Run it up the flagpole and see who is Salutin: The UK gambling sector should prepare for a campaign for a new Gambling Act following Chancellor John Healey’s decision to raise machine games duty (MGD) from 20% to 25%, industry sources suggest.

• The increase falls short of the 40% rate sought by the Social Market Foundation (SMF).
• “We’re pleased the Government has chosen to raise Machine Games Duty, reflecting the higher harm associated with this form of gambling,” said the SMF’s chief economist, Gideon Salutin.
• “However, today’s rise is relatively limited, and we are skeptical that such a small rise to MGD will have a significant impact on industry behaviour.”

Your move: “The anti-gambling lobby pivots more readily than the industry,” said one industry lobbying source. “They always have the next chess move ready, and this will now be about getting a new gambling act. Plus the advertising ban. They’ve moved on from tax.”

• That challenges the suggestion from the analysts that the Budget is somehow a “clearing” event which has resolved the sector’s political uncertainty.

Seeking mitigation: The higher rate takes effect on April 1, 2027, for machine games with stakes over £1 or prizes over £100. Adult gaming centers will also lose business rates relief. The 5ppt increase in MGD from 20% to 25% is an “incremental headwind but well below the widely discussed 40% rate,” said the team at Jefferies.

• Entain estimated an additional annualized cost of ~£25m before mitigation.
• It expects estate rationalization, group efficiencies and potential market share gains to offset the impact fully by the end of 2028, leaving its guidance unchanged.
• “We will continue to work hard to limit the impact of these changes on our business, our people, and the communities in which we operate,” said CEO Stella David.
• “Our priority is to protect jobs wherever possible whilst supporting a sustainable retail presence on UK high streets.”

Morgan Stanley estimated an unmitigated impact equivalent to around 12% of Entain’s UK retail EBITDA and 2% of group EBITDA. Its modeling suggests approximately 10% of shops would become unprofitable, with closures contributing to potential mitigation.

• “We see this as a clearing event for Entain, with this as the major remaining piece of regulatory uncertainty now clarified,” it said.
• Goldman Sachs, assuming 30% mitigation, estimated an ~1.5% impact on Entain’s 2028 group EBITDA.
• JP Morgan estimated an average annualized pre-mitigation EBITDA impact of approximately 3% across Entain and Evoke.

High-wire act: But Pinsent Masons tax expert Bryn Reynolds warned that higher duty could accelerate reductions in machine numbers and closures of less profitable locations. “The chancellor has committed to a balancing act,” he said.

• “While he may raise more from the sector in the short term, there is still a risk of longer-term consequences for the wider tax base if shops close.”
• Regulus’s cash flow analysis similarly illustrated how a 25% MGD rate leaves the weakest betting shop deciles particularly exposed.

Enjoy your trip: The lobbying source questioned whether investors’ relief should become the industry’s political verdict. “It’s the journey which does the damage, as much as the destination,” they said.

• Their concern is the recurring cycle of tax proposals, uncertainty and defensive lobbying. The next campaign could seek broader changes to gambling’s regulatory framework.
• “The budget was a useful vehicle for the last two years and maybe they might feel they have more heft to do a job on DCMS now and will turn their attention to them,” the source added.

As advertised: Dan Waugh, partner at Regulus, questioned whether campaigners’ objectives necessarily require wholesale legislative replacement. “But I don’t even know whether they want a new Gambling Act,” he said. “If you take a look at everything, how much new primary legislation would be needed.”

• “In the short term they will concentrate on the gambling ads campaign,” he added.
• Another industry insider who opted for anonymity said their “optimistic take is that they have done their big tax changes for the sector, last year and now this. What you will get from here on in is smaller tweaks.”
• Yet they agreed that the sector needs to move beyond its annual defensive campaign. “We need a plan to promote betting as an acceptable pastime for millions of people.”

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