP in 2014/15. Some 131.2 million of this was generated by the company itself. The company pays its staff high wages by comparison to both the local average and the industry average. Its workers are highly skilled and very productive. Indeed in 2014/15 the firm s workers were 2.5 times as productive as those in the telecommunications industry as a whole. The company is increasingly investing in its skills base, including through its flagship Tech Ninja Fund. Sky Betting & Gaming also made a significant contribution to government revenues. In total, it supported a 63.5 million tax contribution in 2014/15 equivalent to 12 per resident in the region. Of this amount, 61.2 1 In this report we are treating IT, digital and technological as synonyms. In Fig. 1, we follow the definition of the digital sector provided in the following study: UK Commission for Employment and Skills, "Sector insights:skills challenges in the digital and creative sector", Evidence Report 92, June 2015. For details on the sectors included in this definition, see Appendix 2. 1

million, or 96 percent, comprised the tax contribution of the company itself (including the taxes on its employees wages). This equates to the amount needed to fund the total cost of firefighting and rescue operations of the West Yorkshire Fire & Rescue Authority in 2014/15. In recognition of the positive momentum in Yorkshire & The Humber s digital clusters, the UK Government recently dedicated 11 million to investments in new tech incubators in Sheffield, Leeds and Manchester. In Leeds, the location of Sky Betting & Gaming s headquarters, the firm employed over 600 people in 2014/15, 330 of whom also lived in the city. Some 230 people working in the Leeds office were estimated to be in tech roles and this represented one in every 100 of the city s digital jobs. The company s operations, together with its procurement from local suppliers and the wagefinanced spending of its staff, were estimated to support a total of 700 jobs in the city, or more than one in every 700 people in employment in Leeds, and make a 126.4 million gross value added contribution. Sky Betting & Gaming s technology hub in Sheffield employed about 30 people in 2014/15 and, through all the impact channels, was estimated to support 10.0 million to the Sheffield s economy and about 70 jobs in the city. The company s impact on Yorkshire & The Humber and the two cities that are home to its offices is set to rise considerably in the near future. It will continue to be at the forefront of Yorkshire & The Humber s growing digital economy in an effort to become the leading digital employer in the UK. 2

1. INTRODUCTION The UK s digital companies are creating huge revenues and employment opportunities across the country. In Yorkshire & The Humber, employment in the digital sector has increased by 29 percent since 2000 and by 32 percent since 2008. Digital jobs growth has outpaced overall and retail trade employment growth over both time periods (Fig. 1). 2 Fig. 1. Employment in the digital sector in Yorkshire & The Humber, 2000 to 2014 3 2000=100 140 130 120 110 100 90 80 70 60 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Source: UK CES Digital Retail trade All industries Our city region has already outstripped Bristol and Manchester for employment growth in digital and creative industries. Leeds City Region Enterprise Partnership Sky Betting & Gaming is at the forefront of Yorkshire & The Humber s digital revolution. From its headquarters in Leeds and its technology hub in Sheffield, the firm provides online betting and gaming services to 1.5 million customers, to which the company adds about 10,000 new customers each week. This implies three percent of the UK adult population is currently a customer of the firm. 4 The company s customers represent 21 percent of all regular online gamblers and 13 percent of regular online gamers (Fig. 2). 2 In Yorkshire & The Humber, the retail trade is the sector with the largest number of employees around 248,000 people (or 10 percent of the total). 3 UK Commission for Employment and Skills, "Working Futures", The future of jobs and skills, 11 April 2014. 4 ONS, "United Kingdom population mid-year estimate", 25 June 2015. 3

Fig. 2. Sky Betting & Gaming s market penetration, 2015 Q1 and Q2 5 25% 20% 20% 21% 15% 10% 14% 13% 5% 0% Online gamblers Online gaming 2015 Q1 2015 Q2 Source: Kantar Most of Sky Betting & Gaming s customers access its online services via mobile technology. Over 80 percent of Sky Bet s revenue is generated via mobile apps, with the remainder coming from fixed internet connections. In 2015, CVC Capital Partners bought the majority stake in Sky Betting & Gaming from Sky, which now retains a minority stake the two companies having agreed a long-term brand licence agreement. 6 Making its first steps as a newly independent entity, Sky Betting & Gaming commissioned this work to assess its economic contribution to Yorkshire and The Humber, and cities of Leeds and Sheffield. This report explores the value that the company brought to these economies in 2014/15, in terms of the jobs, the GDP it generated but also in the considerable contribution that it made to public finances through the taxes that accrued to central and local government as a result of its activities. The foundation of this analysis is the use of an economic impact assessment to compute the economic contribution that is made to the region and the two cities. 5 Kantar, "GB Syndicated Gambling Research", 2015. 6 CVC GROUP, "CVC Capital Partners agrees acquisition of Sky Bet from Sky", Press release, 4 December 2014. 4

