UK Chancellor of the Exchequer John Healey has announced a 5% increase in Machine Games Duty in a move that will likely lead to a cautious sigh of relief within the UK’s gaming sector.
The decision offers a welcome reprieve to an industry that had braced for a more aggressive hike, with prior speculation suggesting a staggering 20 percentage point jump to 40%.
Speaking at Wednesday’s budget, Healey said that he would be “raising machine games duty from 20% to 25% for higher-stakes machines, while protecting pubs and seaside arcades”.
The chancellor claimed that this rise in duty would pay for greater support for high streets, including business rate relief for high street businesses.
However, Healey also noted he would “carve out Adult Gaming Centres and vape shops from business rates relief.”
A sigh of relief?
A rise of 5% should, therefore, put the industry at ease. But senior leaders are less sure. In a recent trading update, Rank CEO Richard Harris emphasised that “any increase to machine games duty will increase costs, reduce venue viability, lead to venue closures and job losses, reduce tax receipts and halt investment”.
Uncertainty over future gambling tax policy had, according to Harris, halted further investments.
Speaking to iGB earlier this week in the lead-up to the budget, Greg Knight, CEO of UK retail operator JenningsBet, emphasised that as much as a 5% result would be better, it is still not the outcome the industry is after.
“It’s a bit like when you’re waiting at an airport and they say you’ve got a three-hour delay, then they revise it to half an hour, and everyone cheers,” Knight tells iGB.
“I certainly don’t think it’s a win. It could be an awful lot worse, couldn’t it, but I’m not celebrating because at the end of the day it’s still going to be a big drain on the industry.”
Others have stated that it is not a rise specifically that can cause issues, but the instability of the regulatory frameworks. COO of Genting Casinos Paul Willcock noted at a panel event earlier this month that Genting was “itching to invest” into the UK but only if there was stability.
“If we can get some relaxation or at least certainty on that, then investment will flow,” Willcock told the audience.
Venue closures are still likely on the cards
Sarah Calakovic, regional manager at Buzz Bingo in Kent, told the BBC that a 5% increase in MGD would result in around 40% in loss-making territory. She emphasised that although bingo was the main income source, gaming machines are the “secondary source of income”.
Knight also told iGB that such a rise would probably have to close a “handful” of stores if the rise went through.
Grainne Hurst, CEO of Betting and Gaming Council, reiterated this point.
“Any further tax increase would heap more pressure on an industry already facing substantial tax rises, threatening jobs, high streets and vital funding for British racing,” she said.
Months in the making
MGD, a tax levied on the profits generated from gaming machines located in betting shops and arcades, has long been a point of contention between the government and the gaming industry.
The Social Market Foundation (SMF), a think tank, had initially advocated for a substantial increase in this duty as a means to curtail gaming harm while boosting public finances back in June.
Based on SMF’s proposal, it was reported that the chancellor was considering a rise of MGD to 40%. This rise would have instilled deja vu across the industry following Healey’s predecessor Rachel Reeves’ decision to raise remote gambling duty to 40% from 21%.
The subject had recently become a source of speculation among MPs, with MP Alex Bassinger leading the charge only last week for a doubling of MGD to come into place.
The industry had, of course, hit back at doubling plans, with many focusing on the human aspect of the story. The Betting and Gaming Council cited EY modelling suggesting that a doubling of MGD would put up to 16,000 jobs at risk and lead to the closure of almost 1,500 betting shops and 34 casinos.
It is unclear how the industry will directly respond to this lesser of two evils.
Kathryn Evans
Kathryn covers bitesize breaking news with a primary focus on EMEA and US legislation. A proud North Walian, fluent Welsh speaker and lifelong Wrexham FC fan – long before Hollywood came calling.