UK government’s decision on fixed odds this week

Widespread overnight reports in the UK press Wednesday have predicted that the UK government’s decision on Fixed Odds Betting Terminal maximum deposits is imminent…and the consensus is that it will not be good news for High Street retail bookmakers.

The reports claim that the government will impose a GBP 2 maximum stake despite last-minute warnings from major gambling companies that such a move will result in up to 20,000 jobs lost and financial damage to companies as retail betting shops are shuttered.

Research by professional business services supplier KPMG has estimated a GBP 2 limit would cut revenue for HM Treasury by GBP 1.1 billionn over three years, an annual loss of GBP 45 million to local authorities and a GBP 50 million hit to British racing.

Concerns have been expressed that the government may seek to recoup some of these lost tax revenues by increased taxation on online gambling.

UPDATE:

Overnight reports appear to have been correct; the BBC and other media have reported that the GBP 2 maximum stake feared by bookmakers has been introduced.

Sports Minister Tracey Crouch said reducing the stake to GBP 2 “will reduce harm for the most vulnerable”.

Crouch said: “We recognise the potential impact of this change for betting shops which depend on (FOBT) revenues, but also that this is an industry that is innovative and able to adapt to changes.”

She said the government will work with the industry and the Gambling Commission “to examine the effects of regulatory changes and also the continuing trend of growth of gambling activity online”.

Crouch said FOBTs were “an outlier in the world of high-street gambling because of the speed with which it is possible to lose large amounts of money”. She said that the GBP 2 limit would “substantially” reduce harm and protect the most vulnerable players.

She added: “Even cutting to GBP 10 would leave problem gamblers, and those most vulnerable, exposed to losses that would cause them and their families significant harm.”

The government has not set an exact timetable for implementing its decision, said Matt Hancock, secretary of state for digital, culture, media and sport, applauding the decision as a major step in combatting the social blight of problem gambling.

“We’re going to get on with it. It does take parliament to approve it, so there will be a need to put measures through parliament,” Hancock said during an interview on BBC Radio 4 Thursday.

“I’m not going to set out an exact timetable because today we’re announcing the decision. We’re going to work with the industry to make sure that that’s implemented effectively.

“When faced with the choice of halfway measures or doing everything we can to protect vulnerable people, we have chosen to take a stand.”

Reacting to the government announcement, William Hill and Paddy Power Betfair said the decision would hit gaming revenue hard.

William Hill expects total gaming net revenue to fall by 35-45 percent, while Paddy Power sees a 33-43 percent decline in its machine gaming revenue. GVC said it expects to reposition its business within two years following implementation, with fully mitigated impact of about GBP 120 million pounds on its core earnings. GVC said in statement:

“It is now important that the industry is given an adequate implementation period to help prepare and plan for the shop closures that will arise, including attempting to mitigate the impact of resultant job losses. Significant re-engineering of the machines and gaming software will also be required to effect these changes.”

Shares in betting companies dropped this (Thursday) morning on the news, with GVC down nearly five percent in early trading, and William Hill down nearly six percent.

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