INTRODUCING ECONOMIC IMPACT ANALYSIS This study quantifies the economic contribution of Sky Betting & Gaming using an analytical method called Economic Impact Assessment. It focuses on the impact of the company on the Yorkshire & The Humber region and the cities of Leeds and Sheffield. The results presented are for financial year 2014/15, as the latest year for which data are available. The study looks at three forms of expenditure (Fig. 3): Direct impacts: Sky Betting & Gaming s operational expenditure creates output and employment at its offices in Leeds and Sheffield, and generates tax receipts for the government. Indirect impacts: Sky Betting & Gaming s procurement of capital and non-capital goods and services from local suppliers supports further economic activity down the supply chain. Induced impacts: Sky Betting & Gaming and the companies in its direct supply chain pay their staff wages. A proportion of these are spent at local retail and leisure outlets which stimulates further economic activity, both at these outlets and in their supply chains. The scale of Sky Betting & Gaming s impact for each of the three channels is measured using three metrics: Gross value added: Gross value added is the contribution an institution or company makes to Gross Domestic Product (GDP). It is most easily thought of as the value of the output it produces less the value of the inputs used in that output s production. Employment: measured in headcount terms rather than on a full-time equivalent (FTE) basis to facilitate comparison with ONS employment data. Tax receipts: this study considers the receipts generated from Income and Corporation taxes, employee and employer National Insurance contributions and other indirect taxes paid by employees (for example VAT). Fig. 3. The channels of economic impact 5

2. THE ECONOMIC IMPACT OF SKY BETTING & GAMING The contribution that Sky Betting & Gaming makes to the Yorkshire & The Humber economy is substantial. It includes not only the direct impacts generated at its offices in the wards of City and Hunslet (Leeds) and Central (Sheffield), but also the economic activity stimulated elsewhere in the economy by the company s supply chain expenditure on capital and non-capital goods and services. And beyond this again, employees within both Sky Betting & Gaming itself and its supply chain spend their wages at local retail and leisure outlets. We quantify each of these impacts to estimate Sky Betting & Gaming s contribution to the regional and two cities economies in 2014/15. 2.1 EMPLOYMENT CONTRIBUTION The presence of Sky Betting & Gaming in Yorkshire & The Humber generates economic activity and supports jobs across the region. Including all impact channels (direct, indirect and induced), we estimate that the company supported around 940 jobs in Yorkshire & The Humber in 2014/15 (Fig. 4). The largest impacts on Yorkshire & The Humber s labour market come through the company s own employment and the jobs supported by the wage-financed expenditure. In 2014/15, Sky Betting & Gaming itself employed 637 people in the region, including workers in IT, call centre, marketing and HR roles. This means that Sky Betting & Gaming had an employment multiplier of 1.47; for every 100 jobs in the company itself, it supported 47 jobs elsewhere in the Yorkshire & The Humber s economy. "We're delighted that Sky Betting and Gaming continues to invest in job opportunities here [in Leeds] and the rest of Yorkshire." Judith Blake, Leeds City councillor 7 7 BBC, "Sky Betting and Gaming to create 200 jobs in Yorkshire" (11 November 2015). 6

Fig. 4. Total employment contribution of Sky Betting & Gaming in Yorkshire & The Humber, 2014/15 People 1,000 900 800 700 600 500 400 300 200 100 0 Direct Source: Oxford Economics Indirect (capital and non-capital spend) Induced Total 2.1.1 Direct employment at Sky Betting & Gaming In 2014/15, Sky Betting & Gaming employed 637 people at its offices in the wards of City and Hunslet (Leeds) and Central (Sheffield), almost 250 of whom (or 39 percent) worked in IT roles (Fig. 5). The technological side included roles such as software engineers, software developers, web designers etc. They constituted about one in every 200 digital jobs in Yorkshire & The Humber. 8 8 ONS, "Business Register and Employment Survey (BRES) provisional results: 2014", 24 September 2015. 7

Fig. 5. Sky Betting & Gaming staff by job family, 2014/15 People 300 250 250 280 200 150 100 110 50 0 IT Call centres Other Source: Sky Betting & Gaming Over 110 people were employed at Sky Betting & Gaming s contact centre in 2014/15. The other category mostly included media executives, marketing managers and other commercial roles. As the company grows, new roles are constantly added to the vacancy list, continuously widening the set of skills at Sky Betting and Gaming. The firm is a major employer in Yorkshire & The Humber, as suggested in Fig. 6. In 2014/15, its workforce of 637 people made it a larger employer than many parts of the digital industry. For example, it employed more people than the manufacture of computers and the industry publishing computer games in Yorkshire & The Humber. It employed around the same number of people as worked in all other software publishing activities in the region. 9 When compared to other similar tech companies based in the region, Sky Betting & Gaming was found to employ four times as many staff as WANdisco, a Sheffield-based leading provider of global collaboration software, and nine times as many people as Rockstar Leeds, a Leeds-based videogames producer. 10 9 Production of software different from computer games. 10 Employment data are taken from WANdisco PLC, "Annual Report and Accounts 2014" (2015) and Rockstar Leeds Limited, "Annual report and financial statements for the year ended 31 March 2014" (2014). 8

