The UK government is due to decide on a maximum stake for fixed odds betting terminals (FOBT) after local elections in May.
Big issue for bookies
In 2017, the £1.8bn ($2.5bn) income from FOBTs alone made up over half of a bookie’s income, so you can see why this is a big deal for most of the gambling industry.
Towards the end of last year, campaign groups petitioned the government to review the maximum stake after news that the maximum £100 ($140) was causing severe worry and financial harm amongst the most vulnerable users. This is something that gambling firms believe there is little evidence to support.
However, the government is on board for a big cut, despite the possible hit to the Treasury. In December it announced that consultations would be undertaken to determine a new maximum stake and that this would definitely be lower than £50 ($70). With the recent news, this now looks to be as low as £2 ($2.8).
The story so far
Last month, the Gambling Commission concluded in their recommendation that for some FOBT games such as slot machines, the maximum stake should be £2 ($3.8), and for non-slots, this should be cut to £30 ($42). They also cited that other measures, such as a credit card ban, need to be agreed – although it’s unclear whether the government will adopt these new suggestions. Up until now, FOBTs have permitted players to stake up to £100 ($139) every 20 seconds, meaning they could theoretically lose as much as £18,000 ($25,000) in an hour.
Gambling Commission chief executive Neil McArthur said: “In our judgment, a stake cut for fixed odds betting terminals alone doesn’t go far enough to protect vulnerable people. That is why we have recommended a stake cut plus a comprehensive package of other measures to protect consumers.”
Huge share drop
However, recent news in The Times suggested the government might be going even lower – causing share prices to tumble.
According to the paper, the Chancellor, Philip Hammond, is close to signing a deal with Culture Secretary Matt Hancock at the £2 maximum stake level, but this cannot be implemented until after the May 3 local elections due to parliamentary rules.
For the government, such a cut in stakes would mean a severe dint in revenue from taxes. But the source believes this can be recouped from the high taxing of other forms of gambling.
FOBTs have been in the spotlight because they are alleged to encourage problem gambling.
The real cost of FOBTs
After the announcement, shares in William Hill plunged 12% down to 300.5p, valuing the company at £2.56bn ($3.57bn). This is a real blow after shares were returning strongly in the last few months after their low-level crash to just 250p in October.
The news also hits other gambling firms, with Paddy Power Betfair, the UK’s biggest quoted gaming firm, seeing almost 3% of its stock value wiped at £71.20 ($99), and at the GVC group, which now owns Ladbrokes Coral, shares are down around 4.5% at 927p.
This recent announcement is particularly bad news for Ladbrokes Coral shareholders after the takeover deal included a pot of 32.7p per share and 0.141 new GVC shares, with a further contingent entitlement of up to 42.8p depending on the government ruling on FOBT stakes.
The UK local and mayoral elections take place on Thursday, May 3. It is therefore likely that an announcement on FOBTs should take place the week after.