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Bookies recover poise as UK government's worst case cut in FOBTs maximum stake was expected

The decision follows complaints that the fixed odds betting terminals (FOBT) were highly addictive and had led to gamblers building up very heavy losses in a matter of minutes, leading them to be called the “crack cocaine of gambling”
The terminals are a major source of income for high-street bookmakers which had argued that a cut to the lowest possible option would threaten thousands of jobs

Bookmakers rallied from initial falls on Thursday afternoon, having fallen back in morning trading after the betting industry's worst-case scenario unfolded when the UK government confirmed it will cut the maximum stake on fixed odds betting terminals (FOBT) to £2 from the current £100 in a bid to curb problem gambling. 

The government's decision followed an investigation into complaints that the FOBT machines were highly addictive and had led to gamblers building up very heavy losses in a matter of minutes, leading them to be called the “crack cocaine of gambling”.

READ: Big revenue drops predicted by big three bookmakers from imposition of worst case scenario stake limit

The FOBT touch-screen machines allow players to bet on the outcome of various games such as roulette.

The terminals are a major source of income for high-street bookmakers which had argued that a cut to the lowest possible option would threaten thousands of jobs.

Earlier this week, Roger Devlin, chairman of bookmaker William Hill PLC (LON:WMH) raised the spectre of the UK's bookies being taken over by foreign competition if the government takes a hard-line on FOBTs.

In a statement on the UK government website today, Matt Hancock, secretary of state for the Department for Digital, Culture, Media & Sport (DCMS) , commented: " When faced with the choice of halfway measures or doing everything we can to protect vulnerable people, we have chosen to take a stand.

"These machines are a social blight and prey on some of the most vulnerable in society, and we are determined to put a stop to it and build a fairer society for all.”

Ensure the right balance

The statement said the government had sought to ensure the “right balance between a sector that can grow and contribute to the economy and one that is socially responsible and doing all it should to protect consumers and communities.”

In March, the UK's Gambling Commission recommended new restrictions on fixed-odds betting terminals that were less stringent than feared, suggesting that the maximum stake should be cut from the current level of £100 to £30. But campaigners concerned about the social impact of FOBTs pressed for a reduction to a maximum stake size of £2.

Shares in the three biggest-listed bookmakers all dropped back in an initial knee-jerk reaction, but recovered in the afternoon as investors refocused on this week’s good news rather than the as-expected UK government decision.

The industry got a boost earlier this week after a US Supreme Court decision to sanction the lifting of the ban on sports betting in the country.

Shares soon bounce

Around 2.40pm, shares in FTSE 100-listed Paddy Power Betfair PLC (LON:PPB) rallied 1.9% higher to 8,405p, while FTSE 250-listed William Hill PLC (LON:WMH) added 3% at 326.9p, and GVC Holdings PLC - which recently completed the takeover of merger betting shops chain Ladbrokes Coral – gained 2.8% at 941p.

Neil Wilson, chief market analyst at commented: “What regulators on one side of the Atlantic give, those on this side of the pond taketh away.”

He added: “Ultimately this outcome was well fairly well appreciated although it still comes as something of a surprise given the government's own advisors recommended a £30 cap.

“At least there is clarity at long last and the prospect of US growth should act as a tailwind."

-- Updates share prices, adds analyst comment --

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