As Britain’s Treasury weighs up a possible steep rise in remote gambling duties – with proposals reaching as high as 50% on gross gaming revenue – the mood across the UK’s high street bookmakers has darkened.
What was once a familiar fixture of local life and working-class leisure could soon become a casualty of what the gambling industry has called a shortsighted fiscal ambition.
Even before the threat of new levies, the retail segment was faltering as the nation’s gambling habits migrated largely online. Quarterly updates from Entain – with over 2,000 stores across its Ladbrokes and Coral brands – have repeatedly described retail as a “stable” but low-growth segment, although the group insists it “treasures” its shops as the backbone of its brand.
Major operators have issued stark warnings against a hike, insisting the impact could wipe out retail betting in the country, with thousands of jobs and hundreds of shops at stake. Aside from Flutter’s recent closures, Evoke, which operates 1,300 William Hill outlets, has also threatened to close as many as 200 shops – 15% of its estate – if taxes rise. As have Entain and Betfred.
“If [the tax rate] went up to anywhere like 40% or even 35% there is no profit in the business,” Betfred founder Fred Done said in an interview with the BBC on 19 October. “We would have to close it down … probably 7,500 job losses.”
Speaking to iGB, a spokesperson for Flutter UK & Ireland reiterates the impact a rise could have on its retail business, noting it has already had to close shops even before any tax increase. “We unfortunately had to close 57 Paddy Power shops last month – and that’s before any increase in gambling duty. Any tax increase on business isn’t a free hit, it comes with consequences,” they warn.
Tax hike will ‘devastate’ UK high street bookmaker jobs
A rise in gambling duty will have a significant effect on jobs and sports sponsorships, as well as offering a huge boost to an illegal black market that has almost tripled in size in the UK in the past three years.
A report commissioned by the UK’s Betting and Gaming Council (BGC) in October claimed such a “tax raid” could wipe out £3.1 billion from the UK’s economic output and threaten more than 40,000 jobs.
The analysis by EY found that once lost employment, reduced corporation tax and lower National Insurance contributions are considered, the Treasury’s net gain from the proposed UK gambling tax hikes could fall below £500 million.
“Further tax hikes would devastate jobs, reduce Treasury revenues and drive billions into the hands of the black market,” the BGC tells iGB.
The impact of a possible UK gambling tax rise on the already suffering retail sector has been clearly outlined by stakeholders, but some parliamentarians appear skeptical of the sector’s warnings.
Treasury committee doubts impact of remote tax hike on retail
During a Treasury committee session held in Parliament on 28 October, committee members probed BGC CEO Grainne Hurst and the trade body’s tax policy advisor, Stephen Hodgson, on the issue, seemingly expressing doubts over the sector’s threats that retail would take a hit even if remote taxes were to increase.
Hurst confirmed that UK gambling companies operated a “circular economy” and a single profit-and-loss model, meaning any impact to one side of the business would inherently be felt across the group.
“They will be reinvesting money they make in one part of their business into another. And so if we see any additional further tax increases on any part of the sector, it is likely to have an effect on the retail side of the business,” Hurst told the panel.
“These are businesses that operate in an integrated manner. So if you were to increase remote taxes and leave land-based taxes untouched, you would still see a consequence on the overall ecosystem,” Hodgson added.
“If you look at some of the larger businesses the BGC represents, they are quite integrated. That’s how they manage to achieve economies of scale and become the large, successful businesses they are. And they will look at costs across the board.”
Could the retail sector be shielded from the impact?
Elsewhere, the panel discussed the potential of specifically shielding the retail sector from any tax increase by establishing a separate rate for online and retail betting activities.
Currently the sector pays a flat 15% General Betting Duty across profits made from bets made both online and in-person. But during the meeting Paddy Power co-founder Stewart Kenny proposed a separate lower rate for retail activities to help protect high street bookies from extinction.
“I believe there should be provisions in any taxation [model] that betting shops will be lower, because I think they can be a real social [hub] for people who don’t drink, to have fun. Betting shops do have a future, but obviously like [everything] on the high street they are going to suffer,” he said.
A social institution under threat
Operators have equally raised concerns over the human impact of shop closures. In an interview with The Times, Entain CEO Stella David said closures would be a blow to community identity. “We don’t want to close shops,” she said. “These are part of Britain’s cultural fabric – not just places to bet, but places where people come together.”
