Paddy Power warns over British decision to cut betting machines stakes
Despite the announcement, shares in Paddy Power Betfair and its rivals rise in London
The British government pledged on Thursday to cut the maximum stake allowed in betting machines to £2 from £100. Photograph: Chris Ratcliffe/Bloomberg
British authorities’ decision to slash the maximum stakes in bookie shops’ betting machines could cut Paddy Power Betfair’s revenues by up to £46 million (€52.6 million), according to the Irish group.
The British government pledged on Thursday to cut the maximum stake allowed in betting machines to £2 from £100 in a move likely to cost bookmakers’s £200 million and possibly force hundreds of job losses.
Paddy Power Betfair said that, in 2017, the move would have cost it £35 million to £46 million “representing 2 per cent to 2.6 per cent of group revenue”, but would also cut expenses, including machine duty and supplier payments.
Peter Jackson, its chief executive, noted the group had already warned that unease over machine stake limits was damaging its industry’s reputation.
“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,” he said.
Around half Paddy Power’s 600-plus bookie shops are in Britain, leaving it less exposed to the change than listed rivals William Hill and Ladbroke Coral owner, GVC.
Official figures show there are more than 182,000 gaming machines in the UK. GVC and William Hill generate a large chunk of their retail revenue from them. They are illegal in the Republic.
Despite the British government announcement, shares in Paddy Power Betfair and its rivals rose in London. Investors believe a US supreme court ruling this week allowing states to legalise sports betting outweighed the negative news in the UK.
Paddy Power Betfair benefitted from this and news that it is in talks to buy US company, Fanfuel.
The machines, fixed-odds betting terminals (FOBTs), are regarded as addictive as they allow customers to bet on casino games every 20 seconds.
The British government review was widely expected to result in a cut to the maximum stake, although bookmakers had lobbied against any drastic reduction.
Matt Hancock, the UK secretary of state for sport, described FOBTs as a “social blight that preyed on some of the most vulnerable in society”.