Fig. 6. Direct employment comparison with digital industries in Yorkshire & The Humber, 2014 vs 2014/15 11 Publishing of computer games Computer facilities management activities Manufacture of computers and peripheral equipment 17 78 94 Sky Betting & Gaming 637 Other software publishing 673 Data processing, hosting and related activities 1,203 0 200 400 600 800 1,000 1,200 1,400 Source: ONS (2014), Sky Betting & Gaming People To give an alternative indication of scale, Sky Betting & Gaming employed three times as many people as the Leeds-Bradford Airport, the UK s fastest growing regional airport (Fig. 7). 12 Fig. 7. Direct employment comparison with other Yorkshire & The Humber institutions, 2014/15 Leeds-Bradford Airport 213 Flamingo Land Theme Park 313 Sky Betting & Gaming in Y&H 637 Yorkshire Ambulance Services 4,836 The University of Sheffield 6,129 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 Source: Sky Betting & Gaming, Institutions' annual reports People 11 ONS, "Business Register and Employment Survey (BRES) provisional results: 2014", 24 September 2015. 12 Employment data are taken from Flamingo Land Resort Ltd, "Consolidated Financial Statements for the year ended 31 March 2015" (2016) and Leeds Bradford International Airport Limited, "Report and Financial Statements" (2015). 9

WORKFORCE TRAINING AND DEVELOPMENT Now independent, the company is starting to put together a formal training and development scheme for the first time this year. The training budget is still being defined, but in 2014/15 Sky Betting & Gaming spent almost 120,000 on management development. New programmes to be introduced in the near future include software academies, apprenticeships and placement programmes. One flagship programme offered by Sky Betting & Gaming to its new starters in digital and tech roles is the so-called Tech Ninja Fund. This consists of a 1,000 grant, which can be spent to develop the employee s skills; this can include some new IT kit, attendance at a tech talk, a digital conference or a networking event, as well as training courses. This cost the company about 300,000 last year. Sky Betting & Gaming also cooperates with schools and education facilities to spread interest in digital and tech jobs. For example, a number of employees took part in the teaching of code clubs in local schools. Sky Betting & Gaming s workers are highly productive (Fig. 8). This boosts the price competitiveness of the company s services versus its rivals around the country. In the company, gross value added per person employed in 2014/15 was 2.5 times as large as in the region s telecommunications industry and almost four times as big as productivity in the computer manufacturing industry in the region. The company s workers were five times as productive as all the people employed in Yorkshire & The Humber. Fig. 8. Productivity in Yorkshire & The Humber industries as compared to Sky Betting & Gaming workforce, 2014/15 13 Manufacture of computers and peripheral equipment Data processing, hosting and related activities; web portals Computer programming, consultancy and related activities 54.3 56.8 61.0 Telecommunications 83.2 Sky Betting & Gaming 206.0 Source: ONS, Sky Betting & Gaming 0 50 100 150 200 250 000 per employee 13 ONS, "Annual Business Survey - 2014 Provisional results" (12 November 2015). 10

2.1.2 Indirect (supply chain) employment contribution Sky Betting & Gaming s procurement of goods and services from local suppliers supports economic activity and employment in the rest of the Yorkshire & The Humber region. Sky Betting & Gaming procured 71.9 million worth of non-capital goods and services from UK suppliers in 2014/15. It imported about 30.8 million worth of goods and services from suppliers based overseas. The firm is estimated to have spent 4.8 million (or 6.7 percent of its domestic spend) with suppliers in Yorkshire & The Humber. Many of the purchases were from services that are best provided locally. This included catering, off-site meeting rooms, taxi and other transport, and some services to buildings, such as cleaning activities and repair and maintenance. Many of the company s local suppliers were small and medium-sized enterprises (SMEs). Purchases from such suppliers, and the subsequent economic activity these purchases stimulate, fuel economic growth by creating and sustaining jobs in Yorkshire & The Humber. We estimate that Sky Betting & Gaming s procurement from local suppliers supported around 80 jobs across the region in 2014/15. SUPPLIER RELATIONSHIPS Sky Betting & Gaming works very closely with its suppliers. For instance, some of the game providers in its supply chain are supported in the game design process, hence taking advantage of Sky Betting & Gaming s knowledge of its customer base. These games are then sold to other operators, bringing wider benefits for the suppliers other than the original payment. We are thrilled to be working with Sky, one of the UK s most successful casino brands, and we look forward to rolling out more table games in the future Mark Rehorst-Smith, Core Gaming s Chief Commercial Officer 14 To undertake its activities, Sky Betting & Gaming also purchases capital goods from suppliers across Yorkshire and the rest of the UK. The company reports that it invested 8.8 million in the UK in 2014/15. Some 51 percent of its capital expenditure was made with firms producing hardware, which constitutes the infrastructure supporting website traffic, data storage etc. (Fig. 9). 14 Gaming News, "CORE Gaming signs Sky partnership after ICE" (11 February 2014). 11

