Masters of spin – how slot machine operators are taking over UK high streets

In the corner of a dimly lit room, the face of a middle-aged woman is bathed in the greenish-yellow glare of a giant slot machine. Next to her, an increasingly agitated man jabs furiously at the “spin” button, as the jackpot eludes him yet again.

It is early afternoon on a weekday and they are among half a dozen punters robotically feeding banknote after banknote into the mesmerising terminals of an “adult gaming centre”.

These slot machine farms are one of the few high street venues quietly flourishing on Britain’s high streets despite, or perhaps because of, the cost of living crisis. But an investigation by the Observer raises questions about how they are regulated and whether their operators are bending the rules to squeeze cash out of potentially vulnerable customers.

Analysis of corporate records also reveals how every pound that drops into the slot eventually rolls uphill, helping to enrich billionaire owners and fund political lobbying.

That lobbying now appears to be on the verge of bearing fruit. Regulations governing high street slot machines are likely to be eased, even as the government cracks down on online gambling.

With one eye on a looser legal landscape, the sector’s major players are plotting aggressive expansion, pitting their vast resources against cash-strapped local authorities and the communities they serve.

Gambling on growth

Slots operators are dab hands at bringing in customers and keeping them playing. Staff offer free tea, coffee and snacks – a small expense given how quickly the outlay comes flooding back.

With an in-store cash machine close at hand, it is all too easy to keep absent-mindedly feeding money into seductive games such as Luck o’ the Irish and Jackpot Gems.

Such temptations can be destructive. Wendy Hughes, 64, lost more than £2,000 over the course of 16 hours, spread across two days of play, in the Stockport branch of Merkur, one of the two companies that dominate the sector.

“I just keep loading the £20s in,” Hughes says. “Sometimes I’m in such a daze that I just don’t really care any more.”

Hughes tells how the bookmaker she worked for directed her to start playing machines, on a demonstration setting, to lure in paying customers. It kicked off a descent into addiction that has kept her coming back to spend what little money she has – even when she fell gravely ill with lung cancer.

Hughes’s losses help to explain why operators are doing so well. Income from the £2-a-spin category “B3” machines, the sector’s workhorse, soared by 46% to reach a record £381m in the year to the end of March 2023, according to the Gambling Commission.

On average, each machine now makes £30,500 a year, sucking up the equivalent of an average person’s annual salary.

Some of the machines belong to small, regional, family-owned amusement arcade businesses, or motorway service station companies, which are typically owned by private equity.

But no one collects more from these cash guzzlers than the two major players – Admiral, with 275 shops in the UK, and Merkur, with 230. Admiral is the UK division of the multinational gaming group Novomatic, a private company owned by an Austrian billionaire, Johann Graf. Merkur is a German brand with another billionaire owner, the Gauselmann family.

Between them, the UK divisions of these two companies pulled in combined revenues of more than £420m in the last year for which accounts are available. Little wonder, then, that both are now eyeing a bigger piece of the UK high street.

Merkur opened 38 venues last year, as part of its “UK expansion project”, on top of 36 the year before. Admiral is also in growth mode, promising on its website that “if we’re not already on your high street, we might be very soon”.

From Barnet to Aberdeen and from Norwich to Birmingham, the pair – as well as their smaller rivals – are submitting planning and licence applications, often for 24-hour opening.

Objections from councillors, residents and even the police have met with mixed results. In South Shields and Sunderland, Merkur has been pushing local councils hard to be allowed to open all night, securing a year-long “trial run” in South Shields.

In Enfield, north London, a smaller rival succeeded with an application despite opposition from more than 1,000 local people and the local MP. The council said it was “compelled by law” to issue a licence.

Risk and regulation

They may be growing but, in the midst of intense scrutiny of the gambling industry in the past few years, adult gaming centres have largely flown under the radar, as attention has focused on high-octane products such as fixed-odds betting terminals and virtual, online slots games.

But Dr Matt Gaskell, a consultant psychologist and the head of the NHS Northern Gambling Service, points out that, even at £2 a spin, the appeal of these games can present significant risk.

“It’s the structural characteristics of the slot machine that lend themselves to prolonged play,” he says. “At low stakes, your money can last longer. Patients talk to me about losing long periods of time. It just adds to the preoccupation and the constant reinforcement and engagement with that product. And generally they leave you alone in those places.”

Hughes’s experience showed that allowing customers to play for longer periods could result in large financial losses, as well as mental harm. But she is far from alone.

In responding to a subject access request submitted by Wendy’s ­family, Merkur accidentally enclosed data relating to another of its ­customers. The unidentified person had lost more than £750 in just over an hour.

Data collected by the Gambling Commission in 2019 shows that adult gaming centres hosted sessions of more than an hour on at least 150,000 occasions in the space of six months.

What’s more, it appears that some firms may also be doing some gaming of their own.

Under Gambling Commission regulations, the number of £2 (category B) machines allowed in a gaming centre is limited to four times the number of their lower-intensity £1-a-spin cousins (category C). According to the government’s white paper on gambling reform, published last year, some companies have found an ingenious way around this.

A tablet, such as an iPad, technically counts as a machine. By sticking a rack of lower-stakes category C tablets at the back of the shop, some companies have been able to pack the rest of the floor with higher-stakes machines. It’s a tactic apparently in evidence at the Stockport Merkur, where a trove of tablets are ignored by customers.

Rather than cracking down, ministers look set to loosen the rules, allowing more of the higher-stakes machines, according to proposals outlined in the white paper.

There is some logic to this. Lower-stakes machines are less popular with punters, meaning many of the terminals simply stand there wasting electricity – at an average annual cost of £1,600, according to government calculations.

Changing the allowable ratio – to 50:50 under one proposal – could save the sector £20m in energy costs alone, according to government calculations.

However, the effect on punters is much harder to predict. Moreover, ministers are also looking at whether to allow gamblers to pay with contactless debit cards, making payment even easier.

Lobbying for expansion

With millions at stake – and the future of regulation up in the air – it’s no wonder that operators are pouring some of the money they make from punters into political lobbying. In February last year, Merkur boasted of meeting its 65th MP, meaning it had glad-handed 10% of the House of Commons, including the gambling minister himself, Stuart Andrew.

Rival Admiral says that it also engages with “stakeholders” in the UK, and it is a member of the sector’s trade association, which has itself lobbied ministers.

Merkur said: “We take any allegations against our staff extremely seriously,” adding that Hughes’s case had been “fully investigated” and reported to the Gambling Commission in January.

“We have established that the customer interaction measures recommended by the Gambling Commission were fully in place.

“Regrettably, it would appear that on this occasion individual members of staff at our Stockport venue fell short of what was required of them. Extensive retraining has taken place.”