Questions have been raised over whether looming government measures could lead to an exodus of operators from UK gambling.
A report by PricewaterhouseCoopers LLP (PwC) on behalf of the Betting and Gaming Council (BGC) examined markets across Europe that have taken a similar path to that which is being explored by Rachel Reeves and the Labour government.
It revealed that operators have exited markets in response to regulatory changes in some cases, with an example provided being that the “number of operator licences fell in Italy and Romania following regulatory tightening and the number of operators in the UK has fallen from 626 in 2019 to 570 in 2024 as the regulatory environment has tightened”.
Tapping into market analysis, it stated: “In the first five years after market opening, the number of licensed operators in France declined by more than half. In Denmark and Sweden, operator numbers remained stable under a comparatively more favourable tax and regulatory regime.”
An increase in UK gambling tax could lead to prices increasing and less spending on marketing and bonuses, if the recent report is an accurate operator forecast for the market.
Operator changes could also have a knock-on effect on player behaviour, who are heavily impacted by pricing, bonusing and marketing when selecting who to wager with, with these factors being “even more important for higher spend players”.
Channelisation rate can be affected as well as players switch to unlicensed operators, while the data also showed that regions with an over 25% online gross gaming revenue tax rate had a lower growth in tax take of 9% when compared to jurisdictions with a less than 25% online GGR tax rate of 13%.
The PwC and BGC utilised information from H2 Gambling Capital, Vixio Gambling Compliance and the BGC’s member data to compile its report. It is released as the UK government edges closer to its autumn budget announcement, in which speculation over the past couple of months has suggested it will include a tax hike on the gambling industry.
Manage and mitigate
According to the report, the UK’s gaming tax rates are broadly in line with the average of other European countries across most product verticals, but operators tend to adjust gross win percentage (pricing), bonusing and marketing spend in different tax and regulatory environments to manage their financial performance.
Operators are making investment decisions “to manage returns and mitigate negative impacts from regulation and tax changes”, with betting pricing higher in jurisdictions with higher tax rates, but gaming pricing having little to no changes.
Betting and gaming bonuses are also being reduced in jurisdictions where regulatory tightening or a tax increase has occurred.
The report stated that 11 out of 17 BGC member brands across six jurisdictions – Denmark, Germany, the Netherlands, Spain, Sweden and the UK – reduced betting bonusing and 13 out of 19 reduced gaming bonusing as a percentage of GGR the year after stricter regulations or higher taxes were implemented.
Operator and player behaviour
Marketing spend was shown to change as well, including “in some instances as a direct result of regulatory change”, as 15 of 21 BGC member brands across the six listed jurisdictions reduced marketing spend as a percentage of net gaming revenue the year following regulatory tightening or a tax hike.
Player behaviour can be heavily impacted by pricing, bonusing and marketing when selecting operators to wager with, with these factors being “even more important for higher spend players”, and it can lead to a channelisation rate drop as players switch to unlicensed operators.
Data from 2019 to 2024 also showed that jurisdictions with a less than 25% online GGR tax rate saw a higher tax take growth of 13% in comparison to regions with a more than 25% online GGR tax rate of 9%.
iGaming Expert insight
The report supports the BGC’s argument that a gambling tax increase will drive more players to unlicensed operators, a case the standards body has been making for several months now, but has more recently been pushing as the autumn budget date edges closer.
During a Treasury Committee parliamentary hearing in October, BGC CEO Grainne Hurst argued against such tax increases: “The industry has a lot of regulations in place voluntarily and the white paper to raise those standards. We track behavioural triggers, late-night play, chasing losses, so we make sure players are staying within the regulated space.”
The committee seemed to be unconvinced by industry arguments, maintaining a sceptical stance regarding the BGC-commissioned research throughout the hearing. The mainstream media also heavily criticised the standards body for defending the industry, particularly their strong refutation of gambling’s role in causing social harm.
Whether or not the BGC’s recent report will be taken into account remains to be seen. However, the gambling industry shouldn’t have to wait much longer to find out, as a decision will likely be made within the UK government’s autumn budget announcement on 26 November.
