Sometimes the smallest explosions have the greatest impacts. When Victor Chandler, a little known bookmaker serving big spending punters, moved his entire operation to the tax haven of Gibraltar in 1997 he detonated a small limpet mine which capsized the entire UK betting industry.

The shockwaves are still being felt today. The big-name bookmakers, such as Ladbrokes, were forced to follow Chandler overseas, and the Chancellor of the Exchequer, once confident of making around £500 million a year from betting duties, was left scratching his head.

Chandler laughs when he recalls the way his larger rivals followed him abroad. 'They had to do it,' he says. 'Otherwise we'd have had all their business.'

Not only did his actions give Gordon Brown something to think about, Chandler's adept use of new technology now has serious consequences for the high street. It would take a very optimistic punter to bet on a rosy future for the UK's 8,500 betting shops as a result of Chandler's run to the sun. Telephone and internet betting may have accounted for only around 10 per cent of all the money staked in the UK last year but it is set for huge growth. According to analysts at Datamonitor, online betting in Europe could be worth as much as as £3.5 billion by 2004.

Okay, there is a chance Customs and Excise will challenge the UK bookmakers' actions, but it is hard to see what they can do, now that the horses have effectively bolted. At present the Government can merely prevent the likes of Chandler adver tising in the UK. But click on to any of the big online bookmakers' UK-based sites and you will be offered the chance to jump through to its offshore cousin.

Certainly the Bahamas-based billionaire Joe Lewis thinks Chandler's business represents the future of betting. He liked the company so much that in August last year he bought it. Enic, Lewis's international investment company, valued Victor Chandler International (VCI) at around £65m. Chandler and his partner, Monaco-based millionaire racehorse owner Michael Tabor, will each retain stakes of around 20 per cent in the company. The deal seemed to have been sidelined over the past few months, but Chandler is adamant that it will now go through by November.

The Enic deal, Chandler argues, will give VCI the chance to become a truly global online player. 'There's no doubt that we've got to have the cash to market ourselves. In four or five years' time there will be only four or five players in the world betting market.'

Chandler had one eye on what the big US gaming giants might be looking to do in Europe. 'We needed to do a deal because we've got to establish our position quickly now.'

Apart from Lewis, Chandler also rubs shoulders with another famous businessman. Terry Ramsden, who was once Britain's fifty-seventh richest man but ended up becoming one of the country's most famous bankrupts after running up gambling losses of more than £100m, also does business with Chandler.

'He has brought several deals to the table, one of which is a smartcard idea,' Chandler says. 'He's someone I' have known since he was the biggest punter in the Eighties.'

Sitting in the London Ritz sipping white wine, he outlines his plans for moving forward. All last week his staff were offering commuters at London train stations a chance to win a Porsche by betting on what the Dow Jones would close at on Friday.

This was to launch Marketbet, VCI's new pools-style game which allows punters to bet on the performance of stock markets instead of football matches. Some may question whether the UK needs another pools game, but Chandler has been successful in backing his hunches before. He was one of the first bookmakers to realise that there was huge interest from overseas clients and so, for a while, Chandler looked at developing an offshore tax-free business to run in tandem with his UK operations.

Originally, Chandler considered setting up his operation in Jersey, but that deal fell through, so in 1996 he acquired a betting licence from a casino owner in Gibraltar. The start of Chandler's overseas operations was fairly inauspicious. 'There was just six of us in an office with mobile phones,' Chandler says, puffing on a Camel full strength.

The decision to move the company's entire operation abroad was a gamble. Chandler, who gave up working as a hotel consultant in the Balearic Islands to take over the family bookmaking business when his father died in 1974, had not planned such a dramatic move. For much of the Eighties and Nineties he had been content to buy the odd bookmaker and sell it on to one of the big betting firms.

But in 1997, Chandler read that the Irish government was to cut betting tax from nearly 10 per cent to 5 per cent. This was a huge threat to Chandler, who feared losing clients to Irish bookies. He resolved to move Victor Chandler, lock stock and barrel, to Gibraltar, where the business would not have to pay any betting tax at all.

Now Chandler wants to launch online casinos, and there are also plans to develop Marketbet so that punters can bet on individual companies' shares. In addition, all the company's websites will be translated into Chinese and Spanish, opening up new markets. During Euro 2000 the company took bets from punters in 40 countries. It already boasts 24,000 regular internet customers, and plans to develop broadband and mobile phone betting are also on the cards.

But Chandler, who, with 350 staff, is now one of Gibraltar's biggest employers, is keen to target new audiences through the internet: 'We've got to have a range of products. There's no reason why on the internet you can't play skill games for something as small as a 5p bet. We'll also be extending the games to take in trivia in the future.'

But while Chandler is an advocate of new technology, does he believe it could end up encouraging more people to gamble? 'Everyone's a lot more relaxed about gambling now,' he says. 'You can compare it to drinking. There will be casualties, but they'll always be in the minority.'

While the jump to the Rock has made Chandler rich, it has its downside. 'I miss the racing: throughout the Eighties, at the tracks it was leisure rather than work.'

Profile

Subject: Victor Chandler

Born: 18 April 1951

Job: Chairman and chief executive, Victor Chandler International

Other Directorships: None

Hobbies: The turf, breeding horses, riding