Shares in William Hill are 13% lower this morning having faltered once again at 335p, preventing any imminent revisit of January’s 2018 highs – the highest since summer 2016. This drop is in response to an overnight Times article suggesting UK Chancellor Philip Hammond is close to a deal that would cap the stakes for highly controversial Fixed Odds Betting Terminals (FOBT) at just £2. This would be even more onerous than the UK Gambling Commission’s 19 Mar recommendations of a £2 slots stake limit, a “£30 or lower” non-slot limit, along with player tracking and limits on both games per session and player.

Shares may have jumped 4% in response to a better than expected outcome from the commission in March (there had been fears of a £2 slot and £20 non-slot cap; maybe even a £2 cap across the whole segment) sector shares are understandably lower once again (GVC [now merged with Ladbrokes Coral] -5.8% and Paddy Power Betfair -3.1%) on the possibility of the Chancellor going even further, to help clamp down on what has been dubbed the “crack cocaine” of gambling. That said, today’s share price reactions, whilst punchy, show that it’s no sector disaster, and more important for some than others.

Having previously cut the upper limit from £100 to £50 (Jan), and then pledged another cut to somewhere between £2 and £50 following discussions with both industry and campaigners, a governmental decision to reduce stake limits to as low as £2 may represent the worst case scenario for the sector segment. And it will also deprive the Treasury’s coffers of much needed tax revenues too(£450m per annum) which will have to be made up for elsewhere. For campaigners, however, it would be a very welcome decision, even if they would prefer for FOBTs to be banned altogether.

Mike van Dulken, Head of Research, 24 April 2018