Fig. 9. Capital spend by type of good purchased, 2014/15 million Hardware 4.5 Internal Development 3.3 Games Development 0.6 Other Development 0.4 Source: Sky Betting & Gaming Only a small portion was spent within the Yorkshire & The Humber region, as these suppliers tended to be large corporates (such as Oracle, Microsoft, Cisco etc) or development houses based elsewhere in the UK or abroad. For this reason, the employment impact of this expenditure was limited to around 20 jobs in the region in 2014/15. 2.1.3 Induced (wage spending) employment contribution Both the company and its suppliers pay wages to their staff, and a proportion of these wages is subsequently spent by employees within the wider consumer economy, for example at local retail and leisure outlets. The economic activity that this spending generates constitutes the induced impact of Sky Betting & Gaming on the Yorkshire & The Humber s economy. Sky Betting & Gaming s employees tend to live locally. Nearly half (47 percent) of the staff lived in Leeds in 2014/15, making up one in every 1,300 of all economically active residents of working age in the city. 15 A further eight percent lived in Bradford and almost seven percent lived in York (Fig. 10). 15 ONS, "United Kingdom population mid-year estimate", 25 June 2015. 12

Fig. 10. Geographic distribution of Sky Betting & Gaming s employees and wages, based on employees residence, 2014/15 16 % of total 60 50 40 30 20 10 0 Leeds Bradford York Wakefield Sheffield Harrogate Employees Wages Source: Sky Betting & Gaming, Oxford Economics Sky Betting & Gaming paid its employees gross salaries substantially above the average in Yorkshire & The Humber and the cities of Leeds and Sheffield in 2014/15. The average gross wage for people permanently employed by the company in the region was 36,400. This was 33 percent above the average for jobs in Leeds and 52 percent above the average for jobs located in Sheffield (Fig. 11). 17 The Sky Betting & Gaming s mean salary was also 11 percent higher than the average information and communication employee in Yorkshire & The Humber. Sky Betting & Gaming s data reveal that in 2014/15 the firm paid 22.4 million in wages and salaries to its employees, 86 percent of whom (or 600 employees) were resident in Yorkshire & The Humber. We estimate 18.7 million was paid to staff living in the region. After the payment of taxes roughly 13.9 million was available to be spent by staff in the local economy. We estimate that this expenditure, along with similar expenditure by employees within the company s supply chain, supported 200 jobs in the region in 2014/15. Most of these were in the retailing, housing and transport sectors. 16 The distribution of salaries and wages is less precise than the geographical dispersion of employees. This is the case because three/four-digits postcodes were matched with salaries, hence potentially overestimating the proportion of wages attributable to large postcode areas (particularly Sheffield). Employees postcodes, instead, were provided with five/seven-digits, hence allowing to exactly match the location of residence. 17 ONS, "Annual Survey of Hours and Earnings: 2015, Provisional Results" (2015). 13

Fig. 11. Mean gross wage comparison for Sky Betting & Gaming permanent staff employed in Yorkshire offices and all employee jobs (by place of work) 18 per year 40,000 35,000 30,000 25,000 36,400 32,900 27,500 24,100 24,000 20,000 15,000 10,000 5,000 0 Sky B&G Y&H, information and communication jobs Leeds, all jobs Y&H, all jobs Sheffield, all jobs Source: Sky Betting & Gaming, ONS (2015) By providing relatively high paying employment compared to elsewhere in the region, Sky Betting & Gaming supports expenditure on goods and services in the local economy. The benefit of this is not only felt by the businesses directly serving the firm s employees; it extends to their supply chains and employees, and in turn fosters a greater degree of expenditure in the districts and the region. 2.2 GDP CONTRIBUTION As well as supporting employment, Sky Betting & Gaming also contributes substantially to Yorkshire & The Humber s GDP. The company s total impact on the region s economy was worth 142.8 million in 2014/15. As with employment, this contribution arises from three different channels: its direct operations, its procurement and its staff wage-spending. Sky Betting & Gaming was directly responsible for 131.2 million of this gross value added contribution, representing 92 percent of the total. Its procurement and wage-expenditure are estimated to have supported a further 11.6 million gross value added contribution to the region, representing the remaining eight percent of the company s total impact in Yorkshire & The Humber (Fig. 12). Our results suggest the company had a GDP multiplier of 1.09 in Yorkshire & The Humber. In other words, for every 100 in GDP created directly by Sky Betting & Gaming itself, a further 9 was generated elsewhere in the region. The difference in the company s employment versus gross value added multiplier reflects the high productivity of its workforce, which boosts the size of its direct value added contribution. In fact, Sky Betting & Gaming represents a greater proportion of the total impact in GDP terms and this reflects the company s high productivity. In other words, relatively fewer employees are 18 ONS, "Annual Survey of Hours and Earnings: 2015, Provisional Results" (2015). 14

