U.K. gambling expansion facing hurdles

By Liz Benston

Tuesday, April 6, 2004 | 10:57 a.m.

British legislators considering deregulating that country's gambling industry are expected to dilute original proposals supported by casino groups by recommending restrictions on gambling, analysts say.

A committee of Parliament is expected to report its findings to British legislators Wednesday, a step in what analysts say will mark a years-long process of crafting a final bill opening the United Kingdom to more casinos and slot machines.

Major Las Vegas casino companies will be watching the outcome, including MGM MIRAGE, Harrah's Entertainment Inc. and Venetian parent Las Vegas Sands Inc., which have joint ventures with U.K. companies to develop casinos in Britain. Caesars Entertainment Inc. and Mandalay Resort Group also are interested in Britain but are waiting to see how the legislation shapes up before cutting deals, analysts say.

Legislators may recommend limiting slot machines to three devices per table game in smaller casinos and could also restrict major resorts to areas in need of redevelopment, analysts say.

"Controlling problem gambling is the key objective of the bill and having unrestricted slots at any casinos more than 10,000 square feet has been a concern," UBS Warburg analyst Julian Easthope said in a research note today. "To restrict all units to three slots per table outside resort casinos is likely to have the double benefit to the government of controlling proliferation of both casinos and machines."

Resort casinos could be restricted to urban redevelopment areas, backpedaling from earlier discussions about allowing casinos in open areas, Merrill Lynch analyst Ian Rennardson said in a conference call with investors Monday.

"There's been a definite step back," Rennardson said. Officials are now saying that casinos "should be put in areas where we need regeneration."

Some analysts have offered estimates on the growth of the British gaming market under deregulation. But others say such numbers are premature.

"We've got a lot of questions that need to be answered and Parliamentary time is becoming pretty scarce," Rennardson said.

Several groups have testified before legislators about restricting the spread of gambling. The Royal College of Psychiatrists, a training and accreditation group in Britain, has warned government officials that more gambling halls will lead to more compulsive gamblers. And a group of business owners and residents in Blackpool -- a beach town that has long been considered a prime spot for resort casinos -- also have lobbied against casinos. The Blackpool group has enlisted support from the National Coalition Against Legalized Gambling, a U.S. group known for lobbying against casinos in specific states.

Another major issue -- tax rates on new casinos' gaming revenue -- hasn't yet been outlined, though U.S. gaming companies say British officials are discussing a rate of about 15 to 20 percent that would be in line with comparable casinos in the United States.

Analysts say the bill might not reach its final form until 2005 and could become law by 2006 or 2007. New casinos might not be built until the end of 2007 or 2008, they say.

In spite of the anticipated restrictions, the gambling bill is still expected to significantly expand the scope of gambling activity in Britain, analysts said. The bill's main recommendations include abolishing membership requirements and dropping a rule that requires members to sign up with a casino 24 hours before betting. Casinos also would be larger, with a proposed minimum size of about 5,000 square feet.