Machine Games Duty Rise to 25%: Relief for Investors, but Shop Closures Stay on the Table

October 30, 2026

Analysts call the UK's Machine Games Duty rise from 20% to 25% a clearing event, and Entain expects to offset it fully. But Regulus warns of 2,750 betting shop closures, and Rank faces the biggest earnings hit.

Britain's listed gambling companies have avoided the Machine Games Duty rise that investors feared most. Chancellor John Healey's budget lifted the rate from 20% to 25%, far short of the 40% that had been floated, and City analysts quickly called it a "clearing event". But their own sums show how the bill will be paid: shop closures, lower investment and gains from struggling rivals. One respected industry consultancy warns that the real damage will unfold over years, not quarters.

Why investors breathed out

For months, the market had been bracing for something much worse. The Social Market Foundation think tank had called for a 40% rate, which would have matched Remote Gaming Duty on online casino play. Reports suggested the Treasury was considering it. Against that background, five percentage points felt manageable.

"While a tax increase is never welcome, a 5% increase is at least tolerable, and should act as a clearing event for the sector," wrote David Brohan, an analyst at Goodbody. He meant the five-point rise; in relative terms, the duty rate itself goes up by a quarter.

The first assessments suggest a modest hit to group earnings at diversified operators, which earn most of their money online. For businesses built around physical venues, the picture is different. A manageable earnings downgrade can still mean hard decisions about which sites stay open.

What the Treasury collects

The higher rate applies to machines with a maximum stake above £1 or a maximum prize above £100. Lower-stakes machines in pubs and seaside arcades are left out. HMRC's policy paper puts the extra yield at £135 million in 2027-28 and £130 million in each of the four following years. That adds up to about £655 million over five years, based on figures certified by the Office for Budget Responsibility. HMRC expects around 5,100 operators and 12,400 premises to be affected.

Healey tied the measure directly to his high-street package. The money pays for a higher small business rates relief threshold for retail, hospitality and leisure, while adult gaming centres are explicitly excluded from that relief. Arcade operators therefore pay more and miss out on the support the tax funds.

Revenue is the wrong yardstick, says Regulus

Consultancy Regulus Partners was far less relaxed than the banks. It said the industry had received "a cut to cash flow that will prove fatal to many marginal venues."

Its argument is about the denominator. Compared with more than £5 billion of land-based industry revenue, including food and drink, an extra £130 million a year looks absorbable. Compared with Regulus's estimate of £392 million in free cash flow, after capital spending but before interest, it is about one-third. On its numbers, the average annual cost is roughly:

"These sums are not insignificant sums on land-based estates already on thin margins, high fixed costs," Regulus wrote. It added that profits are concentrated in the strongest venues, which leaves the weaker ones exposed.

Entain says it can absorb the whole bill

Entain, owner of Ladbrokes and Coral, shows the gap between the headline cost and the eventual earnings impact most clearly. It estimates an extra £25 million a year for its UK and Ireland retail business before mitigation, but expects to offset the impact completely by the end of 2028.

Its plan combines estate rationalisation, cost savings across the group and potential market-share gains. Entain said it saw "an opportunity for customer recapture as peers re-evaluate their UK market presence." Its FY2026 guidance and its target of £500 million in annual adjusted cash flow in 2028 are unchanged.

That does not mean it will be painless. Chief executive Stella David said: "Our priority is to protect jobs wherever possible while supporting a sustainable retail presence on UK high streets." She also warned that the new tax would add to the damage from last year's rises and push more customers towards illegal operators, a concern that has grown as reports put the illegal gambling market at $50 billion.

What the banks expect

The banks' scenarios are mostly more cautious than Entain's own target, although they cover different periods and use different assumptions:

JP Morgan expects operators to mitigate most of the impact, mainly by closing loss-making shops and making more use of self-service betting terminals. It estimates that UK retail makes up about 22% of Entain's FY2027 sales and EBITDA, with machines around half of that. For Evoke, owner of William Hill, retail is about 26% of sales and 18% of EBITDA, with machines about 45% of the mix. Flutter's exposure is negligible, although it has already announced plans to cut up to 1,400 jobs in the UK and Ireland because of the online tax rises.

Goldman noted that shop closures and market-share gains are the obvious offsets, especially if smaller competitors suffer most. Retail also has less room than online to save on promotions and marketing, because that spending is already small. Entain shares had fallen about 11% since the start of September, partly on budget fears, so some of the damage was already priced in.

Rank is the most exposed

The split between diversified betting groups and venue operators is clearest at Rank, owner of Grosvenor casinos and Mecca bingo. The company estimates a £9 million annual hit to operating profit before mitigation. Peel Hunt cut its FY2028 operating-profit forecast by that amount and its earnings per share estimate by about 13%, while leaving FY2027 unchanged.

"We believe that Rank can maintain solid operating profit growth despite the machine games duty change," analyst Ivor Jones wrote. He kept a Buy rating but cut his target price from 175p to 155p, and he plans to revisit the mitigation picture after January's interim results. He also sees some relief from rivals' closures: "Every estate of casinos and bingo venues has a number of weaker locations, and site closures benefit their local competitors." Deutsche Bank cautioned that the tax rise could still affect Rank's medium-term investment plans.

The slow-burning closure risk

Regulus argues that tolerable group earnings figures do not prove the policy is affordable. The pressure, it says, builds over time as leases come up for renewal, costs rise and operators decide whether refurbishing a site can still earn a return.

Its five-year analysis suggests the rise will directly contribute to about 2,750 betting shop closures, while accepting that around 1,000 might close anyway. It models 19,000 job losses and £57 million a year less for British racing from media rights and the levy. "The MGD increase will look successful at first, because the tax increase happens at once, but the impact will take months and years to unwind," it warned. By its estimate, a 20% fall in affected Category B machine revenue would wipe out the extra tax take altogether.

Smaller independent arcade operators look particularly vulnerable, because their revenue depends so heavily on machines and they also lose business rates relief from April 2027. The Betting and Gaming Council cited EY projections that almost 9,000 jobs could go and almost 1,000 betting shops and casinos could close or be at serious risk. Chief executive Grainne Hurst called the rise "a deeply damaging decision".

What it means for players and the high street

For customers, the most visible effect is likely to be fewer local betting shops and arcades over the next few years, especially in marginal locations. The big operators will consolidate around their strongest venues and pick up customers from rivals that close. It is a pattern already seen after last year's online tax increase, when the big operators barely blinked even as analysts forecast a 12% drop.

The analysts' relief is mostly about the size of the rise and the end of uncertainty. Entain can aim for full mitigation, and Rank may recover some ground as competitors shrink. But as Regulus points out, the real test comes later, venue by venue and lease by lease, when operators decide which sites are still worth keeping.

Written by Oliver Bennett

Gambling involves risk and isn’t suitable for everyone — please only play with licensed operators, gamble responsibly, set your limits, and if it stops being fun, take a break.