Investors in Britain’s major bookmakers were left nursing large losses on Wednesday following the Chancellor George Osborne’s decision to increase the taxation of Fixed Odds Betting Terminals (FOBTs) from 20% to 25%.
Ladbrokes was the worst hit, losing a massive 12% of its value by the time the London Stock Exchange closed for business. The City fears Ladbrokes’ profits could fall by almost a third as a direct result of the FOBTs tax hike; the high street giant made £422m from FOBTs last year after punters fed a staggering £11.6 billion into the terminals dubbed “the crack cocaine of gambling.”
After early morning trading on Thursday, Ladbrokes’ share price continued to tumble by a further 4.7% after a spokesman for Ladbrokes revealed the gambling firm could close more than 50 of its huge catalogue of over 2,400 retail betting shops.
“The announcements mean yet more taxes on an already heavily taxed industry – another £75m to add to the £1bn already paid. The pips are squeaking and we must surely now be given some stability to continue to support our employment and tax base while delivering for shareholders,” said Ladbrokes spokesman Ciaran O’Brien before adding:
“We will close 40-50 this year. We may now have to look at closing more.”
Fellow bookmaking giant William Hill saw its share price fall by 7%, while Paddy Power lost around 3%. William Hill issued a statement to the London Stock Exchange stating that if the increase in tax had applied to 2013 it would have cost the business an additional £16m.
It wasn’t all doom and gloom for the gambling industry a the Chancellor sliced the tax rate for bingo halls from 20% to 10%. Insiders had thought the cut would have set the rate at 15% — the current rate of taxation for sports bets profits – but the reduction was even greater for them.
Rank Group, owners of the Mecca Bingo brand, saw its share price increase by 7.5%. Its Chief Executive, Ian Burke, was delighted with the news.
“Today's announcement is an important boost for Britain's bingo clubs, which provide a range of social and economic benefits for the communities they serve. By bringing bingo duty into line with other forms of gaming entertainment, the government has created a basis for renewed investment and innovation.”