Flutter Forecasts Major Financial Blow from Tax Reforms
Flutter Entertainment, the global betting giant behind Paddy Power and Betfair, has issued a stark warning that the UK Government's recent Budget decision to significantly increase gambling taxes will deliver a severe blow to its annual earnings. The company projects the financial impact will run into hundreds of millions of pounds over the coming two years.
The Specifics of the Budget Tax Raid
In the Budget announced on Wednesday, the Chancellor revealed plans for a substantial hike in duties for the online gambling sector. The tax rate for remote online gaming duty will surge from 21% to 40%. Simultaneously, the levy on online sports betting, excluding horse-racing, will climb from 15% to 25%.
Flutter, which also operates Sky Bet and the US-based FanDuel, has quantified the expected damage. It estimates the tax changes will reduce its underlying earnings by approximately £241.7 million in the 2025-26 financial year. The following year, the hit is forecast to be even greater, at around £407.9 million.
Industry Backlash and Mitigation Strategies
Kevin Harrington, Chief Executive of Flutter's UK and Ireland division, expressed strong disappointment with the outcome. He stated that the increases will have a significant adverse impact on our industry.
Harrington also raised concerns about the unintended consequences of the policy, arguing that it will hand a competitive advantage to illegal, unlicensed gambling operators who do not pay UK taxes or invest in safer gambling initiatives. He pointed to the Netherlands, where a similar tax increase reportedly led to a rise in black market activity and a fall in government receipts.
In response to this financial pressure, Flutter has announced proactive measures to soften the blow. The company aims to offset up to 40% of the earnings impact by 2027. This will be achieved through a combination of cutting back on promotion and marketing expenditure and implementing wider cost-reduction efforts across its operations.
Market Reaction and Sector Divergence
The Budget announcement triggered immediate turbulence for gambling stocks on the London market. Shares in William Hill owner Evoke plummeted by 18% on Wednesday.
However, the reaction was not uniform across the sector. Firms with more diversified global operations were somewhat sheltered from the worst of the declines. Flutter's shares in London edged higher, likely due to its primary listing now being in New York and its significant US presence. Similarly, Entain, the owner of Ladbrokes, which also has substantial international exposure, managed to recoup its initial losses and close the day in positive territory.
The Chancellor offered some reprieve for other parts of the industry, sparing in-person gambling and horse racing from any tax rises following warnings about potential job losses. In a separate move, she confirmed that bingo duty would be abolished entirely from April next year.