needed to generate a certain amount of value added at Sky Betting & Gaming compared to the rest of the regional economy. Fig. 12. Sky Betting & Gaming s contribution to Yorkshire & The Humber GDP, 2014/15 millions 160 140 120 100 80 60 40 20 0 Direct Source: Oxford Economics Indirect (capital and non-capital spend) Induced Total 2.2.1 Direct GDP contribution of Sky Betting & Gaming In 2014/15, Sky Betting & Gaming earned 247.4 million in revenue. The two major sources of revenue, each earning 117 million, were Sky Bet (the sports betting division) and Sky Gaming (Fig. 13). The latter includes Sky Vegas and Casino, the company's online casino divisions, Sky Poker, the company s online poker division, and Sky Bingo, the company s online bingo division. Oddschecker, its odds comparison website used by other betting businesses, earned the remainder. Fig. 13. Sources of Sky Betting & Gaming s revenue, 2014/15 million 140 120 117 117 100 80 60 40 20 0 Sky Bet Source: Sky Betting & Gaming Sky Gaming (Vegas, Casino, Poker, Bingo) 13 Oddshecker 15

From this revenue, the firm is estimated to have directly generated a 131.2 million gross value added contribution to Yorkshire & The Humber GDP in 2014/15. This was equivalent to 4.4 percent of the region s digital economy. 19 2.2.2 Indirect (supply chain) GDP contribution As with employment, Sky Betting & Gaming s contribution to Yorkshire & The Humber s economy is much more than just the direct contribution. The company s procurement from its local supply chain generates further economic benefits for the region. This stimulates considerable activity at businesses across Yorkshire & The Humber. In 2014/15, the company spent an estimated 4.8 million on non-capital inputs of goods and services from suppliers within Yorkshire & The Humber s industries. This is estimated to have supported a 3.0 million gross value added contribution to regional GDP. It is also estimated to have spent 600,000 with capital goods suppliers located in the region. In total, the company s capital spend stimulated almost a 600,000 value added contribution to Yorkshire & The Humber s GDP. 2.2.3 Induced (wage spending) GDP contribution The payment of wages by Sky Betting & Gaming and within the company s supply chain supports activity throughout the regional economy (the induced contribution). In 2014/15, Sky Betting & Gaming paid 18.7 million in wages and salaries to the 600 employees resident in Yorkshire & The Humber and a proportion of this was subsequently spent at retail and leisure outlets located across the region. Similarly, the company s suppliers are estimated to have paid 1.1 million in wages to their staff following Sky Betting & Gaming s purchase of inputs of goods and services from them. This is estimated to have supported an additional 8.1 million gross value added contribution to regional GDP in 2014/15. 2.3 TAX CONTRIBUTION The economic activity and employment outlined in sections 2.1 and 2.2 of this report bring with them further benefits as a consequence of the tax revenues that they generate. These are used, in turn, to finance vital public services. As with the employment and GDP metrics, tax impacts are related to each of the three channels of economic impact. In total, taking into account the direct, indirect and induced channels, Sky Betting and Gaming supported a 63.5 million tax contribution to government funding in 2014/15, equal to 12 per resident in Yorkshire & The Humber. To give an indication of scale, this was 19 ONS, "Annual Business Survey", 23 July 2015. As we cannot strip out what proportion of value added is attributable to the digital activities and what is instead a result of marketing, we have here assumed that 100 percent of Sky Betting & Gaming s value added can be regarded as digital, IT being the core business of the firm. As far as employment is concerned, instead, we do know how many jobs are in the company s IT department and are therefore able to compare like for like. 16

