Future of Betting Shops seminar: Key points

Future of Betting Shops seminar, held at the Palace of Westminster on Tuesday, was the second in a series of gambling seminars organised by the All Party Betting and Gaming Group (APBGG).

By the time you get to reading this second paragraph of this article, we can imagine you may have already worked out what the key issue and unavoidable debate happened to be.

APBGG co-chairman Philip Davies MP even said from the off that he did not want the seminar to be purely about, you guessed it, fixed-odds betting terminals (FOBTs).

While FOBTs and the possibility of heavier regulation of the machines was spoken of at length, other themes included a decline in independent betting shops, the proposed replacement of the horseracing levy and M & A.

Troubled times

The seminar began with speeches from each of the speakers – Malcolm George, CEO of the Association of British Bookmakers, John Heaton, chairman of Scotbet, and William Hill director group regulatory affairs Andrew Lyman.

Some damning statistics were laid bare by both George and Heaton. When discussing independently-owned operators, George said: “It should be noted that the number of independent betting shops has decreased by 43% since 2009. In December 2009, there were about 1,500 independent betting shops. That number dropped to 877 by the end of 2014.” George went on to say that there were 500 betting shops found to be systematically loss-making in a sample research carried out by KPMG and that the exchequer would stand to lose an estimated £18.6m if those shops were to close.

Following on the topic of independent shops, Heaton said Scotbet’s number of shops have reduced from 75 to 49 in the last five years, with eight of the nine closed last year being due to economic reasons. When addressing the plans for a replacement to the horseracing levy of 10.75% on gross profits with a new racing right, Heaton said: “There seems to be an implication from the British Horseracing Authority that we can afford to pay more – well we can’t. In the current financial year, we’ll make gross profit after tax of £1.23m out of UK horseracing and taking all costs into account, we are losing £265,000 for the privilege of providing horseracing betting in the first eight months of this year. The main problem is the cost of media rights. I am quite happy for us to pay for a racing right based on the turnover and profit that we make on horseracing, but a flat rate charge for my shops is killing them and it’s killing the independents.”

Heaton’s maths also suggested that it is impossible for Scotbet to make high amounts of money from gaming machines, as after paying duty and the machine provider, each Scotbet shop makes approximately £10 an hour from the machines, which does not cover the staff costs for that hour.

Heaton was also critical of parliament removing demand criteria, where bookmakers had to prove there was a demand for a shop, when the 2005 Gambling Act was implemented and that they can have no complaints about bookmakers moving into the high street.

Stuck in the 1960s

Lyman argued that the current debates about betting shops are not too different to when the first legal betting shops in the UK opened in 1961, such as the accessibility to gambling, potential corruption of the working class and a rise in problem gambling. “The same arguments will probably be discussed in this room today, in a slightly different guise,” he said. Lyman disagreed with the view that betting shops are unregulated and said that “nothing could be further from the truth”.

On FOBTs, Lyman said the change in regulation of FOBTs for stakes of more than £50 to be assisted by staff or to be placed through account play led to an approximate 6% hit in betting shop revenues and that there has been a “very significant reduction in profits from stakes of over £50”. It is Lyman’s opinion that figures of £100 possibly being staked on FOBTs every 20 seconds by players “are quite ridiculous and the Responsible Gambling Trust’s research has proved that”.

Maximum stakes

From the first question from the floor, tension was in the air. John White, chief executive of amusement industry trade body BACTA, asked not only if maximum stakes could be reduced but if a different type of machine could be offered altogether. Heaton pointed out that BACTA has been opposed to FOBTs for as long as they’ve been around as they are a competing product. He also argued that there is a misconception of how players play and that they prefer to cover the board when playing roulette, therefore capping maximum stakes at £2 wouldn’t work for Scotbet’s customers.

Sir Peter Bottomley MP asked if the speed of bets being placed on FOBTs could be reduced without affecting profit. Lyman said that the right way to go about it would be to identify problem gambling behaviour at all staking levels. Bottomley wanted to know what the economic impact of stake reduction would be and used the example of reducing the maximum stakes to £20. Lyman reiterated his point about the changes to stakes over £50 and the 6% reduction in revenue and said that “the lower you go, in terms of the stake, the higher the revenue fall is likely to be”.

Problem gambling

Staying on the FOBT topic, Gambling Insider asked to what extent the panel agreed that the focus needs to change to data that could prove if FOBTs drive or can be linked to problem gambling, in light of the UK Gambling Commission’s data showing that the problem gambling rate was 0.5% of gamblers for 2015. George said: “We’ve seen problem gambling levels flat-lining not just for three or four years but effectively for 15-20 years and since long before these machines were introduced. That is the challenge for evidence-based regulation. If we have not seen an increase in problem gambling rates over the period that these machines have been in place, then why restrict choice and drive individuals away from products and potentially away from betting shops? How that is an evidence-based approach wholly escapes me.”

Ladbrokes Coral

When asked by Gambling Insider about what effect the impending Ladbrokes Coral merger could have on the market, Heaton said: “The removal of the demand criteria allowed any bookmaker to open up wherever they like. The only thing that surprises me is that it was very firmly rejected by the Monopolies and Mergers Commission last time and I can’t really see what has changed in the intervening period.”

Gambling Insider verdict

FOBTs were always going to dominate discussions, but it should not be forgotten that there are other issues for UK betting shops to be concerned about. Heaton’s points about costs of operating and the difficulties faced by the independent bookmaker stress the predicament the smaller operator faces as the high-profile bookies merge and cement their position of power.

The industry will not budge on asking for more data to prove that the maximum stakes on FOBTs need to be reduced and the debate still doesn’t show much sign of reaching a conclusion. It will be fascinating to see what more can be added when the APBGG hosts a seminar on the future of gaming machines in June.