Shares in gambling companies have plunged after the Government placed further limits on the number of casinos it will allow under new legislation aimed at modernising Britain's gaming laws.

Tessa Jowell, the minister who had championed the legislation, had already been forced into one embarrassing climbdown by the anti-gambling lobby when forced to limit to eight the number of Las Vegas-style super-casinos allowed.

The new system will also cap the number of medium and small casinos to eight per category, putting a limit of 24 on the number of new casinos to open by 2007, the Department for Culture, Media and Sport announced. The statement added that under the new gambling bill, parliamentary approval would be needed to increase the number of casinos.

Gaming company stocks fell sharply on the news. Shares in Rank fell 26p, or 8.8 per cent, to 270.5p, valuing the business at around £1.6 billion. London Clubs fell 23p, or 16 per cent, to 116p, valuing the company at around £257 million. Stanley Leisure stock sank 37.5p, or 7.9 per cent, to £439.25, valuing the company at around £558 million.

London Clubs International accused the Government of "further restricting the modernisation of gaming regulations."

Minister for Sport and Tourism, Richard Caborn, said: "The overarching priority of this bill is to protect children and vulnerable people. That's why we have adopted a cautious approach throughout, listening to the people's concerns and responding to them.

"Limiting the number of regional casinos to eight in the first phase is a cautious move that will allow us to test the impact of a new kind of casino on the levels of problem gambling."

He added that residents would have the final say about the locations of the new casinos, with local authorities granted powers to stop casinos coming to their area.

The gambling industry has boomed in Britain, with sales of £40 billion recorded in the 12 months to September, against less than £8 billion three years ago, according to figures from the Global Betting and Gaming Consultants (GBGC).

The Government originally proposed not to limit the number of super-casinos, offering unlimited prizes, as part of a drive to help regenerate poorer areas of the country.

But facing criticism from religious leaders, who fear a surge in gambling addiction as seen in Australia after the introduction of looser laws, the Government's proposals were revised in June, with slot machines set to be banned in fast-food outlets.

Industry experts had expected the new law to spark a rush to build Las Vegas-style casinos. Each facility must be larger than 5,000 square metres to qualify for status allowing it to install big-prize machines.

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