UK: Industry stunned as lords rejected the casino proposal

First there was the Budget, when Gordon Brown announced - without warning or consultation - a significant increase in gaming duties. He also, in effect, shut down the country to online gambling companies by setting a new Remote Gaming Duty at a level that everyone says is too high.

Then, on Wednesday night, the House of Lords voted against the Casino Advisory Panel's choice of locations for the 17 new casinos. This was only the second time that the Lords have voted against a piece of secondary legislation in the past 40 years. It showed how strongly many people on the political spectrum feel about the new casinos - both their proposed locations and their ethics.

Mark Reed, leisure analyst at Teather & Greenwood, said: "It's not really a policy. It seems [to be] made up on the hoof. Personally, I think it's incredibly disappointing and a real missed opportunity."

International firms like Genting, the Malaysian conglomerate, bought Stanley Leisure and Harrah's, the owner of Caesars Palace in Las Vegas, gobbled up London Clubs. Their entry into the UK was specifically to take advantage of the granting of new-generation licences. Other international operators such as Las Vegas Sands, MGM and Kerzner, were also eyeing up the new supercasino.

There are, however, some obvious winners from the chaos, most notably Rank - the last casino operator to be listed on the London Stock Exchange. The company operates five casinos in the Greater Manchester area so, if now the proposed supercasino in the city has been scrapped, it will be able to carry on trading free from extra competition.

A Rank insider said the company was grateful for the breathing space, which will give it time to cope with the smoking ban, which will hit its Mecca bingo business hard. Meanwhile both Rank and the other incumbent operators such as London Clubs will be able to advertise for the first time come September. Only 3% of UK adults have visited a casino.

However, Reed said that Rank was whistling to keep its spirits up when it claimed not to be bothered. "It might be good for them in the short term. But, long term, the whole point of this legislation was to make casinos mainstream destinations in the leisure market. Yes, they will be able to advertise, but you have to question whether the existing casinos are high enough standard to attract people to come for a Saturday night out. I don't think they are."

Tessa Jowell yesterday hinted that she would split out the vote for the supercasino from the other 16 licences. But for many casino executives the lack of political support from both Labour and the Conservatives means they are seriously reconsidering their investment plans. One Las Vegas operator said: "Sane minds have not prevailed. We are expanding overseas, but not in the UK."