Last Wednesday at the SBC Summit in Lisbon, H2 Capital's Josh Hodgson set the stage for a panel discussion centered on the UK’s remote gaming tax, which saw a steep increase from 21% to 40% on April 1. According to Hodgson, leading operators dominate about two-thirds of the UK market, with the potential to expand that share to as high as 80%. He posed a critical question: could this be the moment when "scale and balance-sheet strength become the decisive factor"?
Richard Clarke, managing director of Flutter’s brands including Paddy Power and Betfair, expressed serious concerns about upcoming financial challenges. "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," he noted.
While Clarke refrained from detailing his company’s strategy, he referenced the recent restructuring at competitor Entain, which might lead to job cuts.
Entain, for its part, has announced plans to reduce its customer care workforce by approximately 400 positions across 11 countries, including the UK, Gibraltar, Ireland, and mainland Europe. This workforce reduction affects about 20% of its customer support team and follows an earlier cut of 500 corporate, product, and technology roles.
Many other tier one operators are similarly affected by the tax increases, which have pressured profit margins and led to substantial organizational changes, including job cuts from rivals like Evoke and Bet365.
In a conversation with iGB after the panel, which included Andy Wright, managing director for UK and Ireland at LeoVegas Group, Clarke stated, "We’re not ready to share any of our plans. I talked on stage earlier about the four dimensions we can optimise around, and we’d like to see that play out over the next few months."
Clarke pointed out that smaller operators would bear the brunt of the financial strain since many regulatory and tax costs do not scale effectively. "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 about Flutter’s opportunity to expand its market share amid exits from the sector, he quickly dismissed the idea of finding pleasure in such growth due to the surging black market in the UK. "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 remains committed to prudent regulation. "We’re big supporters of well-thought-out, proportionate regulation," he affirmed, highlighting the significant risk of the black market outpacing the regulated market.
Flutter employs 550 individuals dedicated to safer gambling initiatives. Clarke remarked that the company’s strategy involves illustrating the lack of protection offered by the black market. Regarding upcoming Financial Risk Assessments, he indicated that operators need to collaborate closely with the Gambling Commission to ensure effective safeguards for customers. "But the jury’s still out until we get through the next phase," he cautioned.
Clarke also described the experience of black-market customers as "horrific." Research commissioned by Flutter UK&I revealed troubling insights into this sector. Alex Wood, a former fraudster turned counter-fraud advisor and co-host of BBC Radio 4’s Scam Secrets, recounted his experience testing unregulated sites without using a VPN. He found many advertisements on app stores and social media, explicitly targeting individuals seeking to circumvent self-exclusion measures.
For example, under the fictitious identity of a 213-year-old Charles Dickens, Wood opened an account with the Curaçao-based GodOdds and placed a £50 bet on a horse. He also registered as a seven-year-old “Bo Peep” to engage in a £50 basketball bet. After losing hundreds of pounds swiftly, he encountered significant challenges when trying to withdraw funds.
Wood urged the Gambling Commission to intensify its regulatory efforts and called upon the Financial Conduct Authority to take action against payment processors that enable UK black-market gambling.
Clarke outlined three essential conditions for ensuring the regulated market continues to thrive: enhancing customer protection, maintaining proportionate regulation, and making tangible progress against unlicensed operators. He noted that recent dialogues with the Gambling Commission reflect a more optimistic tone compared to past interactions.
Earlier this year, the Gambling Commission received a £26 million grant aimed at combating the escalating threat of illegal gambling.
