The UK Government has had a hard time of it lately. Seemingly unable to make a decision about anything, they have suddenly acted swiftly and decisively. On the one hand, their action might save hundreds of problem gamblers from addiction and crippling financial damage – on the other it may see thousands of people lose their jobs and more harm done to the fabric of our town centres.
I refer, of course, to yesterday’s announcement that the maximum stake on Fixed Odds Betting Terminals (FOBTs) will be cut from £100 to £2.
At the moment the maximum stake on FOBTs – or bots as they are colloquially known – is £100. Campaigners against gambling addiction have long fought for a reduction in this limit – with the high street bookmakers stridently insisting that the limit needs to stay as it is – and they have now got their way.
Despite talk of a ‘half-way house’ limit of £30, the Government has announced a reduction to £2 with Sports Minister Tracey Crouch saying that the reduction, “will reduce harm for the most vulnerable.” Showing scant regard for the bookmakers’ shareholders, she added,
“We recognise the potential impact of this change for the betting shops which depend on FOBT revenues, but also that this industry is innovative and able to adapt to change.”
How did the bookmakers react to the news?
As you might expect, with howls of anguish. William Hill, which generates half its retail revenue from FOBTs, called the action unprecedented and warned that 900 of its shops could close. It forecast that full-year operating profits could drop by between £70m and £100m, while GVC, the owner of Ladbrokes, forecast a full year fall of £160m.
The Association of British Bookmakers said that it expected 4,000 shops to close and “21,000 colleagues to lose their jobs.”
Why did the bookies campaign so hard to keep the limit?
See above: because the Fixed odds betting terminals accounted for a significant slice of their profits. With business rates, town centre rates and staff costs, betting shops are an expensive presence on the high street. The income generated by the FOBTs almost certainly made hundreds, if not thousands, of loss-making shops profitable. But anyone who goes into a betting shop cannot fail to notice that the average age of the customers is far greater than the younger demographic the bookmakers target online.
Call me cynical, but while the bookmakers will be making plenty of noise about the reduction to £2 and the impact it will have on their short-term profits and high street presence, privately they may well be breathing a sigh of relief. Betting shops are clearly an idea whose time has passed, and now the bookmakers can lay the blame for their closure very firmly at the feet of the government.
What’s happened to the bookies’ shares?
In the short term, they have gone down. Having risen sharply on Wednesday on the news that sports betting would become legal throughout the US, they went in exactly the opposite direction on Thursday morning, with Hills and GVC shares falling sharply. Clearly, it is not the function of this site to give investment advice but, as above, it is my hunch that in the long run, this reduction to £2 will not be the disaster for bookmakers they are currently making it out to be.
What happens now?
…It may, however, be very bad news (if not quite a disaster) for British horseracing, with the bookmakers certain to make good on their threat to cut back on sponsorship. Horseracing is heavily reliant on bookmakers’ sponsorship and while the major races will continue to attract sponsors – especially with new sports betting companies seemingly entering the market monthly and needing to gain exposure – but bookmakers’ sponsorship of less important races will unquestionably be cut back.
Will this solve the problem of problem gambling?
I have tried to avoid the cliché of “the crack cocaine of gambling” in this article. When I toured my town’s betting shops recently – and found that more than 50% of people in the shops at 10 am were playing on the FOBTs – I had never seen a group of people that looked less like the apocryphal crack cocaine users.
Yes, many people have undoubtedly lost large amounts of money on FOBTs, and over the coming weeks, these stories will be re-circulated in the media.
But I would suggest that the people gambling the maximum £100 stake on the FOBTs were few and far between. I would say that the bookmakers’ profits come not from the maximum stake, but from the regular use of the machines and the built-in profit margins. Certainly, in the shops I visited, I doubt that the reduction in the maximum stake will have a significant impact on customer behaviour.
As for the headline stories of “I lost £15,000 a day on FOBTs” you have to ask whether that was the FOBTs or the gambler. Alcoholics will find a way to drink and, sadly, compulsive gamblers will find a way to gamble. FOBTs were – and will remain – quick, easy and convenient, but for the problem gambler, they are a long way from the only game in town.
But let us now turn to something more cheerful…
It is Friday morning; the sun is going to shine all weekend and tomorrow Prince Harry and Meghan Markle are tying the knot at St. George’s Chapel in Windsor. It will be a wonderful state occasion, a story of two young people pledging their lives to each other – and, of course, a great chance to place a few novelty bets.
Yes, whatever their worries about the closures of the betting shops, the nation’s bookies have not been slow to offer us odds on tomorrow’s Royal Wedding. There is an absolute welter of Royal Wedding markets. Will Prince Harry be clean shaven? No, is the favourite, but not by a significant margin. Meanwhile, the big question that has been all over the tabloid headlines is who will walk Meghan down the aisle? With her father supposedly due for heart surgery the hot favourite is Doria Ragland – yes, I had to Google it myself. She is Meghan’s mum (or mom, if you are reading this in the US). But there is a ‘springer’ in the market: late money has come in for Prince Charles doing the job – or you can get 10/1 that Meghan walks herself down the aisle.
It is odds-on the Whitney Houston will be the first artist played for the first dance – no prizes for guessing the song – and, according to the bookies, the Queen will be wearing a green hat in church.
Finally, it is 1/5 that Meghan will arrive at the church in a Rolls-Royce, and 16/5 that she will be in a Bentley. If you think that those are rather too old-fashioned, and the latest royal marriage demands something far more cutting edge, then the bookmakers will offer you 250/1 that Meghan will get her phone out and call Uber.