British Racecourses Reluctant to Take on More Debt

The reluctance of racecourses to take on more debt, and in some cases restrictions on their ability to do so, has meant that British racing is set to receive around only half of the £40 million made available to it from the winter phase of the government's sports survival package. 

Instead, in a bespoke arrangement for racing, a £21 million loan is now being borrowed by the Levy Board to help finance the sport through the pandemic. It will pay for previous outlay such as race-day integrity costs and health and safety expenditure, and enable the board to continue its program of financial support and funding for the industry.

The government had originally earmarked £40 million for racing, which was to be targeted at racecourses, from the £300 million made available in November for major spectator sports severely impacted by coronavirus restrictions.

However, tracks had been unwilling to take on more debt having needed to sort out their own credit arrangements in the months preceding the government announcement last autumn.

Racecourse Association chief executive David Armstrong said March 29: "There were structural challenges that in particular meant it was very difficult for racecourses to borrow the money. Racecourses were being asked to borrow money that would effectively be used to fund prize money from which they don't generate returns to pay it back.

"However, the biggest problem was that many racecourses did not want to take funding because they already have significant debt on their balance sheet, and they have added to that debt during COVID quite extensively to help them survive.

"What they didn't want to do was to take on more debt with more repayment obligations in the future, which would have made life very difficult for them. In some cases they couldn't, there were restrictions within their existing borrowing rules that meant they could not take on new loans."

Armstrong said the £21 million figure reflected the Levy Board's expenditure since October on areas outside prize money, such as integrity costs, veterinary research, and people welfare.

He added: "One aspect was that the government was not too keen on the idea of distributing funds from this pot that went straight into prize money. It's about replenishing the Levy Board for the amount of money they have spent since the start of October."

British Horseracing Authority chief executive Julie Harrington expressed the sport's gratitude to Sport England, the Department for Digital, Culture, Media, and Sport, and the Treasury for agreeing that the funding, unlike for other sports, is in effect being paid to another government body in the shape of the Levy Board.

Harrington added: "We are grateful also to the Horserace Betting Levy Board for agreeing to our proposal and borrowing this money to support the central funding of racing. 

"This money will help ensure racing continues behind closed doors despite the absence of spectator revenues. This will benefit our racecourses, our participants, and their communities, and the vital role racing plays as an employer and contributor to the rural economy."

Alan Delmonte, chief executive of the Horserace Betting Levy Board, added: "The loan provides additional flexibility and a cushion for the Levy Board. This short-term benefit outweighed the cost of the interest of the loan, which will be incurred and need to be repaid alongside the loan sum in future years."

A new £300 million summer sports survival package was announced in the latest budget, which ministers said would help sports like cricket, tennis, and racing. The government said further details of the scheme would be announced by Sport England in the coming weeks.

Culture secretary Oliver Dowden said of the latest package of support: "We promised to stand by and protect our major spectator sports when we had to postpone fans returning. 

"Through our sport survival package and existing business support schemes, we have helped hundreds of clubs to survive this difficult winter period. As the turnstiles begin to open over the coming weeks, players, staff, and fans across the country can now look forward to a full return to action with confidence."

The key questions:

How and when will the £21 million be deployed?

The Levy Board has yet to receive the money from the government. The loan is being given to replenish spending the board has already made and is set to be treated as a recharge of its reserves. The likelihood is that racing will make a recommendation to the Levy Board in the coming weeks with proposals for how the money should be spent. The Levy Board has already made funding commitments to the end of June so one question will be whether the loan money will kick in at that point. 

Will it mean an increase in prize money? 

Although racing's proposals have not been finalized it is expected that a significant proportion of the £21 million will be made available for prize money at a time when, even with crowds hopefully starting to return, racecourse finances will still be under pressure. The fact remains that the money will have to be repaid though.

What is the interest rate and over what period will it be repaid?  

The standard terms of the loan are that it has a 10-year term with a two-year holiday and repayments over eight years at an interest rate of 2%. The debt and interest incurred will have to be paid back from future levy income.

Will there be more loans to come under the summer scheme?

Following the budget it was announced that racing was one of the sports that ministers had in mind that could apply for further loans as one of the sports affected by coronavirus restrictions during the summer. However, Armstrong has said the sport has not yet received the guidelines for the latest package and was not in a position to assess how best to access any additional funding.