The bottom may have just fell out of the UK fixed odds betting terminal business as the country’s government finally announced it was cutting the maximum bet allowed on the machines to just £2.
The previous maximum bet had been £100 pounds and the machines were the main source of income for most UK betting shops. The machines, however, have been targeted for advocates of problem gambling treatment and reducing their stakes was seen as a top priority for reformers. Gamblers advocacy groups say that the machines are a prime lure for problem gamblers who could lose thousands of pounds in a matter of minutes.
In fact, UK Culture Minister Matt Hancock said the machines were a “very serious social blight” in announcing the reduction, which was made in an order from the UK Department for Digital, Culture, Media and Sport.
“We have chosen to take a stand,” Hancock said. “These machines are a social blight and prey on some of the most vulnerable in society, and we are determined to put a stop to it and build a fairer society for all.”
However, no date has been set for when the new rule will go into effect, with the government saying it will likely wait until next year to enforce the cuts. The cuts are expected to be made permanent through actions in the UK Parliament.
FOBTs generate £1.8 billion in revenue a year for the betting industry, according to the UK Gambling Commission and about £400m in taxes. The department said it “cover any negative impact on the public finances” by raising taxes on online casino games. Those games are currently taxed at 15 percent while FOBTS were taxed at 25 percent, according to BBC News. The department said any changes in taxes will be announced during the country’s budget process.
“Sometimes in politics you have the chance to really do something to help people and, in particular, this case to help some very vulnerable people—hundreds of thousands of people who lose thousands of pounds on these machines,” Hancock said in the announcement.
UK Bookmakers, however, charged that the reduction in stakes was a purely political move and not based on hard evidence that FOBTs lead to problem gambling.
“This decision will result in unintended consequences including direct and indirect job losses, empty shops on the High Street, and a massive funding hit for the horseracing industry,” said Betfred’s Managing Director Mark Stebbings in a press statement.
William Hill CEO Philip Bowcock said the cut could make 900 of its betting shops—about 38 percent of its shops—unprofitable and force their closure, costing as many as 2,000 jobs.
“The government has handed us a tough challenge today and it will take some time for the full impact to be understood, for our business, the wider high street and key partners like horse racing,” Bowcock said in a press statement. “We will continue to evolve our retail business in order to adapt to this change and we will support our colleagues as best we can. Despite the challenges presented by this decision, our teams will compete hard and offer great service to William Hill customers.”
UK officials acknowledged that the cut could negatively impact the county’s betting industry.
“We respect and understand that this may have an impact on jobs in bookmakers,” said UK Sports Minister Tracey Crouch. “We are working closely with the industry for them to be able to grow and contribute to the economy.”
The British Horseracing Authority, which receives millions of pounds from bookmakers through a special tax, said it would work closely with the government to respond the decision.
In some other industry reactions cited by the BBC, GVC Holdings, which owns Ladbrokes Coral Group, said it expected profits to be cut by about £160m in the first full year that the £2 limit is in force, but has decided not to challenge the ruling in court.
The bookmaker said it was happy that the FOBT issue has been settled after months of uncertainty and that it has been preparing for the cut. Still, the firm is calling for an adjustment period to allow gambling firms to adjust to the new rules.
“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,” the firm said in a stock market update. “Significant re-engineering of the machines and gaming software will also be required to effect these changes.”
Opima CEO Jacob Lopez also called for a transition period.
“This is a measure that will certainly impact those retail bookmakers that haven’t got the budget or the means to make plans to innovate and find ways to become less reliant on revenue generated by the FOBTs in a short period of 12 to 18 months,” he said in a press statement. “It is sad because it could cost thousands of UK industry jobs in the short term; those who will lose their main source of income also have families and responsibilities will find difficult times moving forward.
“We hope a reasonable transitional period will exist for the bookmakers to adapt their retail business models,” he said. “We will need to wait to see the real impact in the next twelve to eighteen months in terms of how the map of the retail industry, already shrinking for the last few years, will end up.”
But not all bookmakers opposed the move. Peter Jackson, chief executive at Paddy Power Betfair, supported the cuts saying his company had been concerned that FOBTs were damaging the reputation of the gambling industry.
“We have previously highlighted our concern that the wider gambling industry has suffered reputational damage as a result of the widespread unease over stake limits on gaming machines,” Jackson said in a press statement. “We welcome, therefore, the significant intervention by the government today, and believe this is a positive development for the long-term sustainability of the industry.”
Still, in a market update, the company said it estimates a 33-43 percent decline in total machine gaming revenues when the cuts go into effect or about £35 – £46 million, representing 2-2.6 percent of group revenues.
The issue had certainly become a major focus for UK media, which has regularly been reporting on missteps in the industry and moves to protect problem gamblers. FOBTS have been a prime target, which some advocates call the “crack cocaine” of gambling, but the media has also focused on alleged deceptive advertising and payment practices in the industry in the last year.
The government has spent nearly a year reviewing possible cuts to the FOBT limit. Though it was obvious the £100-pound limit would go, other proposals had the stake being cut to £50 to £30 pounds. The £2 was considered the most drastic option. The UK Gambling Commission had actually supported the less drastic cuts, but most analysts feel the government gave into popular opinion with the £2 limit.
“The response to our consultation has been overwhelmingly in support of a significant reduction in B2 stakes,” Crouch, the UK sports minister said in his statement. “Local authorities, charities, faith groups, Parliamentarians, interest groups and academics all submitted opinions in favor of a £2 limit. The majority of respondents to the consultation agreed and as such we believe this step has strong public approval.”
Meanwhile, regulators in the UK continue to take a hard line of gambling firms, especially where it concerns self-exclusion lists.
The UK newspaper the Guardian recently reported that the UK Gambling Commission has warned the industry trade body, the Remote Gambling Association, of problems with the use of the new GamStop self-exclusion system used by several sites.
The commission’s executive director, Tim Miller, said he was “yet to see proper evidence of the effectiveness” of the system and said betting companies are continuing to send promotional materials to players who have self-excluded.
Miller said the commission was ready to demand that firms do not send marketing messages to people who have signed up to either GamStop or another self-exclusion scheme, or risk losing their license.
