Regulus Partners has cast doubt on claims from UK-listed gambling operators that they will be able to absorb sweeping tax rises unveiled in the Autumn Budget.
After Chancellor Rachel Reeves confirmed on Wednesday remote gaming duty would rise from 21% to 40%, with general betting duty (excluding horseracing) also up from 15% to 25%, operators moved quickly to reassure the market.
Flutter forecast 27% mitigation in year one, rising to 37% by full-year 2027; Entain said it could offset 25%; evoke claimed a striking 50% medium term; while Super Group and Rank said “mitigation levers” were already under review.
But in a note issued on Friday, Regulus said the promised mitigation levels were unrealistic and risk driving the sector into what it called a “doom loop” of shrinking margins, lost customers and rising black market activity.
“Assuming that the largest UK-facing online gambling companies were not egregiously run before the chancellor came knocking, where is this confidence and these savings coming from?” the analyst firm asked.
Marketing cuts, often touted as the industry’s go-to lever, are unlikely to deliver the savings the operators expect, Regulus warned.
“Marketing is therefore likely only to be cut if and when competitors are absolutely forced to go first,” the analyst firm said.
“Saving on marketing is more challenging than it sounds unless and until the market becomes dysfunctional for a critical mass of operators.”
More immediate changes are likely to come around bonuses, with operators counting on reducing bonus costs from 25% to 15% of GGR to unlock around 25% mitigation “immediately”.
However, Regulus warned this plan is fundamentally flawed. “The idea that gaming customers will simply accept lower bonuses in the regulated market while they are freely available and almost unstoppable in the black market is naïve at best,” the note added.
It pointed out the top 10% of gaming customers generate more than 80% of revenue, hold around 10 active accounts and switch based on generosity. Regulus believes a 20% shift to offshore sites is a “conservative estimate”.
Such leakage would wipe out the assumed benefits of bonus cuts and leave operators “back with the size of problem they started with and structurally loss-making gaming businesses”.
On lobbying, PR-led efforts around tax and regulation have “led from one disaster to another,” according to Regulus, which urged the industry to adopt a more technical, policy-focused strategy.
It said lobbying should focus on a shift from effectively taxing bonuses to taxing gross gaming yield directly, while calling for tighter licensing and more effective black market enforcement.
Otherwise, Regulus concluded, the UK risks “a doom loop disaster for the regulated sector, for government tax receipts and for gaming consumers”.
The post Operator plans to mitigate gambling tax rises unrealistic, warns Regulus Partners first appeared on EGR Intel.
Analyst firm raises questions over claims from listed groups and says industry lobbying over tax has been a “disaster”
The post Operator plans to mitigate gambling tax rises unrealistic, warns Regulus Partners first appeared on EGR Intel.