sufficient to pay for the total cost of firefighting and rescue operations of the West Yorkshire Fire & Rescue Authority in 2014/15 (Fig. 14). 20 Fig. 14. Sky Betting & Gaming s tax contribution in relation to operational expenditure of major public bodies, 2014/15 million Office of the Police & Crime Commissioner West Yorkshire 14.4 West Yorkshire Fire & Rescue Authority 63.3 Sky Betting & Gaming tax contribution 63.5 The Mid Yorkshire Hospitals 173.4 Yorkshire Ambulance Service 239.0 Source: Institutions' annual reports 2014/15, Oxford Economics 0 100 200 300 Of this amount, 61.2 million (or 96 percent) comprised the direct tax contribution of the company itself. A further 0.8 million in taxes were raised along Sky Betting & Gaming s capital and non-capital supply chain (indirect) because of its procurement activity and an additional 1.6 million through the company s staff and those employed in its supply chain spending their wages at retail and leisure outlets (the induced tax contribution) (Fig. 15). 20 West Yorkshire Fire & Rescue Authority, "Statement of Accounts 2014/15", 29 September 2015. 17

Fig. 15. Sky Betting & Gaming s tax contribution in Yorkshire & The Humber, 2014/15 millions 70 60 50 40 30 20 10 0 Direct Source: Oxford Economics Indirect (capital and non-capital spend) Induced Total Sky Betting & Gaming s own direct tax contribution in 2014/15 was predominantly made up of Bet and Gaming duties (Fig. 16). These comprised 34.1 million of the 61.2 million (or 56 percent). The other major contribution came from corporation tax, which amounted to a further 10.8 million for government funding. We calculate that each worker at Sky Betting & Gaming contributed 11,170 per annum in labour tax receipts in 2014/15 (including income tax and National Insurance contributions, both paid by employer and employees). Fig. 16. Taxes paid by Sky Betting & Gaming and its employees in Yorkshire & The Humber, 2014/15 Corporation tax 10.8 VAT 8.0 million Bet/Gaming Duty 34.1 Employee PAYE 3.7 Employer NICs 2.1 Employee NICs 1.3 Stamp duty 1.1 Source: Oxford Economics, Sky Betting & Gaming 18

3. SKY BETTING & GAMING S CONTRIBUTION TO LEEDS AND SHEFFIELD So far this report has quantified the impact of Sky Betting & Gaming on the Yorkshire & The Humber economy as a whole. This chapter explores the impact of the company on the cities of Leeds and Sheffield, where Sky Betting & Gaming s two main offices are located. 21 Each of the company s locations has distinct areas of work. Leeds is the location of Sky Betting & Gaming s headquarters; the firm was among the city s largest IT employers with over 230 staff in its Leeds IT department in 2014/15. According to Leeds Data City, there are 3,370 digital organisations in the Leeds district and about 8,520 in the wider Leeds City Region. 22 In Sheffield, Sky Betting & Gaming has its technology hub. Its strategic position allows this office to take full advantage of the Sheffield-based cluster in data management, analytics, telecommunications and networking. The positive momentum in Yorkshire & The Humber s digital clusters is also recognised by the UK Government. The 2015 Budget announced increased funding for technology hubs across the UK, aimed at supporting the growth of digital businesses outside London. Some 11 million were dedicated to investments in new tech incubators in Sheffield, Leeds and Manchester. 23 3.1 SKY BETTING & GAMING IN LEEDS Including contract and agency workers, in 2014/15 Sky Betting & Gaming employed over 600 people at its office in Leeds. We estimate about 230 were employed in IT roles. This was equal to one in every 100 digital jobs in Leeds (there were over 23,700 digital jobs in Leeds in 2014). 24 Most employees who worked in Leeds in 2014/15 also lived in the city (55 percent of the Leeds-based employees also resident in the city or 330 employees). Sky Betting & Gaming purchase part of the inputs locally and its staff frequent local businesses, hence further supporting employment opportunities in the city. The company spent over 900,000 with suppliers of inputs of goods and services in the city and more than 100,000 in capital goods from Leeds-based suppliers. In addition, staff resident in the city are paid an estimated 10.0 million in gross wages and salaries. This is was two percent of all the wages and salaries paid to people who 21 Leeds and Sheffield Local Authority Districts 22 The Data City, "Digital organisations in the Leeds City Region", 2016. 23 HM Treasury and The Rt Hon George Osborne MP, "Budget 2015: what it means for Yorkshire", Press Release, 19 March 2015. 24 Tech City, "Tech Nation 2016 - Transforming UK industries", 2016. 19

