Machine Games Duty: Protecting Profits Could Come at a Cost to Venues

Britain’s largest gambling groups could absorb the forthcoming machine games duty increase, but protecting company earnings may come at a cost to individual venues. Analysts see opportunities to offset the higher bill through efficiencies, closures and customers switching from struggling competitors. While the move to 25% has eased investors’ fears of a much larger increase, its consequences for betting shops, casinos and bingo halls could take years to become clear.

Entain’s mitigation plans put shop estates in focus

The standard duty rate will rise from 20% to 25% on 1 April 2027. That is a five-percentage-point increase, equivalent to a 25% rise in the rate itself.

Entain estimates an additional annual cost of £25 million for its UK and Ireland retail business before mitigation. However, the Ladbrokes and Coral owner expects to offset the impact fully by the end of 2028 through estate changes, wider efficiencies and potential market-share gains.

Its financial guidance remains unchanged, illustrating how a company can maintain its overall targets while reconsidering the size of its retail presence.

Morgan Stanley estimates that the increase would leave around 10% of  Entain’s shops unprofitable. Its modelling assumes mitigation of up to approximately 50%, largely through closures.

“Our priority is to protect jobs wherever possible while supporting a sustainable retail presence on UK high streets.” — Stella David, Entain chief executive

Rank faces a bigger earnings adjustment

Operators concentrated in physical venues have greater exposure than groups with substantial earnings elsewhere.

Rank, which runs Grosvenor casinos and Mecca bingo, estimates a £9 million annual operating-profit cost before mitigation. Peel Hunt subsequently reduced its FY2028 earnings-per-share forecast by approximately 13%.

The broker nevertheless retained its Buy recommendation, pointing to returns from recent investment and opportunities to optimise additional casino machines.

Competitors shutting weaker locations could also redirect customers towards surviving venues. However, that benefit would accompany a smaller overall market footprint, while higher taxation could affect the returns available from future refurbishment and expansion.

Cash flow pressures could emerge gradually

Regulus Partners argues that revenue alone gives an incomplete picture of operators’ capacity to absorb the increase.

It estimates that an additional annual industry tax bill of roughly £130 million represents around one-third of free cash flow after capital expenditure but before interest.

The consequences may emerge when leases expire, operating costs rise or premises need investment. A venue that continues trading initially could still become unviable later.

The Treasury forecasts £655 million in additional receipts over five years. Whether those receipts materialise will depend partly on how much machine revenue remains as operators close sites and reconsider spending.