UK high-street gambling establishments are confronted with a pressing issue that transcends their financial limits: can they safeguard their future without insisting that other venues bear the burden?
As the prospect of a machine games duty (MGD) increase to 40% looms, some may understandably differentiate between the more deserving betting shops and the perceived less worthy adult gaming centres (AGCs).
However, Nick Rust, the former chief executive of the British Horseracing Authority and an executive in the betting industry, argues that such public dissension could be detrimental to both sides.
"I don’t think the public really differentiates between locations on the high street where you can play machines," he stated.
Rust warns against internal conflict, emphasizing, "Whenever you start attacking a subsector within your own industry, you have to think about what that looks like. Whataboutery isn’t going to help anyone."
Concerns about a potential doubling of MGD are widespread. Regulus Partners has estimated that if the MGD increases from 20% to 40%, approximately 1,500 betting shops may survive, with around 4,000 closures leading to a loss of 28,000 jobs and a £92 million deficit for racing.
In their model, Regulus notes that an average betting shop generates around £440,000 annually, with revenue mostly split between betting and gaming machines. After deducting staffing, taxes, rent, racing payments, and other expenses, the net contribution of each shop stands at approximately £44,000. An increase in MGD would effectively raise the average shop's costs by about £45,000, eliminating that positive contribution.
The repercussions would extend through lease and refurbishment cycles, alongside immediate shop closures. Regulus estimates that betting shop MGD receipts would drop by about 32%, translating to £155 million and undermining anticipated tax revenue.
Rust finds the threat credible, stating, "The 1,500 number rings true to me. This isn’t crying wolf now." However, he is not blindly accepting previous industry warnings, noting that bookmakers retained machine revenue more successfully than they previously implied after the fixed-odds betting terminal reforms.
As Rust scrutinizes current operating pressures, he notes, "I think the damage has been done by general costs, media rights costs, and National Insurance rises."
The arguments against the MGD increase are not limited to bookmakers. Nicole Barrett, CEO of the Bingo Association, appeared on BBC's Breakfast News, alerting viewers about the severe job threat to bingo halls.
"Machines are an important secondary income for bingo clubs. It’s just another tax increase that could undermine that," Barrett explained. Dominic Mansour, CEO of Buzz Bingo, told BBC Five Live that even a 5% increase in MGD would render a third of his business’s clubs unviable, asserting, "It would be really, really tough for us."
Consultant Vaughan Lewis, formerly of Evoke and now with Teise Advisory, views the tax threat in the context of racing’s reliance on bookmakers. His perspective suggests that the machine income generated by shops supports levy and media rights fees, while AGCs contribute nothing to racing. Higher duties, he cautions, might inadvertently bolster arcades at the expense of racing's retail segment.
An anonymous industry consultant challenges the binary distinction between establishments offering similar machines. "On principle, category B machines are either OK or not OK. You can’t separate between an AGC and a betting shop offering the same product," they stated. The consultant argues that conditions regarding player safety in a gambling setting are not affected by venue type and contended, "The idea that AGCs are going to be OK with 40% MGD is wrong—they have a bigger problem, not less."
While Regulus’s model does not offer predictions for AGCs, the notion that they would be safe from heightened duty increases remains debatable. More pressing, the consultant posits that bookmakers risk conceding to the Treasury’s stance.
“If betting uses the argument that arcades can withstand this, then that is saying raise the tax. If a tax rise isn’t a problem for AGCs, then your argument has been lost. It sounds like special interest pleading and not a real argument,” they concluded.
Rust champions a more balanced stance. He recalls past friction during the FOBT debate when amusement industry trade body BACTA criticized bookmakers, a move that ultimately proved counterproductive. Rust reflects on the lingering impacts of this division. "Will attacking another part of the industry have an impact on the public? No."
Rust’s apprehensions extend beyond the fiscal ramifications for racing. He envisions betting shops disappearing entirely from his town, having already witnessed a reduction from two to one.
"There used to be two shops, and now it is down to one, and I can see this becoming a town with no betting shops," he said. Rust worries that fewer community outlets may result in fewer safe environments for social interaction, as pubs also close. He cautions that without licensed venues, illegal gambling components could resurface in bars and clubs.
This poses an uncomfortable question for anti-gambling factions: does shutting down a licensed establishment eliminate demand?
Yet, racing faces its challenges and must reconsider its overreliance on betting revenues without exploring other potential revenue avenues. "Racing has remained drunk on the revenues from betting without thinking about what might happen in the future," Rust claims.
The pressing issue emerges about the actual outcomes of a duty increase: the revenue it would generate, the closures it could cause, and where displaced customers would migrate afterward.
While bookmakers and AGCs may not share identical interests, suggesting to the government that another licensed sector can manage the tax increase could dilute the case that the tax hike itself is counterproductive.
Fighting over survival may ultimately weaken the collective defense of the gambling high street.
