FOBT stakes and RGD increase: Industry reaction

The Government delivered its long-awaited verdict on FOBT stakes this morning, cutting max stakes to £2 and adding the “double whammy” of an impending increase in remote gaming duty.

Here’s what the key stakeholders had to say:

Paddy Power Betfair spokesperson: “We’ve consistently called for a significant stake cut which would take this issue off the table, so we’re pleased that the Secretary of State and Government has acted so decisively. Our industry provides a fun, exciting experience for the vast majority of customers and it makes sense to try and get back to that by removing what had become a toxic issue. Today’s move will have a short-term impact on our business, but we think it’s a really important step towards building a sustainable industry”.

Regulus Partners: “Our model suggests an additional remote tax burden of c. £200m, assuming RGD increases to 20% and GBD remains at 15%.

“The entire GB gambling industry needs to show leadership in safer gambling as a core strategic competence (we see this as a key opportunity with international dimensions; but with increased risks to other sectors due to an emboldened and perceived proven ‘anti’ lobby).

“Engagement with government needs recalibrating to move on, with key lessons learned from the long-term disaster we believe the LBO sector largely brought upon itself; this needs to be seen very much as the beginning of an era, not the end of one.”

William Hill CEO, Philip Bowcock: “William Hill has a long and proud heritage as part of the UK high street and we know how important betting shops are to our customers and their local economies. 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 horseracing.

“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.”

Hills projected a reduction in total gaming net revenue of 35-45%, with around 38% of shops (c900) becoming unprofitable. A proportion of these are at risk of being closed in a “relatively short amount of time” after the stake limit is imposed. Annualised operating profit expected to fall by £70-100m.

GVC: “Whilst we welcome the certainty provided by the announcement, we are disappointed with the outcome, particularly given the previous independent evidence on stake cuts published by both the Gambling Commission and the Responsible Gambling Strategy Board.

“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. Significant re-engineering of the machines and gaming software will also be required to effect these changes.

“Today’s Government announcement marks the end of uncertainty on FOBT staking limits.  As a responsible business, we re-iterate our commitment to work closely with the Government and our regulators to ensure that both our retail and online offerings are places where customers can enjoy gambling in a safe and secure environment. In order to achieve a positive and constructive working relationship, GVC confirms that it does not intend to seek a Judicial Review of the Triennial Review decision.”

GVC projected a £160m impact on EBITDA in the first full year after the cuts, dropping to £120m a year following mitigation measures.

Cenkos analyst Simon French: “Today’s newsflow will hopefully be a catalyst for a more unified lobbying approach from the gambling industry as opposed to the unedifying spectacle that unfolded over machine stakes. As we have stated before, the UK is a genuine world leader in online gambling and this competitive/first mover advantage risks being eroded through a lack of constructive dialogue with government. The ball is firmly in the industry’s court.

Industry exec, speaking off the record: “Online gaming is now firmly in the crosshairs and the increase in RGD could be just the start. While FOBTs have been at 20% tax, with a £100 max stake and 20 second minimum spin rate, online casino is taxed at 15% and there is no practical limit on spin rate and up to £10,000 per spin is allowed.

“Online games also have button specifically designed to encourage people to chase their losses (‘double and spin’) and encourage problem gambling. This is in breach of many licencing objectives and should be illegal and the UKGC have been entirely inept in policing this, and as operators cant/wont self-police, the government will step in.

“Despite the need for KYC online this cannot and will not be allowed to continue, and makes an easy target for socially responsible governments, especially in an environment when almost every major operator in the UK has been fined for extensive failure to protect problem gamblers online.”

We're driving industry reform & safer gambling advancements including the industry first RG ATL campaign, paying millions in UK based taxes, supporting thousands of #Yorkshire jobs + £300m GVA, £1.2m this year alone into L&D, tech academies, grad schemes…? #valuecreation #FOBT https://t.co/yUhXItO9Jj

— Zoanne Garner (@zedheb) May 17, 2018