Labour government plans to steeply increase taxes on gaming firms “would effectively wipe out listed operator profitability and likely pose an existential threat to many smaller operators.” That’s the verdict of Jefferies Equity Research analyst James Wheatcroft, in an investor note published October 13.
Citing reports in The Guardian, Wheatcroft said the Keir Starmer administration was mulling a 100 percent-plus hike in gaming taxes after discovering an alleged “black hole” in the budget left by the Rishi Sunak government. Two proposals were detailed.
Ten Downing Street was said to be torn between two pitches. One, from the Social Market Foundation, called for an escalation of the tax on igaming providers from 21 percent to 42 percent and for the levy on OSB to catapult from 15 percent to 42 percent.
The rival and more draconian proposal hailed from the Institute for Public Policy Research. It offered that the impost on High Street bookmakers should be doubled from 15 percent to 30 percent and for igaming/OSB providers to be taxed at 50 percent instead of the current 21 percent.
To quantify his contention that the £3 billion “tax raid” would “all but wipe out bookmaker profitability in the UK,” Wheatcroft pointed to the cash-flow margins posted by several of Great Britain’s leading firms. Flutter Entertainment’s are the greatest at 31 percent, followed by Evoke Online’s 26 percent, Entain UK Online’s 22.7 percent, Entain Retail’s 21.4 percent, and Evoke Retail’s 14.7 percent.
Wheatcroft, referring to British coverage in general, opined, “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.” He added that the issue quickly faded from news coverage and received scant coverage outside of the British Isles.
The analyst then enumerated myriad ways in which betting firms could recoup tax losses. These included cutbacks in marketing and promotions, less-favorable odds for punters, and fewer club sponsorships. “UK bookmakers will cite a threat to the ongoing financial viability of many retail and online bookmakers (and consequent employment ramifications).”
Other Wheatcroft concerns were a concomitant rise in black-market activity and deleterious effects on the horse-racing industry. With small-scale operators hard-pressed to adapt, he predicted, market share would shift to the majors.