The sense of loss is echoed across the industry, says Bethan Lloyd, senior associate at Wiggin LLP who previously worked in William Hill’s legal team. She points to the special place the high street bookmakers hold in the lives of punters.
“Many of these bookies serve as something of a social base for their regular customers; it is sad that this will be taken away,” she notes.
“Many of our shops play a central role in communities and we are committed to our retail estate, but clearly any duty rise in the upcoming budget could impact our plans,” the Flutter spokesperson adds.
Dan Waugh, a partner at Regulus Partners, believes the disappearance of the betting shop will have real social consequences. “Millions of people choose to bet and watch racing in shops despite the fact they can do both at home. A meaningful number of consumers will find their lives negatively impacted by the withdrawal of an activity that brings them pleasure,” he says.
Impact on mental health
Mark Pearson, Betfred’s head of corporate affairs and communications, stresses there is a lot more at stake than just a line on a balance sheet. “Retail is the very heartbeat of our business,” he says. “Fred [Done] started with just one shop in 1967. Betting shops are a massive part of communities and high streets.”
He also warns the knock-on effects would be profound. An impacted retail sector would mean reduced investment in horse racing and sport, and not least “a free pass for the black market that offers no protection for vulnerable players.”
The BGC estimates that 1.5 million Britons stake up to £4.3bn annually with unlicensed operators in a growing black market.
Dan Waugh at Regulus Partners also adds a sobering warning that funding for treatment of gambling disorders, as well as harm prevention initiatives and research, is at risk of falling too. Under the new statutory levy, around 90% of funding comes from betting shops, online betting and online gaming.
“If consumer spending in these channels falls as a result of tax increases, then we may see essential mental health treatment services collapse.”
The human cost
The threat to the UK land-based gambling sector is not just about betting shops. The proposed UK gambling tax structures from think tanks such as the IPPR and Social Market Foundation (SMF) would hit all land-based gambling venues – from casinos and bingo clubs to seaside arcades.
Dan Waugh believes the SMF and IPPR reports which propose more than doubling current UK gambling tax rates are of “extremely poor quality”.
“Neither think tank appears to have considered the impact of shutting down large swathes of the land-based industry,” he laments. “Clearly, omnichannel incentives will be far less relevant if there are far fewer shops,” he says of crucial player retention strategies that operators have built over years.
But Lloyd acknowledges that successfully converting customers between online and retail has been a challenge for all the major operators. She says many retail clients don’t regularly bet online and stricter marketing rules have added a layer of complexity to omnichannel approaches.
Behind UK high street bookmakers lie thousands of British employees, many of whom have spent decades in the same communities and companies. Lloyd notes the personal cost is that these staffers will unlikely be redeployed as the industry is tightening its belt across the board.
UK high street bookmaker employees won’t be redeployed
This will also negatively impact the consumer experience, Lloyd says: “This route will be minimised or removed, and with it, the grassroots knowledge of the punter and the product.”
Waugh agrees that political advocates of the tax hike underestimate this disruption. “It is easy for people in Westminster think tanks to say that betting shop employees can easily find work elsewhere,” he says. “This ignores the fact that unemployment is rising, that in some parts of the country jobs simply aren’t there.”
The industry’s geography aggravates the issue. “Online gambling – as with ecommerce in general – tends to concentrate employment in a small number of locations,” Waugh notes. “There might be some opportunities for shop workers in places like Stoke-on-Trent and Leeds, but these are exceptions.”
The end of an era?
Retail betting shop closures could have a ripple effect across British racing and related industries. A quarter of racing turnover occurs in betting shops, meaning their disappearance would erode media rights revenues and levy receipts.
“Racing will be the most impacted,” says Lloyd. “Given the demographic of the shops’ customers and their betting patterns.”
As the chancellor’s autumn budget approaches, the industry’s lobbying has reached fever pitch. Entain’s David has urged policymakers to look beyond short-term revenue. “When you start damaging the regulated market, you don’t get less gambling, you just get less safe gambling,” she has told the media.
The image of the British bookmaker has endured for decades. But it now stands at a crossroads. Taxation that aims to boost public finances could instead hollow out the very communities it is meant to serve and, if the environment becomes unsustainable for the operators, policymakers may soon witness the disappearance of one of Britain’s last surviving high street institutions.
What could be the human cost of a tax hike decimating UK high street bookmakers?