UK Gambling Shares Tumble on Fears of Government Tax Grab

October 14, 2024

Stocks of UK-based gambling firms faced a significant decline in early trading on Monday as investors responded to news that the British government intended to implement a "tax raid" on the sector. 

Investors seem to be unsettled by a report in The Guardian on Friday that indicated the new Labour Party government is considering increasing taxes on the sector to fill a £22 billion (US$28.7 billion) gap in the country's budget. 

Although Treasury officials have not reached a conclusion on the matter, they "seemed open" to the proposal of obtaining an additional £900 million (US$1.2 billion) to £3 billion (US$3.9 billion) from the sector, as reported by The Guardian. 

Last year, the sector produced £3.4 billion (US$4.4 billion) for UK tax revenues, accounting for roughly 0.3% of overall government income. 

Sources informed the newspaper that the potential tax increase could be implemented in Labour’s initial budget, anticipated this month. 

Elicit Most Affected 

Evoke [LON: EVOK], which owns William Hill in the UK and 888, suffered the most from the speculation. Its stock plummeted 15% during initial trading on the LSE. 

Entain [LON: ENT], co-owner of BetMGM in the US along with MGM Resorts, followed closely, dropping 14%. The company possesses UK heritage betting names like Ladbrokes and Coral, in addition to bwin, PartyPoker, and several regional European brands. 

Shares in Flutter Entertainment [LON: FLTR], the owner of FanDuel and brands like Betfair and Paddy Power, fell 7%, mirroring the decline of Britain’s top land-based casino operator, Rank Group [LON: RNK]. 

In total, the four firms collectively lost £3.25 billion ($4.2 billion) in market capitalization within a single morning. All four had slightly risen at the time of publication, mid-morning UK time. 

The former Conservative Party government enforced stricter gambling regulations through a series of measures that are being implemented in the industry gradually. These consist of budget assessments for gamers and betting caps for online slot machines. 

The industry anticipated that although Labour would carry on with the execution of these reforms, there would be no additional government-imposed restrictions on the gambling industry. 

Doubling Taxes? 

The Treasury is currently reviewing a report from the left-oriented think tank, Institute for Public Policy Research (IPPR), as reported by The Guardian. The study suggests that the government might generate £2.9 billion (US$3.8 billion) in the coming year by increasing taxes on "higher harm" goods, like slot machines and casino games. 

The Betting and Gaming Council cautioned that regions that have implemented “disproportionate” taxes have experienced an increase in illegal online gambling. 

A source from the industry informed The Guardian: “The anti-gambling campaign has contributed at least £1 million (US$1.3 million) to Labour in the last 18 months, raising questions about what they anticipate receiving in exchange for it.”