The FOBT Fallout Continues – Why 12,000 Job Could be at Risk

Posted by Harry Kane on Wednesday, August 21, 2019

When the government department for Digital, Culture, Media and Sports (DCMS) announced that the betting cap for fixed-odds betting terminals (FOBTs) was to be slashed from £100 to just £2, it’s fair to say that the entire industry went into an initial state of shock.

The initial forecasts suggested that the impact on the UK’s offline gambling industry would be seismic, with operators bracing themselves for a cumulative hit in excess of £200 million. After all, the total FOBT spend on these shores peaked at £1.7 billion in September 2017, whilst this accounted for more than half of all betting shop profits recorded during this period.

The betting threshold was finally rolled out in April, however, and operators have now begun to count the real cost of this new legislation. But how are firms responding to the FOBT cap, and could the law have a detrimental impact on the economy as a whole?

Counting the FOBT Cost – How Are the Market Leaders Responding?

There’s often a huge chasm between perception and reality, which is why so many of the market leading betting brands chose to keep their powder dry until the FOBT cap was officially rolled out at the beginning of the new financial year.

The response since has been definitive, however, with William Hill, Ladbrokes Coral and Betfred having announced tenacious plans that involved the culling of jobs and the closure of multiple bricks-and-mortar outlets nationwide.

William Hill has led this charge, pledging to close 700 high-street shops in the coming months whilst placing around 4,500 jobs at risk in the process. It’s thought that this would offset much of their projected £820 million loss as a result of the FOBT cap, whilst the brand also invests heavily online and continues to expand into the U.S. market.

At the same time, the Ladbrokes Coral owner GVC Holdings has already confirmed that up to 900 shops could close, which in turn could cause 5,000 permanent members of staff to lose their jobs. Betfred has also hinted at 500 store closures, with a subsequent reduction in head-count of 2,500.

Even with three these brands alone, these strategies could drive a total of 2,100 high street closures in the UK, whilst costing up to 12,500 employees their jobs.

In percentage terms, we could well see a quarter of the UK’s 8,423 bricks-and-mortar betting shops close their doors in the coming months, with nearly 12% of the people employed in the industry also losing their part of full-time jobs.

Exploring the Truth Behind These Numbers and the Real FOBT Cap Cost

There’s no doubting that these figures are significant, both from the perspective of offline gambling in the UK and the economy as a whole (we’ll touch more on this later in the piece).

However, it should be noted that this outlook is still considerably better than the one that was laid out when the cap with initially announced, at which point bookmakers estimated 4,500 store closures and a whopping 21,000 job losses.

Of course, it can be argued that the closure of any independent betting shops needs to be factored into these figures, whilst bookmakers will also claim that it’s hard to gauge the impact of such a huge legislative change.

However, the suggestion remains that the Association of British Makers (ABB) deliberately over-estimated these figures in order to deter the government from their course, whilst some commentators have also claimed that the number of shops open in the UK was over-inflated due to the excessive profits earned through FOBTs in the first instance.

This puts the FOBT cap and its subsequent fall out in a slightly different perspective, both in terms of shop closures and whether or not these high-stakes machines were masking an ongoing decline in offline gambling throughout the UK.

Industry statistics certainly seem to hint a sustained and relatively quick decline in offline betting empires, particularly as the iGaming market in the UK continues to gather significant momentum.

After all, the region’s iGaming market achieved a total GGY of $5.6 billion in the year ending September 2018, whilst growing to account for 39% of the overall industry during the same period.

Conversely, income from racecourse and bookmaker betting fell marginally from £3.3 billion in April 2015 to £3.2 billion in September of last year, highlighting the fact that online and mobile wagering is now more popular than the traditional alternative.

To put this in perspective, a 2018 YouGov poll confirmed that 13% of respondents placed a bet online during the previous 12 months, whilst just 11% wagered at a live event or at a local bookmaker.

In this respective, the FOBT cap may have simply exacerbated the existing challenges already facing bricks-and-mortar bookmakers in the UK, rather than being the root cause of the issues within the marketplace.

Gambling and Beyond – What About the Wider Economy?

On a fundamental level, there’s no doubt that the FOBT cap will cost jobs across the length-and-breadth of the UK, and this can hardly have come at a worse time given the looming spectre of Brexit and its potential impact of manufacturing and agriculture.

This is one of the reasons why many have called on operators and the government to help minimise redundancies and find alternative job roles for people wherever possible.

This process would involve the delivery of ongoing support and potential retraining to individuals who lose their job as a result of the FOBT cap, in order to negate the adverse impact on local communities and households that may subsist on relatively low incomes.

This would certainly prevent innocent workers from falling victim to the FOBT cap, which was designed to protect vulnerable gamblers rather than penalise operators or those who work tirelessly on their behalf.

Beyond the immediate impact caused by job losses, the government could also see its own tax revenues decline as a result of the FOBT Cap.

After all, firms will see their revenues and profitability impacted significantly by the FOBT cap, creating a scenario where they’ll repay considerably less in income tax during the current financial year.

Of course, the government have compensated for this by increase the rate of Remote Gaming Duty (RGD) by 6% to 21%, which makes commercial sense given that firms are now turning their attentions online.

However, this could squeeze operator’s margins a little too tightly, causing some to consider relocating overseas and to tax-friendly jurisdictions like Malta or Cueta in Spain.

Regardless of how this plays out or the social merit of the FOBT cap, this new legislation will undoubtedly have a seismic impact on offline gambling in the UK and the wider economy as a whole.