worked in the city. A significant proportion of this income was spent at retail and leisure outlets in the city. Including all impact channels (direct, indirect and induced), we estimate that the company supported over 700 jobs in Leeds in 2014/15, or one in every 700 people employed in the city. This is probably a conservative estimate, as many of Sky Betting & Gaming s employees, and those employed in its supply chain, are likely to spend a fair proportion of their salary in Leeds retail and leisure outlets (for example during lunch-breaks or after work), albeit not living there. However, due to difficulties in accurately apportioning this spend, it is not included in the calculations in this study. When we moved across from Harrogate to Leeds in 2010, we were confident that this city was the perfect place to develop our business. We re even more certain that with the wealth of technology talent and knowledge in the Yorkshire area, as well as the historical links to sport, this is the perfect place to start the next chapter in the Sky Betting and Gaming success story. Richard Flint, Chief Executive of Sky Betting & Gaming 25 In addition to the employment activity supported directly and through the indirect and induced channels, Sky Betting & Gaming supported a 126.4 million gross value added contribution to GDP. This was equivalent to 0.6 percent of Leeds entire economic output (Fig. 17). Of this, 122.6 million was generated by the company itself, representing almost one fifth of the entire digital sector in the city s gross value added (the Leeds digital cluster generated 671 million in gross value added in 2014). 26 25 "Sky Bet gears up for expansion under new owner", Yorkshire Post, 4 December 2014. 26 Tech City, "Tech Nation 2016 - Transforming UK industries" (2016). 20

Fig. 17. Sky Betting & Gaming s contribution to Leeds, 2014/15 million People 140 800 120 700 100 600 80 60 40 500 400 300 200 20 100 0 GVA (LHS axis) Employment (RHS axis) 0 Source: Oxford Economics We've got the highest concentration of digital, data and technology innovators in the UK, plus outstanding connectivity that global businesses already rely on, as well as plans to expand our region s capacity and resilience. Leeds City Region Enterprise Partnership 3.2 SKY BETTING & GAMING IN SHEFFIELD In total, Sky Betting & Gaming generated a value added contribution of over 10.0 million to Sheffield s economy in 2014/15. This was equivalent to 0.1 percent of Sheffield s economic output. Economic activity linked to the company supported over 70 jobs in Sheffield in 2014/15 equivalent to one in every 3,900 jobs in the area (Fig. 18). Taking into account all of the effects above, in 2014/15 Sky Betting & Gaming s footprint on Sheffield consisted of a value added contribution of 8.6 million, or 3.1 percent all the digital value added produced in the area of Sheffield & Rotherham (the local cluster generated 273 million digital GVA in 2014), and an estimated 30 jobs created in the area due to the company s own activities. 27 A further 300,000 value added contribution and 10 jobs were supported through its procurement of capital and non-capital goods. The latter arose from a 500,000 spend on non-capital goods and services from Sheffield-base suppliers and a further 100,000 invested in Sheffield in 2014/15. Staff resident in Sheffield were paid an estimated 3.8 million in gross wages and salaries, part of which was then spent in the local economy. These employees were paid on average 2.5 times as much as the average Sheffield 27 Tech City, "Tech Nation 2016 - Transforming UK industries" (2016). 21

resident. 28 Almost 30 jobs were estimated to have been supported in the area through the firm s payment of wages, with 1.1 million in value added contributed to the Sheffield economy. Fig. 18. Sky Betting & Gaming s contribution to Sheffield, 2014/15 million People 12 80 10 8 70 60 50 6 40 4 2 30 20 10 0 GVA (LHS axis) Employment (RHS axis) 0 Source: Oxford Economics 28 ONS, "Annual Survey of Hours and Earnings: 2015, Provisional Results" (2015). 22

4. CONCLUSION Sky Betting & Gaming makes a substantial contribution to the Yorkshire & The Humber, Leeds and Sheffield economies. It does so through the company s own operations, its purchases of capital and non-capital goods from local suppliers and the wage-financed spending of its staff. Sky Betting & Gaming is estimated to have supported 940 jobs in Yorkshire & The Humber in 2014/15, 637 of which were in the company itself and around 300 elsewhere in the regional economy. The company therefore had an employment multiplier of 1.47; for every 100 people employed directly, it supported 47 jobs in other industries in Yorkshire & The Humber. Sky Betting & Gaming also made a significant contribution to Yorkshire & The Humber s output. It supported a total value added contribution of 142.8 million to regional GDP in 2014/15. In 2014/15, Sky Betting & Gaming supported 63.5 million in tax receipts. This was enough to finance the running costs of firefighting and rescue operations of the West Yorkshire Fire & Rescue Authority in 2014/15. Taking account of the impacts in Leeds only direct, indirect and induced impacts Sky Betting & Gaming generated a 126.4 million value-added contribution to the city s economy. This activity supported 700 people in employment in the city. Similarly, the analysis shows that, in total, Sky Betting & Gaming supported over 70 people in employment in Sheffield. The company also supported a value added contribution of 10.0 million to the city of Sheffield s GDP in 2014/15. The company s impact on Yorkshire & The Humber and the two cities that are home to its offices is set to rise considerably in the near future; with the betting market forecast to grow at 10-15 percent a year and Sky Betting & Gaming s growth in excess of that, the future prospects look very favourable. The will help Sky Betting & Gaming achieve its objective of becoming the leading digital employer in the UK, and will help it drive forward Yorkshire & The Humber s growing digital economy. 29 Our ambition is to be the best digital business in the UK and that means investing in our people and our facilities. Richard Flint, Chief Executive of Sky Betting & Gaming 29 "Sky Bet pays off for Wellington Place", Business Quarter, 16 March 2016. 23

