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LONDON (Reuters) - Britain raised taxes on high-stakes gambling machines on Wednesday, hitting the shares of bookmakers that rely on them for a growing share of their betting shop income.
The duty will rise to 25 percent from 20 percent, Chancellor George Osborne said in his annual budget statement, responding to the spread of fixed-odds betting terminals that critics say are highly addictive.
Gamblers can spend up to 300 pounds a minute on the machines, more than 33,000 of which have been installed in shops around the country over the past decade.
Bookmakers recently introduced warnings to try to prevent players from running up rapid losses but say there is no evidence to support claims that the machines are leading to an increase in problem gambling.
Shares in Ladbrokes, Britain's second-largest bookmaker, fell by almost 12 percent to 139.8p, while market leader William Hill was down 7 percent at 350.1p.
William Hill said the tax increase would have cost it 16 million pounds had it been in force last year and analysts forecast a cost of about 20 million pounds for Ladbrokes when the tax takes effect next year.
Ladbrokes is more reliant on income from its high street shops than William Hill because it has struggled to build up its online business.
"The news is a surprise and a clear negative for both stocks," Investec analyst James Hollins said.
"Forecasts will have to change and this is a massive blow, particularly to Ladbrokes, placing significant pressure on group returns, the turnaround of mobile and the dividend that the group had stated was secure for 2014," he added.
Bookmakers are already facing an additional 300 million pound bill from December when the government closes a loophole that had allowed them to cut their tax burden by basing online gambling operations offshore in places such as Gibraltar.
Ladbrokes, which has suffered a series of setbacks over the past 18 months, cried foul over the government move.
"Today's announcements mean yet more taxes on an already heavily taxed industry - another 80 million pounds to add to the 1 billion already paid," spokesman Ciaran O'Brien said.
"The pips are squeaking and we must surely now be given some stability to continue to support our employment and tax base while delivering for shareholders."
There was better news for Rank Group, which announced plans to open three new bingo clubs after the government halved duty on the game to 10 percent.
"By bringing bingo duty into line with other forms of gaming entertainment, the government has created a basis for renewed investment and innovation," said Ian Burke, chief executive of Rank, which has 97 bingo halls in Britain.
Shares in the company, controlled by Malaysia's Guoco Group, rose 8.6 percent to 156.6p. ($1 = 0.6034 British Pounds)
Additional reporting by Alistair Smout; Editing by Andrew Roche and David Goodman