Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Shares of UK-based bookmakers fell sharply on Monday on concerns that the government could raise taxes on gaming companies in this month’s Budget.
Entain, the London-listed gambling group that owns Ladbrokes, plunged by as much as 14 per cent in early trading after a newspaper report on Friday that chancellor Rachel Reeves was weighing possible tax increases on the sector worth up to £3bn. While they subsequently partially recovered, shares in the company closed 8 per cent lower.
Shares of rival Flutter, which owns brands including Betfair and Paddy Power, fell 6 per cent in London, while Evoke, owner of William Hill and 888, lost 14.3 per cent. Casino operator Rank Group fell 3.2 per cent.
Entain, Flutter, Evoke and Rank lost a combined £2.4bn in market capitalisation during the day.
However, Reeves appeared to downplay the prospect of a punitive raid on the sector. “We’re proud of those businesses choosing Britain as a place to invest and create jobs,” she told reporters at an international investment summit on Monday in London.
“We want a competitive tax system for all parts of our economy,” said the chancellor, a Leeds MP, adding that she welcomed the presence of Sky Bet paying “decent wages” and providing jobs in the city.
The Guardian reported on Friday that the government was contemplating an increase in gambling taxes, based on proposals by think-tanks including the Institute for Public Policy Research, which has estimated that the government could raise £2.9bn next year, and up to £3.4bn by 2030.
The IPPR has suggested doubling the duty on high street bookmakers to 30 per cent and increasing the online casino gaming duty from 21 per cent to 50 per cent. “Gambling harms are increasing” due to the rise of online casinos, said the report.
It cited new research from the Gambling Commission that found 2.5 per cent of the adult British population may be suffering from problem gambling, “far higher” than previous estimates of about 0.3 per cent.
However, Investec analyst Roberta Ciaccia said the IPPR proposal to sharply raise gambling taxes was “not realistic at all, as it will not allow any operator to be profitable”.
Ciaccia said such an increase would wipe out companies’ profit, as most large operators in the UK generated core profit margins of about 20-25 per cent online and 15-20 per cent from betting shops.
The Social Market Foundation, meanwhile, has called on the government to double taxes on online casino gaming to 42 per cent, a rate it said could bring in as much as £900mn to the exchequer.
The public policy think-tank will issue a report on Tuesday arguing that online casinos are “more closely associated with harm than other forms of gambling”, citing the Gambling Commission’s finding that online slot players are six times more likely to be classified as having a problem than the typical gambler.
The report will say British tax rates are often lower than those in other countries; France’s online sports betting tax rate is 55 per cent and Austria levies 40 per cent on online gambling.
“We have already discussed these proposals with people in government in recent weeks,” said a person close to the SMF.
Shore Capital analyst Greg Johnson said ramping up gambling taxes could result in lower tax revenues from the industry should it lead to mass closures of betting shops and online gaming sites.
The government is currently in a process to implement tougher regulations particularly on online gambling, including affordability measures and deposit limits, as outlined in a white paper published by the former Conservative government last year.
“The market is already becoming more challenging [for operators],” said Johnson, adding that there was a risk of “encouraging people to move to [illegal] offshore betting sites, which don’t pay any tax”.
Additional reporting by Jim Pickard and George Parker
Letter in response to this article: