Tougher regulation could see a fifth of bookies losing money says JP Morgan

A fifth of Britain's betting shops could become unprofitable if further regulations are imposed on the gambling industry, according to a research note from JP Morgan.

A further 20 per cent of shops could become only marginally profitable if measures such as limits to the number fixed odds betting terminals (FOBTs) and the size of prizes are introduced.

Revenue from FOBTs could be hit by as much as 15 per cent if maximum stakes are cut from the current level of £100 to £20.

In the wake of the House of Commons debate on FOBTs the bank warned that "even modest" restrictions on gaming machines could have a significant impact on the industry driving material downgrades and shop closures.

The research note says new regulations could be introduced as soon as the spring of 2014 but that they are more likely to come in the autumn.

JP Morgan highlighted the risk to the sector if the Labour party continues to focus on the issue, with political considerations overriding plans to wait for the outcome of the Responsible Gambling Trust's study (due autumn 2014) before taking a decision.

Labour leader Ed Miliband has previously attacked FOBTs as "dangerously addictive."

Under Labour's proposals councils could use planning powers to control the number of betting shops opening in their area.

However, the vices attributed to FOBTs have been hotly disputed. According to the Institute of Economic Affairs, £42bn is put into FOBTs each year, with 97 per cent of this figure is returned in prizes. The £1.5bn per year lost through FOBTs is equivalent to the amount lost through over the counter betting.