Flutter Entertainment, the global betting giant behind Paddy Power and Betfair, has issued a stark warning that the UK government's decision to significantly increase gambling taxes will slash its earnings by hundreds of millions of pounds over the next two years.
The Budget Blow to the Betting Industry
In the recent Autumn Budget, the Chancellor announced a major shake-up for the online gambling sector. The tax rate on 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%.
This move has sent shockwaves through the industry, with Flutter being one of the first major players to quantify the expected financial damage. The company, which also operates Sky Bet and the US-based FanDuel, projects the tax changes will reduce its underlying earnings by approximately £241.7 million in the 2025-26 financial year. The impact is forecast to deepen considerably the following year, with an estimated £407.9 million hit in 2026-27.
Mitigation Strategies and Industry Backlash
In response to this substantial financial pressure, Flutter has outlined a plan to soften the blow. The firm aims to offset up to 40% of the impact by 2027 through a series of cost-cutting measures. These initiatives are expected to include significant reductions in promotion and marketing expenditure, alongside wider efforts to streamline operations.
Kevin Harrington, Chief Executive of Flutter's UK and Ireland division, did not mince words, labelling the tax increases a "very disappointing outcome" with a "significant adverse impact on our industry". He raised a critical concern, arguing that the hike will inadvertently hand a competitive advantage to illegal, unlicensed gambling operators.
"These black market operators don't pay tax and don't invest in safer gambling," Harrington stated. He also pointed out that at 40%, the UK's remote gaming duty now exceeds that of other regulated markets like the Netherlands, where a similar tax increase was followed by a rise in illegal gambling and a fall in government tax receipts.
Wider Market Reactions and Selective Relief
The Budget announcement triggered immediate turbulence on the London stock market for gambling stocks. Shares in William Hill owner Evoke plummeted by 18%, while Rank also saw heavy declines after revealing the changes would reduce its earnings by around £40 million.
Rank noted that the positive effect of the abolition of bingo duty would only partially counter the damage to its online gaming business and is now reviewing mitigating actions.
However, not all firms felt the pain equally. Companies with broader global operations were somewhat insulated. Flutter, which moved its primary listing to New York last year, saw its London-listed shares edge higher. Entain, the owner of Ladbrokes, also managed to recover from initial losses and close in positive territory, thanks to its diversified international exposure.
The Chancellor offered some reprieve for other parts of the sector, sparing in-person gambling and horse racing from any tax rises following warnings about potential job losses. In a welcome move for some, bingo duty will be abolished entirely from April next year.
