Catastrophic: warning for racing if FOBT limit is reduced to £2

Large-scale betting shop closures following a government crackdown on fixed odds betting terminals would have a "catastrophic" effect on British racing, one of the sport's leaders has warned.

Arena Racing Company chief executive Martin Cruddace, who previously held the same role at the Association of British Bookmakers on an interim basis, said that – while bookmaker claims about betting shop closures were overstated – losses of up to 3,000 shops were possible.

This would result in a minimum £55 million cut to the sport's income, with the vast majority of that sum inevitably being cut from prize-money, forecast to be £160m this year.

The BHA also warned of the unintended consequences of government action as the sport, bookmakers and the City reacted to a Sunday Times report suggesting culture secretary Matt Hancock favoured cutting the maximum stakes on the controversial machines to £2.

Hundreds of millions of pounds were wiped from the values of William Hill and Ladbrokes Coral on Monday as their share prices went into freefall following the news.

A government consultation on gambling closes at noon on Tuesday. It set out a number of possible outcomes, all reducing the maximum stake on FOBTs from £100 to a range between £2 and £50.

Martin Cruddace: 'Between 2,500 and 3,000 shops could close'

The machines have become vital to betting shop operators with the gross gambling yield – the amount kept by operators after winnings have been paid out – for FOBTs in the year to March reaching £1.8 billion, compared to £1.39bn from traditional betting.

The betting shop industry has claimed that, with the sector paying up to £30,000 per shop for media rights, the loss of 3,000 betting offices would lead to racing losing out by £90m per annum.

While Cruddace did not go that far, and said the sport supported measures to protect consumers from harm, he did warn that racing would be hit hard by a cut to £2.

"We fully support the government’s desire to pursue a policy that can protect consumers within a socially responsible gambling industry," he said. "We also believe the gambling industry, more than ever, is prepared to actively implement measures to further the government’s stated policy aims.

"It is not for us to give a view on what that the maximum stake should be, but we do believe we have to point out the impact on British horseracing of a reduction to £2.

"While we believe some of the predicted numbers on shop closures, in the event of a £2 maximum stake, are overstated, we do think that between 2,500 and 3,000 shops could close."

Will Lambe: 'Our submission will emphasise how our sport’s commitment to social responsibility and contribution to the economy, is supported by sustainable income from the betting sector'Credit: Edward Whitaker

Cruddace said the way media rights deals and how the levy is calculated were heavily dependent on betting shop numbers.

He added: "These shop closures would have a minimum £55 million impact on British horseracing.

"We also need to be cognisant of the impact on the profitability of the remaining shops. The effect on prize-money and the economic ecosystem of the industry would be pretty catastrophic.

"It would be a sad irony that the great work of the industry and government in extending the levy to online operators last year could be undone (and more) at a stroke."

It is understood a cut to £2 could lead to losses of £15m for Arc, rising to £20m-£25m for Racecourse Media Group, whose members include Jockey Club Racecourses and large independents such as Ascot and York.

The BHA said it agreed with the government that there should be a balance between the bookmaking industry's economic contribution and a socially responsible betting sector, while not damaging racing in the process.

BHA executive director Will Lambe added: "Our submission on behalf of British racing will emphasise how our sport’s commitment to social responsibility and contribution to the economy – including employment, education and training and charitable initiatives in many rural communities – is supported by sustainable income from the betting sector, as recognised by the government’s recent and very welcome levy reforms.

"Any measures that severely compromise the sport’s financial stability would have unintended consequences to British racing and the wider rural economy."

William Hill's share price ended down 11.6 per cent at 297.2p on Monday, while Ladbrokes Coral were down nearly eight per cent at 168p.

GVC Holdings, the price of whose proposed takeover of Ladbrokes Coral would be affected by a change in FOBT stakes, fell 1.2 per cent to 926.5p.

Ladbrokes Coral chief executive Jim Mullen said the Sunday Times story was the latest in a stream of speculation about the government's final verdict.

He went on: "We are very clear that stake cuts will fail to adequately address any issue of problem gambling. The industry has also always made it clear that a cut to stakes will have serious consequences – resulting in shop closures that will ultimately affect jobs, tax revenue and the funding of racing."

He later added in an interview on BBC Radio 4: "For the first time I can remember, racing and bookmakers have no quarrels with one another. We recognise that some of our customers have problems, but we have been working with charities and other bodies to tackle problem gambling."

Asked about those who would like to see FOBTs banned whatever the cost, he replied: "If that were a subjective view certain people had, I could engage with that. As it is, this is an evidence-based review and there is no evidence [that cutting stakes would reduce problem gambling]."

Jim Mullen: 'We are very clear that stake cuts will fail to adequately address any issue of problem gambling'Credit: Mike Abrahams

William Hill chief executive Philip Bowcock said the stock market reaction to the story illustrated the drastic impact such a move would have on the retail betting sector.

He added: "This rumour comes as the deadline for further submissions to the consultation closes tomorrow. We note the DCMS announcement that all the evidence will be considered and urge the secretary of state to take note of the research and expert advice – particularly that of the Responsible Gambling Strategy Board – that questions whether stake cuts will have any impact on problem gambling."

Reacting to the news, analysts at Dublin-based Davy Research said: "The first thing to say here is that we don’t normally publish on the back of press speculation and would stress that a final decision has not yet been made.

"If the government was to make a decision before the end of the consultation period it would be leaving itself wide open to a judicial review."

While the consultation closes on Tuesday, the government's final decision will not be announced for some weeks.

A Department for Digital, Culture, Media and Sport spokesperson said: "We are clear that FOBT stakes will be cut to ensure we have a safe and sustainable industry where vulnerable people and children are protected.

"We are currently consulting on what the exact cut should be, and will make a final decision in due course, once all the evidence has been considered."

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