On Wednesday, UK Chancellor John Healey announced a five-percentage-point increase in the Machine Gaming Duty (MGD). While this rise is less severe than the proposed 40% increase discussed over the summer, industry players caution that it could push more customers toward unregulated gambling operators.
Operators and industry experts have noted that this new duty is only one part of a series of recent tax and regulatory adjustments impacting both retail and online gambling sectors. Notably, last year's budget introduced a significant hike in the remote gaming duty (RGD), which soared from 21% to 40%. Beginning next year, a new general betting duty for remote betting will also be implemented, increasing from 15% to 25%.
Dan Waugh, a partner at the advisory firm Regulus, pointed out the negative implications of this tax increase. He stated, "If your income tax went up by a quarter overnight, you wouldn’t see that as a positive," highlighting concerns that the hike could lead to further closures of venues and job losses. Waugh also indicated that constantly changing fiscal policies could make the UK appear unreliable to potential investors.
Legal professionals echo these sentiments. Bethan Lloyd, a partner at Wiggin, remarked, "The industry is already very squeezed. A 5% increase on an industry that has very squashed margins is not ideal." She emphasized the potential impact on horse racing revenues due to many bettors relying on retail betting shops rather than online options. While she anticipates continued consolidation and cost-cutting within the sector, Lloyd believes that technological advancements and new market entrants might help alleviate some pressures over time.
Ismail Vali, president of Gaming Compliance International, raised significant concerns about the MGD hike, describing it as part of a "perfect storm" encouraging consumers to shift toward an expanding illegal gambling market. Vali cited alarming data indicating that the unregulated portion of online gross gaming revenue in the UK has escalated from 0.43% in 2020 to an estimated 9% by the end of 2025, essentially doubling from a small base each year. He warned, "We are knocking on the door of 10% illegal black market share."
As legal operators trim their marketing budgets due to tightened profits, consumers may encounter unverified brands offering more attractive odds or bonuses. Vali noted the proliferation of "plug-and-play" offshore sites that can be established for as low as £25,000, posing a significant risk to the regulated market's integrity.
The discussions around the proposed 40% MGD increase, which emerged prior to the election, stemmed from a report by the Social Market Foundation think tank. Some industry experts have urged caution, pointing out that these proposals did not come from official government plans.
Despite varying opinions, there is a consensus that the cumulative effect of recently imposed RGD increases and the new MGD rise presents a substantial challenge for operators. Waugh remarked, "The industry needs to work out how it breaks this cycle of tax increases and regulatory tightening, because otherwise it’s heading to a pretty dark place."
Looking forward, Lloyd indicated that larger, diverse groups like Flutter and Entain are likely to manage cost increases better, whereas smaller, retail-focused operators may face heightened risks. While Waugh expects venue closures and job losses, he refrained from predicting a substantial wave of mergers solely driven by tax hikes.
Vali anticipates considerable structural changes ahead, stating, "I expect to see retail consolidate. I expect some operators to fail and I expect more migration to online platforms." He underscores that controlling the illegal market's growth is paramount and can only be accomplished through enhanced enforcement and coordination among regulators, platforms, payment providers, and advertising entities.
He further identified a broader public policy challenge — while the UK is known for its esteemed licensing system, excessive regulatory and tax pressures might drive legal operators towards a reluctant acceptance of losing market share to illegal competitors. Vali advocates for strategies focusing on monitoring, enforcement, and optimizing the overall landscape of gambling.
Waugh warned of potential further tax increases, suggesting that they could be influenced by the government's attitude toward the gambling sector. He contrasted Chancellor Healey's comments regarding banks, which included praise and an incremental tax increase of 3% on banking surcharges, with the lack of acknowledgment for the gambling industry’s contributions. Waugh observed, "It was not surprising, but I think the other thing is the sense that actually the government looks down its nose on this industry, and the sense it’s prepared to be vindictive even."
He concluded, "We’ll be back here in a year’s time because it’s again not even apologising for raising taxes. I think that’s striking.",
