At the SBC Summit in Lisbon last Wednesday, H2 Capital's Josh Hodgson set the stage for a panel discussion focused on the UK's remote gaming tax, which increased from 21% to 40% as of April 1.
During the discussion, Hodgson noted that Tier one operators already control about two-thirds of the UK market, with the potential for that number to rise to 80%. He questioned whether this period would mark a time when "scale and balance-sheet strength become the decisive factor."
Richard Clarke, managing director at Flutter's Paddy Power and Betfair, portrayed a somber outlook, stating, "We’re expecting a £500 million impact from next year. That impact has already started to come through this year, so it has to be managed, and we’re working on that."
While he refrained from disclosing specific strategies, he mentioned that looking at Entain's response may provide insights into the sort of restructuring — likely including job cuts — that could become necessary.
Entain Plc has revealed plans to cut around 400 customer care roles across 11 countries, which constitutes approximately 20% of its customer support staff. This follows another major workforce reduction earlier this year that affected 500 corporate, product, and technology positions.
The impact of these tax increases is not isolated to these two companies; many Tier one operators are feeling the squeeze as profit margins tighten, leading to significant structural changes and job cuts across the sector. Rivals like Evoke and Bet365 have also announced job reductions or office closures in response.
In conversation with iGB following the panel, which featured Andy Wright, MD for the UK and Ireland at LeoVegas Group, Clarke maintained that details about Flutter’s plans were not ready for disclosure. "I mentioned on stage the four dimensions we can optimise around, and we’d like to see that play out over the next few months," he said.
Clarke pointed out that the regulatory and tax burdens disproportionately affect smaller businesses, as certain costs do not scale. "We’re a big business, and there are things we can do with one or two million that give us an advantage," he explained. "I’d agree with the general point that scale matters here, and we’d expect to take market share as a result of the squeeze."
When asked if he felt positively about the tax due to the market space it has created for Flutter, Clarke was clear. "Absolutely not. If we end up in a situation where Flutter grows market share while the black market grows faster than the regulated industry, that can’t be something anyone should be happy about. We should be focused on addressing what drives the black market."
Clarke emphasized that Flutter’s position on regulation remains unchanged: "We’re big supporters of well-thought-out, proportionate regulation," he said. He indicated that the risk of the current environment is more about the balance tipping in favor of the black market than merely the tax issue.
Flutter employs 550 individuals dedicated to safer gambling initiatives. Clarke remarked that their strategy involves "holding up a mirror to the lack of protection in the black market."
Regarding the upcoming Financial Risk Assessments expected to be implemented soon, he stated operators need to collaborate with the Gambling Commission to ensure these checks protect customers effectively. "But the jury’s still out until we move into the next phase," he added.
Clarke described the experience of users on black-market platforms as "horrific." Research commissioned by Flutter UK&I showed the extent of the issue, revealing alarming conditions for unregulated customers.
For instance, Alex Wood, a former fraudster turned counter-fraud advisor, spent two weeks testing unlicensed gambling sites. He found access easy without a VPN, discovering them through app stores, social media, and search engines, frequently advertised as outside the GamStop self-exclusion scheme.
Using a site based in Curaçao, Wood created an account as a fictional 213-year-old Charles Dickens and placed a £50 bet on a horse race. He also opened another account listed under a seven-year-old identity for a basketball wager. He lost substantial amounts quickly and found it difficult to withdraw his funds.
Wood urged the Gambling Commission to enhance its efforts and called on the Financial Conduct Authority to target payment providers facilitating UK black-market gambling.
Clarke outlined three key conditions for the regulated market to continue its success: the need for improving customer protection, ensuring regulation remains proportionate, and making genuine progress against unlicensed operators. He remarked that recent discussions with the Gambling Commission indicated a "different tone from the past."
Earlier this year, the regulator received a £26 million grant aimed at combating the growing threat of illegal gambling.
