The next phase in the Fixed Odds Betting Terminals saga has begun. As soon as the government announced that it was considering limiting the maximum stake playable on FOBTs, the major bookmakers began to threaten the possibility of store closures as a result.
The machines, which were labelled as the ‘crack cocaine of gambling’, were extremely profitable for bookies, being the third biggest sector in terms of money raised after online betting and the lottery, so it wasn’t a shock that bookmakers feared what would happen if the maximum stake was cut.
In the end, the government decided to reduce the maximum stake from £100 to £2, initially planning to introduce the cut in October of 2019 but changing their minds towards the end of 2018 and moving it to April of 2019 instead.
Now it appears as though William Hill plans to make good on its threat to close shops, announcing that it plans to close around 700 of them. That would put 4,500 jobs at risk of the 12,500 that it boasts in the roughly 2,300 shops that it currently runs. The hope is that voluntary redundancies and redeployment of staff will save as many jobs as possible.
The Announcement Was Expected
Whilst the announcement from William Hill is very much seen as bad news, given the sheer number of people who will lose their jobs as a consequence, it was not unexpected.
Ladbrokes began drawing up a shortlist of shops that it could close as soon as the government confirmed the cut in maximum stake would be coming, finding 71 of its 1,000 shops that could be closed.
Paddy Power was one of the only bookmakers with a high street presence that chose not to opt for an FOBT-heavy strategy and said during the debate of stake cuts that it didn’t foresee having to close any of its stores as a result.
William Hill, on the other hand, were one of the main bookmakers that had opted for a strategy of going big on Fixed Odds Betting Terminals. The machines were considered ‘a licence to print money’, with more than half of the annual revenue accrued by bookies with shops coming from them.
In 2018, for example, £1.7 billion of the £3.2 billion revenue came from FOBTs. Some bookmakers attempted to direct customers to other games in the months leading up to the cut, but none of them offered the same ability to maximise profits in the same way as the roulette game on the FOBTs.
William Hill Did Ask For Rent Cuts
William Hill have taken their time to make the decision to cut jobs, having previously tried to find other ways of making the necessary savings to avoid people losing their livelihoods.
In March of this year it was revealed that the company had asked its landlords to cut their rent by 50% in a bit to offset the cost of revenue that the curb in maximum stake would result in. The company feared having to close 900 of its 2,300 shops, so it wrote to its landlords to ask for a cut in rent. The hope was that the cuts could be backdated to March of 2019.
The move followed a similar one from major retailers who had done a similar thing in May of 2018. The likes of Mothercare, House of Fraser and Carluccio’s attempted to use company voluntary arrangements, or CVAs, in order to get rent cut to help them cope with the move to online shopping from consumers.
Bookmakers had previously avoided similar losses by the move online primarily thanks to FOBTs, but the cut in stake caused William Hill too much financial damage. William Hill also made efforts to avoid damage from the cut by attempting to make headway in the United States of America.
Job Losses Were Exaggerated
It was always felt by the government that the figures being threatened by bookmakers in terms of job losses were exaggerated.
A report written for the Association of British Bookmakers by KPMG suggested that somewhere between 15,000 and 21,000 jobs would be lost by cutting the maximum stake from £100 to £2. That is the figure that William Hill based their initial declaration that it would need to close around 900 shops on, but the initial assumptions made in the creation of the report were based on parameters set by the ABB itself.
Paddy Power suggested that the report was ‘unrealistic’ and that it was unlikely that there would be an increase in shops that were ‘loss making’ compared to how many there already are.
It felt that the likely losses would be far less severe than those being predicted by the ABB. Still, William Hill has cited a ‘significant fall’ in revenue from gaming machines since the stake cut, which is what has led it to make the decision to have to close as many as 700 shops. Players cold previously lose £100 every 20 seconds on the machine, or £300 per minute. The move to losing £6 per minute has reduced high street bookmaker’s licence to ‘print money’.
‘Significant Impact’ Was Predicted
When William Hill released its annual report in March it predicted a ‘significant revenue impact’ resulting from the machines having their maximum stake cut from £100 to £2. The report said, “The net impact of the new £2 limit will, we estimate… be a reduction in retail’s operating profit on an annualised basis of approximately £70-100m”.
The founder of the campaigning organisation the Safer Online Gambling Group, Adam Bradford, said that job losses were unfortunate but ‘inevitable’ and that William Hill should consider deploying the staff that would lose their jobs into work helping addicts.
The Operations Director of the betting shop workers’ union Community, Tom Blenkinsop, said that the news would be ‘devastating’ for his members. He also made the point that the government should shoulder some of the responsibility to help those that are at risk of losing their jobs. He said, “Workers don’t deserve to be the victims of the changes happening in the industry as a result of either government policy or the significant shift towards online gambling”, also asking what support the government can offer workers about to lose their jobs.
Is The FOBT Issue An Excuse?
Whatever way you look at the FOBT issue it is not the whole reason behind betting shop closures.
The sports high street betting market has been declining for over a decade as people move online and many think that companies like William Hill are using this simply as an excuse to get rid of shops, which are significantly less profitable compared to online. By closing stores at this time and blaming FOBT stake reduction as the reason, these companies may be hoping they have less of a public backlash.
Introduction of FOBTs in the first place was only a means to keep shops profitable as they took less and less sports wagers across the counter. If they had never have been brought in it is likely many more shops would have closed years ago.
The fact that people are choosing to spend more leisure time and money online means inevitably there is less of a place for high street companies, and this has been seen across nearly all retail sectors.
The effect of bookies closing shops is however more marked, simply because of the number of stores there are on British high streets. It was also the bookies in the first place that bought up many of the failing retail shops on the high street following the 2008 recession.
UK high streets will surely see a lot more empty shops as these effects come to bite, as there seems to be no industry left that will want to occupy those spaces. The phrase ‘high streets are now just bookies, coffee shops and charity shops’ may no longer be true, it may just be coffee shops and charity shops now.