English bookmakers are bracing for a report by Britain’s Department for Culture, Media and Sport due this month that is expected to recommend sharp cuts to the maximum bet allowed at fixed odds betting terminals, but one UK firm is backing such a move.
According to a report in the Financial Times, Breon Corcoran, CEO of Paddy Power Betfair, has written to the department saying that due to the “toxic” nature of public debate on FOBTs, only significant action will help in “addressing societal concerns.”
The high betting limit on the terminals—which now stands at £100—has set off a public debate in Britain with many problem gambling advocacy groups and members of Parliament calling for a drastic cut in the amount. Such a move is expected to cut deeply into bookmaker’s revenue.
Corcoran sent the letter to Tracey Crouch, minister at the Department for Culture, Media and Sport.
According to the Times report, the letter read, “Whilst we are not aware of any evidence which links stake size to problem gambling, we are acutely aware of the increasing reputational damage to the gambling industry that has followed lack of progress in this area. We now believe that the issue has become so toxic that only a substantial reduction in FOBT stake limits to £10 or less will address societal concerns. I am confident we could operate our retail business successfully and profitability under such circumstances. Other well-run operators should be able to do the same.”
Though Corcoran is the first gambling firm CEO to publicly support cuts, the Times report said former Paddy Power co-founder and CEO Stewart Kenny, secretly lobbied against the terminals in 2009.
As British bookmakers wait for the report, it’s been suggested in varying published articles that cutting the maximum bet to £2—which many advocacy groups back and is expected to be the report’s recommendation—would reduce bookmaker’s revenue by hundreds of millions of pounds. Some reports have said such a cut could cost Paddy Power Betfair £10 million in revenue.
Paddy Power Betfair has significantly less retail outlets in the UK—about 100—compared to competitors such as William Hill, which has around 900, and Ladbrokes and Coral, which combined have over 3500 UK shops.
In a related story, Ladbrokes Coral has reportedly hired Deutsche Bank, Greenhill, and UBS as corporate advisors on “consolidation matters” in preparation for the government’s decision.
Meanwhile, the UK’s Labour Party has introduced a proposal to increase taxes on the gambling industry to fund new national programs to fight problem gambling. The proposed programs would treat mental health issues and aim to curb problem gambling as a growing problem in the UK.
“The number of problem gamblers in this country has risen by a third in just three years,” said Shadow culture secretary Tom Watson at the party’s recent conference in Brighton. “Two million people are either problem gamblers or at risk of addiction. Children and young people are being targeted by betting advertisers more than ever.”
Watson also said the current system, where firms are asked to voluntarily contribute 0.1 percent of profits to such programs, isn’t working. The 0.1 percent contribution suggested for education and treatment under the GambleAware program should bring in £13.8 million pounds a year, the party said, but in the year ending September 2016 firms only contributed £7.6 million pounds.
The proposal also comes after a UK Gambling Commission investigation found that more than two million UK citizens were either problem gamblers or at risk of addiction. The report also found that many bookmakers do not adequately administer self-exclusion protocols on their sites and problem gamblers on self-exclusion lists often still find a way to access sites.
The party is also expected to call for a review into problem gambling and the ability of the national health service to treat it.
Meanwhile, the London Sunday Times recently reported bookmakers Ladbrokes Coral is reviewing merger options on the eve of the UK government’s announcement on fixed odds betting terminals. Anticipating potential restrictions, Ladbrokes Coral has hired the Deutsche Bank, Greenhill and UBS as corporate advisors to weigh all merger options and assess its business strategy.
The Times reported 35 percent of Ladbroke Coral’s net machine revenue comes from FOBTs. The government is expected to limit machine betting to £20 ($26.90) every two seconds, down from £100 ($134.28)
In August, Reuters reported Ladbrokes Coral was the subject of a takeover by the British online gambling company GVC Holdings but the talks went nowhere. GVC’s proposal valued Ladbrokes Coral at about 2.7 billion pounds ($3.47 billion), or 140 pence ($1.88) per share. GVC also was prepared to offer an additional 50 pence ($.67) a share to about 3.6 billion pounds ($4.84 billion), if the government’s proposals were helpful to the industry.
British betting companies are merging to be able to absorb rising costs associated with stricter regulation and higher tax rates. Ladbrokes completed its merger with Coral last year, Paddy Power and Betfair also merged and GVC bought Bwin.
