Stake cut will spark betting shop closures and job losses, bookies warn
Britain's biggest bookies have warned over potential betting shop closures and job losses as the move to slash stakes on fixed-odds betting terminals (FOBTs) to £2 is set to hit profits.
Shares were initially sent slumping across the sector as the big players estimated the extent of lost revenues and earnings, although some of the stock losses were later clawed back.
William Hill, which makes more than half of its retail revenues from FOBTs, said the "unprecedented" decision could see around 900 of its betting shops become loss-making, with a proportion at risk of closure after the new £2 limit comes into force.
The group said the stake cut could reduce annual earnings by between £70 million and £100 million, and estimates it will cut its total gaming net revenues by as much as 45%.
The firm has already recently cautioned the stake cut could leave it at risk of a foreign takeover.
It comes as the Association of British Bookmakers predicted more than 4,000 shops could close across the entire sector, with the loss of 21,000 jobs.
William Hill plunged as much as 9% at one stage before later recovering to stand 0.4% lower, while Ladbrokes owner GVC and Paddy Power Betfair tumbled 7% and 5% respectively before recovering to make small gains.
Philip Bowcock, chief executive of William Hill, said: "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.
"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."
GVC said it expected profit to be cut by around £160 million in the first full year after the £2 limit comes into effect.
Kenneth Alexander, chief executive of GVC, said: "Although we are ultimately disappointed with the outcome of the Triennial Review, it is a decision we accept.
"The uncertainty has weighed heavy on the industry and the many thousands of people who work within it. Our focus now is to work with government to build a constructive relationship that will ensure a positive future for the sector."
Paddy Power Betfair welcomed the move to help improve the sector's image, but warned it could hit its gaming revenues by between £35 million and £46 million.
The hit to its profits could be offset by factors including gamblers switching to other games, as well as benefits from less competition as rivals are forced to merge, it said.
Peter Jackson, Paddy Power Betfair's chief executive, said: "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.
"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."
Russ Mould, investment director at AJ Bell, said gambling stocks were in "crisis management mode".
He said: "The next issue to consider with the sector is the potential for the UK Government to increase taxes for online betting in order to recoup money it used to get from gambling machines.
"That would represent a double blow for companies."
He added: "Amid this period of turmoil, William Hill is certainly looking vulnerable to a takeover bid, particularly as it already has a foothold in the US."