The UK gambling sector has been thrown into turmoil following reports that Chancellor Rachel Reeves may impose significant tax hikes on the industry. A new levy, expected to raise as much as £3 billion, is under consideration as part of efforts to plug a £22 billion shortfall in the government’s budget. The proposed tax increases, which are said to target online gambling companies and bookmakers, could be included in this month’s fiscal plan.
Market impact on key players:
According to Bloomberg, the immediate reaction in the stock market has been pronounced, with some of the largest gambling companies in the UK seeing drastic drops in their share prices. Entain Plc, the parent company of Ladbrokes, suffered a decline of up to 15.3%, reflecting investor concerns over the potential financial hit. Similarly, Rank Group Plc, operator of the Grosvenor casinos, experienced a 6.7% decline. William Hill’s owner, Evoke Plc, was not spared either, seeing its shares fall by 16.2%, while New York-listed Flutter Entertainment, which owns Paddy Power and Betfair, saw its shares tumble 8.8% on Friday and continued to fall in Monday trading, with a loss of nearly 8%. Combined, nearly £3.5 billion in market value has been wiped from these companies in just a few days.
Financial analysts are divided on the potential consequences of the proposed tax changes. According to Citibank analyst Monique Pollard, the tax hikes would have a “material” impact on the earnings of companies like Entain and Flutter. Pollard stressed that the proposed measures could significantly alter the profitability landscape for gambling operators in the UK.
Jefferies analyst James Wheatcroft, however, expressed skepticism about the likelihood of such drastic changes being enacted, labeling the reports “unrealistic.” Wheatcroft pointed out that the magnitude of the tax increase under consideration would “all but wipe out bookmaker profitability in the UK.”
The proposals, first reported by The Guardian, are driven by recommendations from two influential think tanks—the Institute for Public Policy Research (IPPR) and the Social Market Foundation (SMF). Both organizations have proposed measures to increase gambling taxes, particularly on online gambling, as a way of raising substantial revenue for public finances.
The IPPR’s plan calls for a doubling of taxes on high-risk gambling products, such as online casino games, which they estimate could generate £2.9 billion in additional revenue next year, with the potential to reach £3.4 billion by 2030. The proposed tax increases would specifically target “higher harm” products, leaving taxes on less risky forms of gambling, such as bingo and the national lottery, untouched. The plan suggests raising the Remote Gaming Duty, currently set at 21%, to as high as 50%.
The SMF’s proposal advocates a more moderate tax increase, suggesting the doubling of online gambling taxes from 21% to 42%, which could raise approximately £900 million annually. Both proposals have garnered political support from Derek Webb, a significant donor to the Labour Party and a former poker player who has long campaigned for tighter regulations on the gambling sector.
Industry concerns and potential consequences:
The gambling industry has voiced concerns that such significant tax hikes could have unintended consequences. Representatives from the Betting and Gaming Council, a prominent industry lobbying group, have warned that similar moves in other markets have led to the growth of illegal black-market gambling, as consumers seek alternatives to avoid higher costs imposed on legal operators.
Dan Waugh, an adviser at Regulus Partners, echoed these concerns, cautioning that a sharp rise in gambling taxes could lead to greater consumer harm. “If you raise the cost of consumption, there’s a point at which consumers may end up bearing the additional cost, leading to unintended negative consequences,” Waugh stated.
As of now, the UK Treasury has refrained from making any formal statements about the possibility of increased gambling taxes. However, sources close to the discussions have indicated that the proposals remain on the table and are being actively considered as part of Chancellor Reeves’ broader efforts to address the public finance deficit.
One insider noted, “There’s no obvious pushback to these proposals within the Treasury, and they are definitely being considered for the upcoming budget.”
