UK gambling stocks rebound after tense day
Stocks in the biggest UK betting companies dramatically fluctuated throughout Wednesday after Chancellor of the Exchequer Rachel Reeves revealed the budget for the upcoming fiscal year.
Shares in Entain, an international sports betting and gambling group that oversees operations in established betting firms such as Coral and Ladbrokes, fell sharply ahead of the budget after a report from the Office for Budget Responsibility (OBR) was leaked. The firm rebounded at the end of trading, finishing 3.5 percent up on the day.
Evoke, which oversees UK betting brands like 888, William Hill, and Mr Green, ended the day 18.3 percent down, with the company removing its medium-term guidance after the changes in tax and claiming the measures will cost it £80 million in the next fiscal year.
Online betting companies to pay billions in extra UK tax
In her second budget as chancellor, Reeves turned her glare on an industry that generated revenues in excess of £12 billion in the last tax year.
Companies will feel the sting most from a near-doubling of the Remote Gaming Duty (RGD), from 21 percent to 40 percent. Any operator that is licensed in the UK or offshore must pay RGD if they want to provide remote gambling facilities to UK players.
Online sports bets will also be subject to a tax rise up to 25 percent from 15 percent, though bets placed on horse racing are exempt from any increase. The traditional high street bookmaker has also escaped any additional tax measures.
The tax increase is predicted to raise more than £1 billion per year by 2031.
Announcing the new policies, Reeves told a packed Commons: “I will reform gambling taxes in response to the rise in online gambling. Remote gaming is associated with the highest levels of harm and so I am increasing Remote Gaming Duty from 21 percent to 40 percent, with duty on online betting increasing from 15 percent to 25 percent.
Fierce reaction from leaders in sports betting sector
As expected, the news has gone down badly in the iGaming industry, with executives bemoaning the impact it will have on businesses, with some claiming the move will cost jobs and ultimately harm the economy.
A statement from Entain said on Wednesday that it expects about £200 million of additional cost to its UK and Ireland online business.
It read: “Aligned with the Betting & Gaming Council (BGC), Entain strongly believes that maintaining well-balanced regulatory frameworks alongside proportionate tax regimes is critical to protecting customers and supporting the sector.”
“Today’s announced tax changes fail to deliver this balance and will see regulated operators limited to providing a less attractive and lower quality customer offering compared to the unlicensed and untaxed black market.”
Flutter UK and Ireland CEO Kevin Harrington, also voiced fears that the policy would drive gamblers to unregulated markets: “Today’s tax increases are a very disappointing outcome and will have a significant adverse impact on our industry. These black market operators don’t pay tax and don’t invest in safer gambling. At 40 percent, the UK’s remote gaming duty is now above countries such as the Netherlands, where a recent tax increase saw a rise in illegal gambling and a fall in Government receipts.”
He is hopeful, however, that “proactive cost initiatives” Flutter took in the build up to the budget will help the business navigate the changes.
Horseracing, bingo and betting shops escape unscathed
There were concerns by some observers that one of the UK’s oldest gambling exports, horseracing, would also be hit in the budget. But the British Horseracing Authority (BHA), the body responsible for the governance, administration and regulation of horseracing and the wider horseracing industry in Britain, has expressed relief at the budget.
In a statement, it said: “British horseracing welcomes the decision to spare the industry from any punishing increase in direct gambling taxation. In her budget, the Chancellor Rachel Reeves confirmed that racing’s remote betting tax rate would remain at 15 percent in recognition of its vital importance as a cultural and sporting asset enjoyed by millions of people across the country every year.
Bingo halls had even better news, with a 10 percent tax duty abolished from April onward. Betting shops also dodged any fallout. There had been fears that a rise in tax for high street retail betting could force thousands of UK betting shop closures.
Before the budget was announced on Wednesday, Betfred owner Fred Done had said: “If [the tax rate] went up to anywhere like 40 percent, or even 35 percent, there is no profit in the business. We would have to close it down. I’m talking about job losses. We’re talking probably 7,500.”
Meg Hillier, the chair of the Treasury select committee, believed the budget reflected and rewarded the contributions to wider British society. She told the Guardian: “Some parts of the gambling industry, such as racecourses and bingo halls, make a cultural contribution to our country. It’s reassuring to see that the chancellor agrees with us on this and I look forward to discussing it further with her when she appears in front of us in December.”
References
Guardian
Flutter
Morning Star
Games Hub
