Racing in the Recession - The Going is Heavy

In the week of the Tattersalls October Yearling Sale, Tom Thomson-Jones looks at how the recession is affecting the horse-racing industry in the UK and finds that the downturn is showing through in falling prices for horse prices at the yearling sales. Declining prices have affected demand at slaughter houses and change the cost of inputs for glue factories - a good example of the inter-relationships between markets. The UK has sixty one tracks - how many will survive the recession?

Last year there was finally strong evidence to suggest that the credit crunch had finally caught up with Horse racing industry and the bubble in horse prices had ultimately been burst. Much like football, horse racing has had, over the years, ridiculous amounts of money injected into it. No one is entirely sure where this enormous supply came from, be it sponsorship, arab investors, or just an increase in innocent popularity, but it certainly blew everything out of proportion, much like football.

At the beginning of last year’s sales (the horse transfer market) prices were remaining strong, at the Tattersalls yearling sales in October the average horse was sold for around £75,000. Despite other values in racing falling like sponsorship etc., horses were continuing to sell at record prices throughout the year. The average at Newmarket sale 08’ was 102,448 guineas or £107,570, 40 per cent higher than 2007’s average. Yet at the Newmarket sale in early January, the top price was just 74,443 guineas, a 28 per cent reduction on last year.

For the best part of 2009 prices have continued to drop almost proportionately to house prices. Due those owners trying respectably to lock away the wallet, the demand for race horses has dramatically fallen causing a massive decrease in price and a sharp inward turn on breeding. This year over 200 foals were denied by horse owners and were sold instead to slaughter houses and glue factories. Because of this large rejection of stock, many breeding studs have gone into administration and many have closed down.

This downturn in racing is likely to carry on until mid-2010, where prices will regain normal standard and those that fled the sale will return bright and early for the first Lott.

Tom Thomson-Jones