Kirsten Fleming: Betting industry must choose other options

They are a favourite amongst bookmakers and their customers, but new rules which have come into force this month see a maximum stake of £2 for fixed-odds betting terminals (FOBTs) which is a significant reduction from the previous maximum bet of £100. The changes arose after mounting pressure was placed on the government to enact measures that will protect those at risk of gambling harm, but the move could spell trouble for the industry and its profitability.

Fixed-odds betting terminals have been under increasing criticism for encouraging high-stakes betting. Picture: Ian Georgeson

According to the Gambling Commission, there are more than two million people in the UK who are either “problem gamblers” or at risk of addiction. The government’s decision is therefore seen as a welcome step in the right direction, particularly as FOBTs have been under increasing criticism for encouraging high-stakes betting.

FOBTs were introduced in casinos and betting shops in 1999 and offer computerised betting games at the touch of a button. Before the government’s clamp-down, bets with stakes of up to £100 could be played as often as every 20 seconds.

The government said it “recognised the strength of feeling” on the issue and that it knew “gambling addiction can devastate lives”. It has, however, been a heated issue in parliament and, as a result, the enforcement date (initially scheduled for October 2019) has been brought forward to this month.

Kirsten Fleming is an Associate in Addleshaw Goddard's Business Support and Restructuring team

However, while the measures (and the move to bring forward the enforcement date) have been commended, particularly by those who have experienced gambling addiction, they could have the potential to cause major financial distress for bookmakers and betting shop owners, who largely rely on profits gained from FOBTs.

The Gambling Commission recently reported that the gambling yield of the industry in Great Britain in 2018 was £14.4 billion, with £1.7bn of that coming directly from FOBTs. There are around 32,956 FOBTs in the UK, and that excludes the machines provided in venues that are not licensed by the Commission.

The figures highlight the reliance bookmakers have on FOBTs as a key source of profit, and so the newly-introduced £2 limit could have a detrimental impact on the industry, including threats of closure and the loss of jobs. In a recent statement, the Association of British Bookmakers commented that the reform is expected to result in up to 4,000 shop closures and 21,000 job losses. It also poses a knock-on impact on suppliers and other stakeholders, as well as pubs and arcades that may rely on FOBTs as a steady source of income.

To make up for the loss in tax revenues from FOBTs, the government has also announced there will be a rise in Remote Gaming Duty taxes in online gambling, from 15 per cent to 21 per cent. This increased levy is likely to have a damaging effect on the online gaming sector, which includes online betting, bingo and casino games. It therefore seems likely that, regardless of the measures introduced to offset the pressures of the reform, there is likely to be an impact on most aspects of the industry – whether in stores or online.

It is therefore inevitable that the betting industry will experience a period of financial distress. However, the smart businesses in the sector are looking at the viability of this part of their business, by carrying out revised projections and considering other opportunities to compensate from the potential loss of income. We would strongly urge companies who are not already taking advice to do so, and act sooner rather than later to avoid the significant impact these reforms may have on their business if appropriate measures are not put in place.

Kirsten Fleming is an associate in Addleshaw Goddard’s business support and restructuring team