5. APPENDIX A: METHODOLOGY MODELLING THE YORKSHIRE, LEEDS AND SHEFFIELD ECONOMIES USING INPUT- OUTPUT TABLES In order to quantify Sky Betting & Gaming s indirect and induced impacts, the analysis in this report is based on input-output tables estimated for Yorkshire & The Humber, Leeds and Sheffield. These are developed by combining ONS (2014) input-output data 30 for the whole UK with the techniques developed by Flegg, et al. (1995). 31 Input-output tables are designed to give a snapshot of an economy at a particular time, showing the major spending flows from: (1) final demand (i.e. consumer spending, government spending and exports to the rest of the world); (2) intermediate spending patterns (i.e. what each industrial sector buys from every other sector the supply chain); (3) how much of that spending stays within the economy; and (4) the distribution of income between employment income and other income (mainly profits). In essence an input-output model is a table which shows who buys what from whom in the economy. The latest domestic use input-output table for the UK was for 2010. This table is used to estimate the impact on other industries as a result of Sky Betting & Gaming s spend on inputs of goods and services, and its employees spend at leisure and retail outlets. The starting point for estimating the indirect impact is through information provided by Sky Betting & Gaming on its procurement of inputs of goods and services from UK suppliers. In absence of any information of the proportion that is spent with firms in the locality, the expenditure is allocated to the region and the two cities in accordance with their share of national gross value added. The firm s procurement expenditure is then consequently allocated to 20 different industrial sectors based on the type of products and services purchased by the average firm in the arts, entertainment and recreation industry. The next step in estimating the indirect impact is to examine the effect of this spending on the total sales of different industries in Yorkshire, Leeds and Sheffield (using the regional and subregional input-output tables). This is done by calculating multipliers for each industry that can be used to show how Sky Betting & Gaming s supply chain purchases impact each individual industry. 32 As such, the impact on both first-tier and the second-tier suppliers further down the supply chain can be modelled. 30 ONS, Input-output analytical tables - 2010, ed. Richard Wild (Newport: ONS, 2014). 31 Webber C.D. and Elliot M. V. Flegg A. T., "On the appropriate use of location quotient", Regional Studies, 29 (1995): 547-61. 32 These are known as Type I multipliers, which estimate the impact on the whole domestic economy of 1 spent in a given industry, through its supply chain. 24

The induced impact is modelled using a similar method. Sky Betting & Gaming provided data on its staff s basic salary by home postcode. Oxford Economics used this to model the typical spending profile of employees of Sky Betting & Gaming and its suppliers, by allocating consumer expenditure according to household expenditure identified in the input-output tables. Here again multipliers are calculated for each industrial sector and are employed to estimate the impact of consumer spending at leisure and retail outlets in the region and the two cities. 33 The impact on employment can also be modelled by taking into account the productivity (or gross value added per employee ratios) of the sectors involved in the supply chain and consumer spending, obtained from ONS and Oxford Economics data. 33 Here Type II multipliers are calculated, which also include the effect of spending by households stimulated as a result of the additional employment generated by the additional 1 spend. 25

6. APPENDIX B: DIGITAL INDUSTRIES In Fig. 19, the digital industries are made up of the following 2-digit Standard Industrial Classification 2007 (SIC) codes, as defined by the UK Commission for Employment and Skills. Fig. 19. Digital industries, UK CES SIC (2007) Description 61 Telecommunications 62 Computer programming, consultancy and related activities 63 Information service activities 95 Repair of computers and other goods In the rest of the report, whenever employment and value added comparisons are made with digital industries, Tech Nation s definition is employed (Fig. 20). 34 Fig. 20. Digital industries, Tech Nation SIC (2007) Description 26.20 Manufacture of computers and peripheral equipment 58.21 Publishing of computer games 58.29 Other software publishing 61.10 Wired telecommunications activities 61.20 Wireless telecommunications activities 61.30 Satellite telecommunications activities 61.90 Other telecommunications activities 62.01 Computer programming activities 62.02 Computer consultancy activities 62.03 Computer facilities management activities 62.09 Other IT & computer service activities 63.11 Data processing, hosting & related activities 63.12 Web portals 95.11 Repair of computers & peripheral equipment 34 Tech City, "Tech Nation 2016 - Transforming UK industries", 2016. 26