Shares of UK gambling companies fall by £2bn amid talk about higher taxes in the budget

The value of the British gambling sector has dropped dramatically, reducing it by more than £2bn. This is after the Guardian reported Treasury officials may be able to collect between £900m (£900m) and £3bn (£3bn) in additional taxes.

Rachel Reeves is under pressure to increase taxes on the industry from two influential think tanks, while she uses every lever available to plug the £22bn “black hole” that has appeared in the nation’s finances.

Treasury officials who are working on Labour’s first budget for 14 years, to be announced on October 30, may be willing to raise the duty paid by a sector that brings in £11bn per year from British consumers.

Two separate proposals have been made, one by the Social Market Foundation, which would increase the online gaming tax by £900m and another by the Institute for Public Policy Research, which would remove a number of duties levied by the sector for nearly £3bn.

Analysts warned that while the government is unlikely to increase the duty, the sector will be subjected to stricter regulations and taxes.

Investors responded by selling off gambling company shares on Monday. This collectively reduced their value to more than £2bn. Entain, the owner of Ladbrokes, dropped 8%, while Flutter, a company that owns Paddy Power, SkyBet and SkyBet brands, dropped nearly 6%.

Evoke, the owner of William Hill, also fell 14% and Playtech, the maker of gambling software, dropped 1%. Rank, the company that owns Mecca Bingo and also has brands for online gambling, saw a 3% drop.

The FTSE gambling index has fallen by over £2bn. Bet365, the UK’s largest gambling operator, is not listed.

The IPPR, a left-leaning think tank, has a tax plan that Treasury officials have been looking at. According to the report of the thinktank, the government can raise £2.9bn in next year and up £3.4bn within 2030 by doubling tax on products that cause “more harm”, such as online gambling games. The taxes raised £3.3bn last year or approximately £2.2bn without lottery duty.

In the IPPR proposal, Treasury would not impose any duties on activities that cause “less harm”, such as bingo and the lottery. They argue that the chancellor instead should double taxes, such as the general betting duty of 15% levied on the profits of high-street bookmakers.

IPPR would increase the remote gaming duty charged to online operators from 21% to 50%.

A second think-tank, SMF, has been working on a moderate proposal that will be published on February 2nd. It would double the tax rate on online gambling firms from 21% to 42.2% and raise about £900m.

Derek Webb is the SMF’s biggest supporter. He has become one of Labour’s five top individual donors, after giving £1.3m to the party since 2023.

Webb is a casino game inventor who has made a fortune. He is the leading supporter of reforming gambling regulations and taxation.

Jefferies, a broker, said that it believed the government would not opt for very steep increases in the tax paid by this sector as they “would effectively wipe out listed operators profitability and pose a threat to many smaller operator’s existence”.

Analysts at AJ Bell stated that the tax proposals were a “serious reminder” of the increasing headwinds facing the sector in terms of taxation and regulation. This is a risk investors should consider.

Grainne Hurst is the chief executive officer of the Betting and Gaming Council. She said that the current speculation about taxes was driven by antigambling campaigns, based on a fantasy economics and [is] not credible.

“I would like to make it clear to the government that any additional tax increases will not only put a brake on our sector’s growth, but will also threaten jobs and derail horse racing.

Our industry is at a crossroads, as we try to implement the White Paper. These measures will cost us more than £1bn. The new levy for research, prevention, and treatment of problem gambling will raise £100m per year from the bookmakers.