New UK lottery operator expects to fall short of charity money vow initially

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The incoming operator of Britain’s National Lottery said it expects to initially fall short of promises it made bidding for the lucrative government contract as it prepares to take control of the country’s largest distributor of charity funds.

Robert Chvátal, Allwyn group chief executive, told the Financial Times the lottery “may get a headwind initially” that pushes money for good causes below the amount originally projected for the first two years.

Chvátal also said that plans to replace the lottery’s 40,000 retail terminals and to overhaul its digital products would be delayed “by at least half a year”. He insisted that Allwyn would still meet its 10-year targets.

“The phasing has changed,” said Chvátal, but “in the great scheme of things of 10 years, we have a chance to catch up”.

The handover to Allwyn in just over four months marks the first time in the lottery’s 29-year history that it will switch hands. The National Lottery offers weekly draws and instant games, and is a key provider of funding for sports, heritage and good causes across the UK.

The transition has been contested, with incumbent contractor Camelot and Allwyn previously clashing in court over the tender process. The dispute was resolved by Allwyn buying Camelot for £100mn.

Allwyn, owned by Czech billionaire Karel Komárek, has told the National Lottery’s 12 associated charitable bodies, which distribute money to good causes, to expect that last year’s funding of about £1.8bn will barely increase next year, according to two people briefed on the discussions.

Chvátal said Allwyn would still meet the long-term target from its bid of generating £38bn for good causes — including UK Sport, which supports Olympic athletes, and the Arts Council England — over the course of the decade-long licence, averaging £3.8bn in good causes funding a year.

Under the new lottery licence, Allwyn will charge a smaller management fee, meaning a higher proportion of revenues are distributed to beneficial works. However, charities were warned by Allwyn that because of the slower-than-expected handover process, annual sales — which last year totalled £8.2bn — would be broadly flat as well in 2024.

“We are going to do everything in our power, despite the . . . economic world, the cost of living crisis, all the rest of it, [to ensure] the amount of money going to good causes does not drop year-on-year,” said Andria Vidler, who started as Allwyn’s UK chief executive last month.

“I do expect to be able to hit the quantum over a 10-year period,” she added.

Allwyn still believes that its success in increasing participation in lotteries in Austria and Greece can be replicated in the UK. It hopes refreshed scratch cards will boost revenues.

Vidler said that Allwyn’s plans outlined in its bid to cut lottery ticket prices from £2 to £1 in an attempt to drive demand were “under review”. “I’m allowed to come in and question things,” she added.

From the start date of the fourth National Lottery licence on February 1 next year, Allwyn was meant to install a new technology provider Scientific Games to replace existing supplier International Games Technology.

But that transfer would now be “deferred” by at least six months, Chvátal said.

“Day one is coming closer but even in our bid we did not intend to change everything with the flick of a switch . . . it will be a gradual change,” added Chvátal. “February 1 will bring some news . . . and there will be some following important milestones.”

Last month, Allwyn struck a multimillion pound deal with IGT for the New York-listed company to continue providing the software and hardware underpinning the lottery’s retail terminals for an extended period.

Chvátal admitted that Allwyn would have to simultaneously pay two technology suppliers: IGT, which will continue to provide services, and Scientific Games, which will take over running the scratch card games division.

Referring to the interim agreement with IGT, Vidler said: “Damn right, it wasn’t meant to happen.” The deal with IGT was to ensure “there will be no interregnum or interruption of service”, explained Chvátal.

MPs who have presided over the transfer of the government contract have cautioned that Allwyn must be allowed a fair chance to deliver.

Dame Caroline Dinenage, chair of the House of Commons culture, media and sports select committee, said the lottery “had never changed hands previously so it’s obviously going to take some time to bed in”.

“I do think the National Lottery is due a refresh,” said Dinenage. “Allwyn made some really ambitious promises . . . about their ability to rejuvenate our National Lottery and to return more money to good causes, and they should be given a chance.”