Potential Mandatory Levy on UK Gambling Operators Causes Stocks Drop

  • A British Medical Journal report is calling for a massive overhaul of UK gambling laws
  • It says there should be a mandatory levy on gambling companies
  • These funds would go towards the treatment of gambling addiction
  • There is a voluntary levy currently in place, but it is not very effective
  • News of this potential mandatory levy triggered a fall in UK gambling stocks
Paddy Power Betfair, William Hill and GVC Holdings were among the gambling companies who saw their share price fall after the call for a mandatory levy.
Paddy Power Betfair, William Hill and GVC Holdings were among the gambling companies who saw their share price fall after the call for a mandatory levy.

A call by a leading medical publication for a mandatory levy to fund gambling addiction services has triggered a drop in share prices of top gambling companies.

Funding gambling addiction

The British Medical Journal is calling on the UK government to make drastic changes to the country’s gambling laws. It wants the introduction of a new mandatory levy on operators that would go towards the treatment of gambling addiction.

In response to the report in the BMJ, a number of UK gambling companies saw their share prices drop. The potential introduction of a mandatory levy would have an impact on their profit levels. Among the affected companies were Paddy Power Betfair, William Hill and GVC Holdings.

The comprehensive report in the BMJ highlighted that the economic cost of problem gambling has been severely understated. The report’s authors – academics from Australia and the UK – found a significant link between suicide and problem gambling.

A new gambling act would shift the focus onto the industry as a whole rather than simply looking at the individuals. An estimated 430,000 people in the UK are struggling with gambling addiction.

Despite this significant figure, there is currently only a single NHS treatment center dedicated to gambling addiction in the entire country. A second treatment center was due to open in April, but has been delayed. The government has promised to open more treatment centers.

Funding for the treatment of gambling addiction in the UK is in short supply. In 2018, just £1.1m ($1.5m) was spent on this help, amounting to only £0.02 per capita. New Zealand spent $9.5m in this period, more than 100 times more per capita than was spent in the UK.

Voluntary levy not enough

Currently, there is a voluntary levy on the gambling sector. This calls for 0.1% of revenues to go to organizations that help people with gambling addiction.

In the most recent full year of results, gambling companies in the UK earned revenues of about £14.4bn. Funds from the voluntary levy should therefore have been £14.4m.

GambleAware, one of the treatment charities that receives funds from the voluntary levy, got less than £10m in that period. Some of the gambling companies gave sums as small as £1 or £5m.

This is why GambleAware has called for the introduction of a mandatory levy. The Labour Party and the UK Gambling Commission are also on board with this idea. A mandatory levy could generate an additional £60m each year in funding.

A very real issue

One of the most worrying trends is the number of young people starting to gamble from a young age. Everywhere they look they see positive gambling messages. They also see their friends and family betting on a daily basis and this normalizes it in their developing brains.

According to a survey published by the UK Gambling Commission in November 2018, 14% of children between 11 and 16 years old had gambled in some form in the past week.

Public cost of gambling

A report in 2016 from the Institute of Fiscal Studies attempted to place a figure on the public cost of gambling addiction. It came to a range of between £260m and £1.2bn each year. However, the authors of the BMJ’s report believe that this figure could be a lot greater.

Dr. Heather Wardle, lead author of the paper, said: “Gambling harms have been vastly underestimated. It is placing major burdens on resources, relationships and health. The time now is for action to reduce harms which is going to require a much more significant level of funding than is currently available. We believe that a compulsory levy on the industry is the only way to achieve this.”

The last significant change to gambling laws in the UK was the Gambling Act 2005. Since the legislation was passed, gambling marketing practices have exploded. Almost $1.5bn is spent each year on advertising for the sector. The majority of this expenditure is on direct marketing and social media.

This has led some countries, such as Italy, to implement bans on all forms of gambling advertising and sponsorships.

There have been some positive moves in recent times. The maximum stake on fixed odds betting terminals was slashed from £100 to £2. The regulator is also examining the possibility of banning the use of credit cards to fund online gambling accounts, as well as implementing mandatory affordability checks.