Manchester supercasino: Britain's house of cards

The choice of Manchester to host the supercasino should have been the last throw of the dice. But all bets are back on as controversy erupts over competition issues and the recommended sites

It was such an outsider, any bookie would have happily given odds on it. Even the Secretary of State for Culture, Media and Sport, Tessa Jowell, was said to have been surprised. But against the odds, the Casino Advisory Panel recommended last week that Manchester should host the UK's largest-ever casino, leaving the two frontrunners, Blackpool and the Dome in Greenwich, stunned and empty handed.

Beside the Manchester "super" casino, 16 other licences were handed out for eight large and eight small casinos. They stretch across the country, from Dumfries and Galloway in Scotland to Great Yarmouth in Norfolk; from the London borough of Newham to Torbay in Devon.

But shocks aside, last week should have drawn a line under the controversial passage of the Gambling Act, which comes into force in September. Once the panel - which spent a year studying submissions - had announced its decision, winners should have celebrated and losers commiserated. All that was left was for MPs to rubber-stamp the recommendations and for local councils to start the search for operators.

Yet if that looked like an odds-on bet, it didn't come off. Instead, there was anger, competition fears and legal threats (not to mention the Cassandra-like warnings that we are about to become a nation of gambling addicts).

One of the biggest concerns for operators such as Harrah's Entertainment, the US gaming giant which acquired London Clubs International last year, is that most of the new licences are for areas where casinos are already permitted. Under the Act, existing sites will be granted "grandfather" rights and allowed to keep trading. But that may be of scant consolation to the two casinos already operating in Great Yarmouth, for example, where the fear is that the new one will muscle them out.

"It's like having a corner shop and a supermarket setting up shop on its patch," argues Penny Cobham, the chairman of the British Casino Association. "It does seem to be an extraordinary distortion of competition."

The association is so concerned that is considering challenging the panel's decisions, either through a judicial review or in Europe. "We are talking to lawyers about the fact that 11 of the 17 new licences have been given in existing, permitted areas," says Ms Cobham. "I haven't had a chance to read all of War and Peace yet," - a reference to the panel's 179-page report - "but one must assume that [competition issues] didn't weigh too heavily on their minds. Our members will not accept 40 years of investment by shareholders being jeopardised gratuitously."

The voices of dissent were sounding long before the panel reached its decision. Gala Coral's chief executive, Neil Goulden, has gone on record saying he would lodge objections if new casinos were given to towns where the group has gaming halls (which is exactly what happened, though Gala is understood to be letting the association fight the battle). And in its last trading update, Rank warned that margins were already coming under pressure as competition heats up.

Not everyone, however, is taking such a pessimistic view. Mark Reed, a leisure analyst at stockbroker Teather & Greenwood, concedes there will be losers but doesn't believe this will be bad for the industry. "The operators are going to have to invest in existing casinos, which have been designed for the hard-core gambler, not the leisure market. Most are grimy, seedy places that are dead before midnight, which is exactly when the average leisure customer wants to be in bed.

"It's also questionable how many existing casinos will have the space to add entertainment and broaden the appeal. So there are going to be some that suffer. There will be winners and losers."

Overall, though, he thinks the new casinos, and efforts to widen the appeal of gambling - less than 3 per cent of the population goes to casinos now - will have a positive effect. "The hope, ultimately, is that the new sites will grow the market. The new ones will be more tailored to leisure customers, which would bring it into the mainstream. And if that happens, it will be good for everyone in the industry."

Public perceptions, however, may be harder to overcome. There are worries about how the UK will look when the new casinos are up and running, and whether problem gambling - where people become addicted, often losing vast sums - will rise.

Most concede that the biggest threat comes from online gaming, where people can bet in their homes for hours at a time. But concerns about the impact of the new casinos remain, and pressure is growing on the industry to raise awareness of the dangers and to help fund gambling charities such as GamCare. The Act contains a statutory instrument which, if enacted, could force the industry to pay, and Ms Jowell has taken the first steps towards making that happen.

The main beneficiary would be the Responsibility in Gambling Trust (RIGT), which funds GamCare as well as other educational and research projects. It is supported by the industry on a voluntary basis but its chairman, John Greenway, concedes it is not reaching its financial target - around £3m a year.

"I'm satisfied the RIGT is on course to do what's required of it by Parliament and the Government, but there's no question we need more money," he says. "We need to double the amount. I'm optimistic we can do this on a voluntary basis, but it's understandable what the Government is saying [about the statutory instrument]. We're not getting funding from some players. We're not getting the support that we should get."

Mr Greenway says, for instance, that bookmakers Gala Coral, Ladbrokes and William Hill all give generously, while online group PartyGaming is the trust's biggest donor. But others, such as 888.com, are offering considerably less.

Gambling will always be controversial, however - no matter how much money is pumped into combating problems. So it is no surprise that everything to do with the Act, right from its inception, has made headlines.

Domestic and international operators promised an investment boom when the Government first announced it was shaking up Britain's gambling laws, most of which date back to the 1960s. It had originally envisaged unlimited supercasinos, but the scrutiny committee of MPs charged with reviewing the Bill whittled that down to eight.

Then, just before the last election, and this time facing pressure from the opposition, the Government backtracked once more and agreed to just one supercasino. As a result, the inter- national players have either pulled investment programmes or dramatically scaled them back.

Despite the grumbles, though, operators are already jostling for position. The Excel centre in London's Docklands, for example, is putting itself forward as an ideal location for Newham's casino, while Ladbrokes has confirmed that it is "actively assessing opportunities" in both large and small casinos. The company will also "consider our position" about bidding to become the Manchester operator.

But things are unlikely to be simple when it comes to the most controversial casino of them all. For a start, it is not known whether the Government will approve the proposed site, near the Manchester City football ground. Although the panel recognised this as a deprived area, the Government has not yet published its exact guidelines as to where casinos may be located, so it could fall foul of this.

Some believe it should. One MP involved with the Act was surprised that the panel apparently disregarded the scrutiny committee's recommendations that the supercasino be a "destination" venue away from residential areas - somewhere you have to make an effort to get to.

The panel reviewed each submission on a variety of criteria, one of which was the need for regeneration. In its report, it said of Manchester: "The proposal had a unique formula to offer which served to set it apart from the others... in terms of the full range of our specific remitted criteria of best test of social impact, regeneration need and benefits and willingness to license."

But critics say this is wrong, claiming that the area - there are 10 casinos in Greater Manchester, according to the association - does not fulfil the regeneration criteria. The city centre was extensively rebuilt after the 1996 IRA bomb, and it successfully hosted the 2002 Commonwealth Games.

Manchester also has plenty to offer already - two Premiership football clubs, for example - which is not something Blackpool can boast. Before the panel announced its recommendations, the Lancashire town's burghers were clear: no supercasino and Blackpool would go under. Whether that happens remains to be seen, but there could be no mistaking the blow to the town last week.

So the choice to award Manchester the supercasino licence has left a nasty taste for some. The association's Ms Cobham sees it as symptomatic of how the whole process has been handled.

"The Government is trying to ride two horses at the same time. They tried to have both a regeneration bill and a social policy bill and the two have ended up sitting uneasily together," she says. "There wasn't a clear vision and Tessa Jowell never wanted to deal with gambling."

Flawed or not, however, the Gambling Act is here to stay and operators, for all their concerns, are doing all they can to make sure they take advantage of it. No one knows if Britain will become the new Nevada but a least that prospect is no longer such an outside bet.