Shares in William Hill (>> William Hill) and Ladbrokes (>> Ladbrokes Coral Group) fell more than 12 percent after reports that the government was set to lower the limit on betting shop terminals to 2 pounds from 100 pounds in a move that could hit their revenue.
Their losses dragged the mid caps index <.FTMC> down 0.1 percent by 0922 GMT, more than offsetting gains among energy stocks, which tracked gains in crude oil prices. [O/R]
Oil majors BP (>> BP) and Shell <RDSa.L> rose 0.7 percent, helping the country's main share index FTSE 100 edge up 0.1 percent. Stronger healthcare stocks also provided support.
William Hill and Ladbrokes, which is being bought by GVC (>> GVC Holdings) for up to 4 billion pounds, both hit their lowest level in more than seven weeks, while Paddy Power (>> Paddy Power Betfair) on the FTSE fell 1.4 percent. GVC fell 4 percent.
The Sunday Times newspaper, citing an ally of new culture secretary Matt Hancock, reported that the betting cut was being taken to help tackle the issue of problem gambling.
In spite of the heavy losses, Investec analysts affirmed their buy rating on William Hill, saying a consultation over FOBTs (fixed odds betting terminals) only closes on Tuesday and that speculation over the final outcome was premature.
Among other outstanding movers were shares in Ocado (>> Ocado Group PLC), up more than 10 percent, after the online grocer signed a deal with Sobeys Inc to develop the online grocery business at Canada's second largest food retailer.
On the FTSE, NMC Health (>> NMC HEALTH) rose 2.7 percent to a new record high after it announced the acquisition of majority stakes in a cosmetic surgery company and a clinics business for a combined $207 million.
In the same sector Shire (>> Shire) also rose, up 2.9 percent.
Relx (>> RELX), down 2.4 percent, was the biggest blue chip faller, following a downgrade to "equal-weight" from "overweight" from Morgan Stanley.
(Reporting by Danilo Masoni; Editing by Gareth Jones)
By Danilo Masoni