During a panel at the SBC Summit in Lisbon last Wednesday, H2 Capital’s Josh Hodgson highlighted the implications of the UK’s remote gaming tax, which increased from 21% to 40% as of April 1. He noted that tier one operators currently dominate about two-thirds of the UK market, with potential for that figure to rise to 80%, prompting him to question whether scale and financial strength would become crucial competitive advantages.
Richard Clarke, managing director of Flutter-owned brands Paddy Power and Betfair, warned of a significant financial hit: "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 Clarke refrained from detailing specific response strategies, one could look to Entain’s recent actions for clues, which may involve restructuring and job reductions.
Entain Plc has recently announced plans to cut approximately 400 customer care roles across 11 countries, including the UK, Gibraltar, Ireland, and mainland Europe, accounting for around 20% of its customer support workforce. This follows earlier job cuts of 500 in corporate, product, and technology sectors.
Clarke emphasized that these drastic measures are not unique. Other companies such as Evoke and Bet365 have also made cuts as the steep tax hikes tighten profit margins and prompt structural adjustments.
After the panel, which included Andy Wright from 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."
He also pointed out that the regulatory and tax burdens disproportionately affect smaller operators because certain 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 noted, agreeing that the scale would help them gain market share amid the sector's challenges.
When asked if the exit of smaller operators created opportunities for Flutter, Clarke stressed the dangers of a growing black market. "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."
He also pointed out that Flutter remains committed to regulation, saying, "We’re big supporters of well-thought-out, proportionate regulation. The risk at the moment, and it’s more of a risk than a tax concern, is that the balance starts to tip in favour of the black market."
Clarke revealed that Flutter has a dedicated team of 550 working on safer gambling initiatives, stating their strategy aims to reflect the lack of protection in the black market. He remarked on forthcoming Financial Risk Assessments, emphasizing the need for collaboration with the Gambling Commission to ensure customer protections are effective.
Clarke criticized the experience of consumers in the black market as “horrific.” Research commissioned by Flutter UK&I indicated that unlicensed websites are easily accessible. Alex Wood, a former fraudster who now advises on counter-fraud measures, demonstrated this by creating fake accounts on various unlicensed sites, confirming their accessibility and lack of customer safeguards.
He called for the Gambling Commission to take stronger action and urged the Financial Conduct Authority to hold payment providers accountable for facilitating UK black-market gambling.
Clarke identified three critical areas for maintaining the success of the regulated market: enhancing customer protection, ensuring proportional regulation, and making tangible progress against unlicensed operators. Recent dialogues with the Gambling Commission, which received a £26 million grant earlier this year to combat illegal gambling, suggest a shift towards a more proactive stance.
