The financial fallout from the Covid-19 lockdown will become more apparent as each sector reopens and tries to cope as a running business under the social distancing and other health procedure guidelines they will have to abide by.
Economists are predicting a recession of this, that and the other magnitude, unemployment is expected to rocket upwards as some business will never reopen, and others are expected to make massive cuts.
Our ability to move about, socialise and therefore spend is going to be seriously curtailed, so supply will outweigh demand in many areas.
The business models of many companies and businesses will have to be tailored to adjust to the new demands, and a radical change in how we live and support ourselves is on the cards.
In the world of racing, the first to be put to the sword will be the racecourses themselves.
We have 26 on this Island, which, per capita, is not small, but with only one in Dublin and one outside of Cork, Galway, Limerick and Belfast, most are in less-populated areas and many are owned and supported by local business and farming people.
The vast majority of Irish racecourse are run in a non-profit way, with any profits being reinvested in the upgrade of the facilities. HRI owns four racecourses and the land on which another is located. With an average of €50,000 per meeting generated from media rights income, pre Covid-19 the racecourses had a stable income supply to cover the running and maintenance costs of their tracks.
The crucial part of the deal was the income generated from the price each individual betting shop paid to show the pictures — that constituted over 60% of that fee.
Gate receipts, hospitality, sponsorship deals and advertisement packages made up the rest.
In the post Covid-19 era, all they will have is a part of that media rights deal as betting shops remained closed. Streaming payments are expected to rise as people bet and watch via whichever bookmaker they chose, but there is no guarantee what that might amount to.
The costs will remain the same and, while each and every one of us has thanked whomever has supplied the nice weather whilst we have been in lockdown, the spiralling costs of maintaining grass racetracks with artificial watering is going to put revenue-deprived racecourses under huge pressure.
Each race meeting staged in June will be a lossmaker for the racecourses that stage them. So, why stage them you might ask? For the 15,000 people racing employs, 99% of whom are in rural areas, races need to be run to sustain the industry.
Horse racing is a pyramid with the races at the very top. It spreads out and down all the way to thousands of breeders at the bottom — or the beginning, in fact.
However, if the top falls off the pyramid will crumble just as quickly as if the bottom is pulled out. The racecourses, with the backing of their boards, are stepping up to the plate. They have made money off the back of the industry in the past and are now going to suffer the losses to help get the show back on the road.
However, I am not convinced all 26 racecourses in Ireland will be in a healthy enough financial situation to sustain these losses. I feel a permanent closure or two could be coming.
HRI, perhaps in a prudent manner for what lies in store, has made significant cuts to prizemoney for the foreseeable future. That, of course, impacts jockeys, trainers and owners. But it is the impact on owners that will carry the biggest fears in this Industry.
Will the cutbacks in prizemoney, which is used by most owners to counter the costs for the care of their horses, mean they invest less going forward? If so, this will impact the numbers of horses in training, with knock-on effects all the way down through stable staff, jockeys, trainers, farriers, etc, until you reach the bottom of the pyramid.
The Irish Government invested €67.2 million in the industry last year, and even leaving the 2% tax on betting aside, which generated €98 million in 2019, the income tax, PRSI, PAYE, USC and vat collected by revenue from imports, exports and employment in this sector indicates a healthy indirect return from its investment in the sector.
By having a good standard of prizemoney on these shores, Irish trainers have been able to attract some big-spending foreign owners onto our island and the investment of past governments in our breeding sector has enabled Ireland to become a world leader in the thoroughbred sector.
That’s not me hyping my own sport. Ireland is a world leader in this industry. It exports a of huge number of thoroughbreds around the world and we compete and win at international levels globally. I am not certain of many other industries in this country that are world leaders.
Investment in this industry right now can lead to growth in a sector that is going to struggle in lots of other countries.
Last week the New Zealand government pledged support of $72.5m to the industry there, and yet globally they are tiny in comparison to us. China, Hong Kong, the USA and Australia all want Irish horses, and all already have investors in horses here.
We will need to generate money to help cover the costs of the lockdown. Investment in a sector in which we are already leaders can generate a whole lot more.