According to consultancy firm Regulus Partners, the UK government risks deepening the crisis facing British high streets and jeopardizing tax revenues if it moves ahead with plans to double the Machine Games Duty (MGD). The firm projected that the horse racing sector could see a dramatic reduction of approximately a third of its annual income—amounting to £92 million ($121.6 million)—if the tax increases as proposed.
These warnings surfaced ahead of Chancellor John Healey’s autumn budget, set to be presented later this month.
The analysis revealed that raising the MGD to 40% would likely render many betting shops unprofitable. Estimates suggest that as many as 4,000 betting outlets could shut down within three years if no counteracting measures are introduced, reducing the total number of shops to around 1,500—about a quarter of the current figure.
Currently, betting shops generate an average revenue of £440,000 each year, split evenly between gaming machines and betting activities. This financial examination noted that roughly 30% of revenue supports staffing, which accounts for approximately 35,000 full-time equivalent jobs. Additionally, about 20% goes to government duties, VAT, and rent, while business rates consume 7% to 10%. Moreover, around 6% funds British horse racing through media rights and mandated levies.
Should the MGD rise to 40%, shops would incur nearly £45,000 in additional costs annually, leading to nonexistent free cash flow and subsequent closures. Regulus predicted that about 1,500 shops would immediately operate at a loss, forcing them to close their doors. Another 1,000 shops might follow suit within two years as revenues stagnate while fixed costs continue to escalate.
Regulus warned that the closures would not merely shift customers to other locations. The current market operates with limited extra capacity, and there is little inclination among customers to switch shops. Since 2014, revenue from horse racing linked to betting shops has effectively stagnated, only increasing by 0.7% annually, while revenue per shop has risen a modest 1.8% per year—both below inflation.
This potential revenue loss has prompted significant concern from the British Horseracing Authority (BHA), which described the analysis as a "stark warning" to both the industry and the government. Regulus estimated the MGD increase could cost the horse racing sector £92 million annually, threatening vital funding and investments for the industry.
Greg Swift, the BHA’s director of communications and corporate affairs, stated, "We strongly urge the government to seriously consider the secondary impact on horse racing of a tax hike on betting shops and also urgently explore measures to ensure that British racing—and the 85,000 jobs it supports—is put on a long-term and sustainable financial footing."
Both Regulus and the BHA are challenging the Treasury's belief that raising the MGD will ultimately increase tax receipts. They forecast a potential 32% drop in MGD revenues to about £155 million if the predicted shop closures materialize. The analysis also anticipated around 28,000 job losses across the wider economy, with local trading and supplier losses potentially amounting to £500 million annually.
More industry pushback continues as Regulus's report adds to mounting criticism against the proposed MGD hike. Deutsche Bank noted that Rank Group would face significant challenges if the MGD were raised, projecting an annual duty cost of about £35 million for the operator due to its extensive land-based network, which would amount to roughly 44% of the company's forecasted EBITA for 2028, and about 17% of its EBITDA in the short term, even after any mitigation.
Entain CEO Stella David cautioned that a sharp MGD increase might drive consumers away from the regulated market, with estimates suggesting that stakes of up to £1 billion could shift towards the black market. David highlighted the broader implications of such a tax rise on employment and community businesses, noting, "They are people losing their jobs and communities losing long-established high street businesses."
Betfred's owner, Fred Done, warned that the MGD hike could force the closure of 495 shops within a year, resulting in 2,575 job losses and an estimated £67 million in lost tax revenue.
