UK Chancellor of the Exchequer John Healey has officially announced a 5% increase in Machine Games Duty (MGD), easing concerns within the UK gaming sector that had anticipated a more severe increase. Previously, there had been speculation of a monumental hike of up to 40%, a notion that would have sent shockwaves through the industry.
During Wednesday's budget presentation, Healey stated he would raise machine games duty from 20% to 25% specifically for higher-stakes machines, while simultaneously offering protection for pubs and seaside arcades.
This tax increase is intended to fund additional support for high streets, including providing business rate relief to these retail areas. However, Healey also indicated that Adult Gaming Centres and vape shops would be excluded from this relief, adding a layer of complication to the tax implications.
While a 5% rise may appear manageable, industry leaders express skepticism. Richard Harris, CEO of Rank, highlighted that any increase in machine games duty invariably raises operational costs, jeopardizes venue viability, and ultimately leads to venue closures and job losses. He also emphasized that the uncertainties surrounding gambling tax policy have stifled further investments in the sector.
Before the budget reveal, JenningsBet CEO Greg Knight expressed that while a 5% increase is preferable to expected higher hikes, it wasn't the resolution the industry sought. He compared the relief to a traveler receiving an update on a delayed flight, stating, "It’s a bit like when you’re waiting 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."
Concerns over closures are echoed by Sarah Calakovic, regional manager at Buzz Bingo, who explained that a 5% MGD increase could push their operations into loss-making territory, especially as gaming machines serve as a vital income source behind bingo. Knight also noted that the adjustment could necessitate the closure of several stores.
Grainne Hurst, CEO of the Betting and Gaming Council, reiterated the potential impact of any additional tax burden, warning that it would intensify pressures on an industry already grappling with rising taxes, potentially threatening jobs and funding for British racing.
MGD, a tax levied on profits from gaming machines in betting shops and arcades, has been a contentious issue between the government and the gaming industry for some time. Back in June, the Social Market Foundation (SMF), a think tank, had suggested a significant increase in MGD to help address gambling harm while enhancing public finances.
These discussions prompted reports that Healey was contemplating raising the MGD to an alarming 40%, a move reminiscent of his predecessor Rachel Reeves, who had raised the remote gambling duty from 21% to 40%. Speculation about an MGD increase also surfaced in parliamentary discussions, with MP Alex Bassinger advocating for a doubling of the tax.
The industry has vehemently opposed such increases, pointing out the potential human cost. The Betting and Gaming Council referenced modeling from EY, indicating that doubling the MGD could put around 16,000 jobs at risk and lead to nearly 1,500 betting shop closures and the shutdown of 34 casinos.
As the dust settles from this latest announcement, it remains to be seen how the gaming industry will respond to what is deemed a lesser evil in the face of previously feared tax hikes.
