Today, UK Chancellor John Healey is set to deliver the autumn budget in Parliament, a crucial moment for the UK's retail sector, which is on edge due to expectations surrounding a potential increase in Machine Game Duty (MGD) for Category B gaming machines.
In June, the Social Market Foundation think tank proposed doubling MGD from 20% to 40%. Their report argued this change could generate between £275 million and £458 million while addressing the increased risk associated with these gaming machines. Notably, former Prime Minister Gordon Brown and several Labour MPs supported this proposed increase.
The possible hike has stirred significant concern among various industry stakeholders. The Betting and Gaming Council (BGC) commissioned research indicating that a significant tax increase could jeopardize 16,000 jobs, 1,500 betting shops, and 34 casinos. Furthermore, the Treasury could face a loss of £124 million in tax due to potential shop closures.
Despite these worries, The Times has reported that Healey is likely considering a more modest 5% increase instead. Some industry representatives view this as a much-needed relief compared to the initial proposals. Greg Knight, CEO of JenningsBet, likened the situation to receiving a less severe delay at an airport, stating, "I certainly don’t think it’s a win. It could be an awful lot worse, couldn’t it, but I’m not celebrating because at the end of the day it’s still going to be a big drain on the industry."
Simon Zinger, managing partner at Calibri Law and Bluestar Partners, echoed Knight's sentiments. While acknowledging that a 5% increase is less harsh than anticipated, he cautioned that any tax rise is ultimately harmful to the industry.
The BGC also weighed in, warning that any increase poses risks to jobs and businesses, though the impact may be less severe than with a proposed 20% hike. Financial consultant Andrew Bowden assessed the potential effects of a 5% MGD increase, estimating that, without shop closures, the Treasury would collect around £120 million—far below the SMF's forecast. He suggested that it would take about 280 closures to offset any tax gains from betting shops.
Knight pointed out that he may need to close some stores to compensate for the proposed tax increase. Meanwhile, bingo halls and amusement arcades have expressed fears that a 5% rise would force many of them into losses, with Buzz Bingo stating that 40% of its clubs could fall into this category.
Zinger, who has experience at Entain, warned of potential regulatory repercussions stemming from the MGD increase alongside remote gambling tax hikes. He anticipates a rise in enforcement actions and fines as operators may reduce compliance measures to protect their margins.
Despite the challenges, there may be some beneficiaries in the online sector. Companies like Midnite and Mr Q, which operate exclusively online, could gain from the added pressure on their retail competitors. Zinger noted that smaller online businesses might find opportunities to capitalize on these market shifts, as they can adapt more swiftly to regulatory changes.
As Healey prepares to announce the budget, serious questions linger about the evidence backing any adjustments to gambling policy. A draft from the SMF concerning the MGD hike was accidentally made public, revealing internal doubts among staff regarding the accuracy of job loss projections if the duty were to increase. In discussions surrounding the smaller potential increase, SMF senior fellow James Noyes referred to a higher 25% rate as “a reasonable level.”
The continuous uncertainty surrounding MGD and other regulatory changes has left many in the industry frustrated. Knight emphasized the mental strain that prolonged uncertainty brings, stating, "It’s just not good for any business to have three or four months of uncertainty. We’re just sitting here and waiting really."
Above all, the industry is seeking long-term clarity to facilitate stable planning. While a 5% increase may be manageable, stakeholders are wary of potential future hikes. Zinger commented that a 5% rise may not be advantageous for long-term growth in the UK gaming sector, suggesting that the government is likely to pursue further tax increases in the future.
Both Genting Casinos and Hippodrome representatives have voiced their desires for a stable regulatory environment, voicing frustrations regarding the current unpredictability.
Knight called on the government to provide assurance that tax policies would remain stable for the remainder of the current parliamentary term, enabling businesses to plan with confidence in the future.
