The UK government faces significant risks to British high streets and potential tax revenue losses if it moves forward with plans to double the Machine Games Duty (MGD), according to a report by Regulus Partners. The consultancy estimates that if MGD increases, the horse racing industry could lose approximately £92 million ($121.6 million), equating to about a third of its annual revenue.
These warnings come as Chancellor John Healey prepares for his autumn budget announcement scheduled for later this month. Regulus indicates that raising the MGD to 40% could make many betting shops financially unviable. The firm estimates that up to 4,000 betting shops might shut down over the next three years without any intervening measures, leaving the UK with only around 1,500 shops, which would represent about a quarter of the current total.
The report highlights that betting shops currently generate average annual revenues of around £440,000 each, derived equally from category B gaming machines and betting activities. Around 30% of this income goes toward staffing, supporting roughly 35,000 full-time equivalent jobs. Additionally, about 20% is paid in duties and value-added tax (VAT), while 7% to 10% is allocated to business rates. Approximately 6% of revenues contribute to funding British horse racing through media rights and a statutory levy.
If MGD rises to 40%, each betting shop could see costs increase by about £45,000 per year, extinguishing free cash flow and leading to closures. Regulus expects that approximately 1,500 shops could become loss-making almost immediately, forcing their closure, while an additional 1,000 shops may follow suit within two years due to stagnant revenues and increasing fixed costs.
Regulus also warns that the closure of shops would not simply lead to customer redistribution among remaining locations, as the current market has limited capacity and customers tend to be reluctant to switch shops. Since 2014, betting shop revenues linked to horse racing have stagnated, with a growth rate of just 0.7% annually, and revenue per shop rising only 1.8% per year, both trailing behind inflation. Therefore, lost revenue from closures could be permanently gone.
The British Horseracing Authority (BHA) has reacted strongly to these potential losses. They described Regulus’ findings as a serious warning for both the industry and the government. According to Regulus, doubling the MGD could cost the horse racing industry about £92 million each year, which threatens essential investments in funding and research. BHA’s Director of Communications, Greg Swift, urged the government to consider the detrimental effects a tax hike would have on horse racing, which supports 85,000 jobs, and to pursue measures that ensure the sector remains financially sustainable in the long term.
Both Regulus and the BHA dispute the Treasury's expectation that a hike in MGD will result in increased tax receipts. Regulus projects that doubling the tax could lead to a 32% drop in MGD revenues, lowering them to around £155 million if the predicted shop closures occur. The potential economic fallout could include around 28,000 job losses, with impacts on related suppliers and local businesses potentially reaching £500 million annually.
The pushback against the MGD increase has been growing within the industry. Deutsche Bank recently reported that Rank Group might bear the brunt of an MGD rise due to its extensive physical presence, estimating that it could incur additional costs of about £35 million annually—roughly 44% of its projected 2028 EBITA.
Entain CEO Stella David warned that a sharp rise in MGD could drive customers toward unregulated gambling markets, possibly shifting up to £1 billion in stakes away from regulated venues. She stressed the broader implications of such a tax increase on jobs and community businesses. Similarly, Fred Done, the owner of Betfred, indicated that the MGD hike would compel Betfred to close 495 shops within a year, leading to the loss of 2,575 jobs and an estimated £67 million in lost tax revenue.
