With rounds and revenue down, the UK golf industry finds itself squabbling over taxes. But there may be good news on the horizon.
By Trevor Ledger
The golf industry in the United Kingdom is a house divided. President Lincoln famously described the problem of the U.S. being a house divided. The ensuing unification of the American “house” saw a remarkably bloody civil war. While U.K. golf is certainly less harrowing, it is not any less bitter.
The bitterness stems from taxation. Proprietary golf clubs — which are for-profit enterprises — pay a 20 percent Value Added Tax on memberships, whereas private member clubs pay nothing due to their nonprofit status.
This is not a new story. In May of last year the United Kingdom Golf Course Owners Association called for the proprietary rate to be dropped to 5 percent with the rate for private clubs to be introduced at 5 percent.
But the UKGCOA’s call has not yet been resolved. Moreover, some private clubs have managed to take advantage of the situation by charging a nominal membership fee and then giving discounts on green fees – thus offering an unfair advantage over proprietary clubs, according to UKGCOA members who have been campaigning for a fair deal throughout 2012.
One such member is former Women’s British Open winner Vivien Saunders, owner of Abbotsley Golf Club in Cambridgeshire.
“This is a disaster for proprietary clubs that we have warned the government about since 1993,” she said in Golf Club Management. “We warned that members clubs would start a membership scheme charging a small membership fee, charge a daily play fee and get VAT exemption on that.”
As the battle continues to rage, there has been vitriol splashed on either side. One golf industry professional maintains that proprietary clubs were largely born out of a skewed free market in the 1990s — when the Royal and Ancient Golf Club called for dozens of new courses to be built — and that changing market forces have now caused courses to struggle. It is unreasonable for them to expect market interference in the form of a rescue package, it’s argued.
Some regard golf club closure as a lesson being learned, albeit a harsh one. The Organisation of Golf and Range Operators recently suggested that up to 50 U.K. golf courses could close in 2013 due to poor weather and continued economic doldrums. Wintry weather continued into this spring, with snow closing roads as late as March 22. That will likely mean the annual membership renewal season will be a crunch time for clubs.
“With the terrible [summer] weather from last year having already been factored in for most proprietary clubs, we may well be about to see a dreadful period for some membership clubs, because if the members don’t think that their membership is good value for money, they won’t renew — simple,” said Colin Jenkins, chairman of OGRO.
Yet this grim picture of disunity and scrabbling for an ever-decreasing pot of golf revenue is set against a backdrop of relatively positive news. Recent surveys suggest that golf in the U.K. is not on its downers as much as was previously thought. A KPMG survey from 2011 showed that 70 percent of British golf clubs were profitable, up from 56 percent in 2010.
While the remaining 30 percent may not find encouragement in the success of their peers, only 7 percent of clubs reported their business performance was “poor.” Also, 20 percent of clubs reported they had returned to pre-recession levels for profit. That would be welcome news for any industry, but especially for a leisure industry that is traditionally first in and last out of financial difficulties.
A UKGCOA survey of rounds in 2012 showed that 17.5 percent fewer rounds were played from April to September in 2012 compared to 2011. This was related to the unusually wet summer. The mild winter, on the other hand, saw an increase in rounds.
The London Olympics also impacted golf play, according to Sports Marketing Surveys. It found that British clubs averaged 400 fewer rounds due to the one-time event.
Since these were one-off events, positive figures are expected for 2013.
So why such a positive note for play? For a start: Beginners are getting into golf in big numbers. More than 70,000 attended introductory sessions run by the England Golf Partnership from April through September. That was double of the numbers in 2011.
“The results of our survey indicate that the long-term, downward trend in golf participation may be reversing,” said a spokesman for Sport England, an agency focused on helping people and communities across the country create athletic habits for life. “The sport is reaping the benefit of the work of the England Golf Partnership and its network of county golf partnerships which reach out at grass-roots level to attract new golfers and returners to the game.”
This all brings hope that the rosier economic forecast will bring an end to the bitterness over taxes.
