Today, Chancellor of the Exchequer John Healey will present the UK’s autumn budget in Parliament, a moment that has the retail sector on edge. Following months of speculation, a rise in Machine Game Duty (MGD) on Category B gaming machines is now anticipated.
In June, the Social Market Foundation (SMF) think tank proposed increasing MGD from 20% to 40%, estimating that such an increase would generate between £275 million and £458 million while addressing the increased risks associated with these gaming machines. The proposal has garnered support from various figures, including ex-Prime Minister Gordon Brown and several Labour MPs.
The proposed hike has met strong resistance from the industry, which includes bingo halls and betting shops. A study commissioned by the Betting and Gaming Council warned that up to 16,000 jobs, 1,500 betting shops, and 34 casinos could be at risk, predicting that the Treasury might actually lose £124 million in tax revenue due to shop closures.
As operators including bingo halls brace for impact, The Times has reported that Healey may settle on a smaller increase of 5%. While some within the industry view this as a relief, Greg Knight, CEO of JenningsBet, expressed skepticism. He remarked, "It’s a bit like when you’re at an airport and they say you’ve got a three-hour delay, then they revise it to half an hour, and everyone cheers. I certainly don’t think it’s a win. It could be a lot worse, but I’m not celebrating because it’s still a big drain on the industry."
Similarly, Simon Zinger, managing partner at Calibri Law, cautioned against viewing the 5% increase as a victory. "The 5% is a win relatively speaking, if you think about what was possible, but I don’t think it’s a win given that any level of additional tax would be counterproductive," he stated.
The BGC reiterates that any tax increase would jeopardize jobs and businesses, although the fallout from a 5% increase is expected to be less severe than from a 20-point rise. Financial consultant Andrew Bowden estimated that if no shops closed, the treasury would collect about £120 million in tax, which falls significantly short of SMF’s projections. He cautioned that it might take 280 closures to negate any financial gain from betting shops due to the tax rise.
Knight indicated that if the tax increase were to go ahead, he might have to shutter a "handful" of stores. Reports from the BBC indicate that bingo halls and amusement arcades anticipate closures due to the tax rise, with Buzz Bingo claiming that 40% of its clubs could fall into the red.
Zinger also predicts an uptick in fines and enforcement actions as operators may reduce compliance measures in an effort to safeguard their profit margins following the tax increases. He forecasted an enforcement spike within 12 to 24 months due to compliance issues stemming from this and recent remote gambling tax rises.
While retail operations brace for new challenges, the online sector may stand to gain, particularly brands like Midnite and Mr. Q that have no retail exposure. Zinger noted that a higher MGD could actually present opportunities for smaller, agile online challengers who may thrive as they avoid some compliance pitfalls larger operators could encounter.
As Chancellor Healey assesses the situation, concerns linger surrounding the robustness of the evidence informing gambling policy changes. A draft of the SMF’s report that was mistakenly published revealed doubts among its authors about the accuracy of job loss projections, leading to questions about the potential industry fallout from a tax increase.
Despite advocating for a 40% rate, SMF senior fellow James Noyes appeared untroubled by the smaller proposed increase, remarking on social media that a 25% rise would be a “reasonable level”.
Knight expressed frustration at the uncertainty clouding decisions about MGD, emphasizing the personal impact on workers. He noted, “For the three months throughout the summer since [the SMF] report came out, I have been inundated with staff asking if their shop’s going to close. There are real-world consequences to what people do.”
The industry has also expressed discontent over recent regulatory changes, particularly the controversial implementation of financial risk assessments, which critics argue lacks sufficient evidence and clarity.
As the budget announcement approaches, the demand for long-term stability and clarity within the UK gambling market remains crucial. A 5% increase in MGD might be manageable, but businesses are wary of future hikes. Zinger articulated this concern, stating that the 5% increase doesn’t bode well for the sector’s long-term growth, as it’s likely the government will seek further tax increases in the future.
Investment in the sector is hampered by the lack of regulatory stability. Genting Casinos COO Paul Willcock noted that the uncertain climate is preventing significant investment, while Hippodrome executive chairman Simon Thomas called for assurance on stable "playing conditions".
Ultimately, as Knight reflects on the matter, he emphasizes the need for the government to provide clarity about any future increases in MGD. He advocates for transparency in tax policy, urging for a commitment that could enable businesses to plan confidently moving forward.
