Bookmakers take hit over fears of tax increase

British bookmakers became the latest victims of pre-budget anxiety after a report that the Treasury is considering a £3 billion tax raid on the sector wiped billions from the market value of its biggest players.
Entain, Flutter, Evoke (formerly 888.com), Playtech and Rank Group suffered steep share price falls as trading opened on Monday, initially erasing more than £3.5 billion from their collective market value.
The sell-off was prompted by a report published in The Guardian over the weekend suggesting that Rachel Reeves was facing pressure from two influential think tanks to raise taxes on the industry to help plug a £22 billion “black hole” in the public finances.
The Social Market Foundation suggested lifting online casino gaming taxes from 21 per cent to 42 per cent, which could bring an extra £900 million into the exchequer. The foundation is backed by Derek Webb, a gaming entrepreneur turned regulation campaigner who is now one of Labour’s top individual donors.
The Institute for Public Policy Research (IPPR), meanwhile, wants the duty on high-street bookmakers’ profits doubled from 15 per cent to 30 per cent and the take from online gaming boosted to 50 per cent, raising as much as £3.4 billion by 2030. Duties on “lower harm” products, such as lottery and bingo, would remain unchanged.
The shares of Entain, the owner of Ladbrokes and Coral, lost 15 per cent in early trading before closing 8 per cent, or 61½p, lower at 705½p. Evoke, which owns William Hill, dropped 14.4 per cent, or 9¼p, to close at 55¾p. Shares in Flutter Entertainment, which is behind brands including Betfair and Paddy Power, fell 6 per cent, or £11.10, to £174.30. The Mecca Bingo owner Rank Group retreated 3.2 per cent, or 2¾p, to 84p; while Playtech, whose software underpins a host of online casinos and sports betters, fell 0.7 per cent, or 5p, to 735p.
The losses eased throughout the day as analysts expressed scepticism over the scale of the tax rises, which several suggested could leave many businesses in the industry loss-making. The five companies closed the day having lost a combined £2.4 billion in their market capitalisation.
James Wheatcroft at Jefferies, the investment bank, told clients: “The proposals apparently being considered would all but wipe out bookmaker profitability in the UK, per our estimates. The headlines highlight that changing tax (and regulation) is a legitimate concern when investing in gaming companies, but the extent of these proposals seems unrealistic.”
Investec said the tax plans were “unrealistic” as they would be “industry-destructive” and more or less wipe out profit margins across the gaming industry. JP Morgan described the proposals as “excessive and detrimental to the overall regulated UK gaming market [which would] drive players to the black market”.
That view was echoed by the Betting and Gaming Council, a gambling industry lobby group, which said disproportionate tax regimes could lead to a spike in illegal black market gambling.
Citi analysts said it was unlikely that the government would implement a massive tax rise given the material disruption it would cause, “but we see UK gambling tax creep as incrementally more likely”.
The UK levies seven different types of betting and gaming duty, with the rate varying depending on the type of activity. Last year the taxes raised £3.3 billion. Labour has warned that taxes will go up in the budget on October 30, as the chancellor scrambles to find ways to balance the public finances.
A spokesman for the Treasury said: “We do not comment on speculation around tax changes outside of fiscal events.”