Entain And Rank Share Prices Climb Amid Promising MGD Development

UK gambling stocks seem to be appealing again to investors, with Entain and Rank Group’s share prices rebounding strongly following a promising development concerning Machine Games Duty (MGD).

The Times suggested that the MGD rate may now be capped at 25% instead of rising to 40% in the Budget, which will be delivered by the Chancellor, John Healey, next week. On the back of the update, Ladbrokes and Coral owner Entain’s shares jumped 4.5% to 454p on the FTSE250, while stocks in Rank, the face behind Grosvenor Casinos, rose by 6.9% to 82p.

MGD development

Discourse over MGD has intensified over the past few months. Former Prime Minister Gordon Brown urged the government over the summer to hike the levy on Category B machines in betting shops, as he suggested it could generate as much as £500 million for the economy. Think tank Social Market Foundation (SMF) had also pointed to how a higher tax rate would limit more harmful forms of gambling.

Last week, 90 backbench Labour MPs signed a letter written by prominent gambling critic Alex Ballinger, backing proposals to lift the MGD rate to 40%. But it seems that such calls may have fallen on deaf ears as the MGD hike might not be as severe as previously envisaged.

Betting industry lobbying hard

Driving the MGD fear among the betting industry is the increasing concern that the retail sector could be wiped out. Entain’s CEO Stella David has also written to the government to back off from their plans as they have already tabled 400 job cuts as part of a cost-cutting initiative.

Flutter, meanwhile, announced earlier this week a drastic company restructure, unveiling plans to shed as many as 1,400 jobs across its UK & Ireland (UK&I) division. Previous modelling carried out by accountancy firm Ernst & Young (EY) indicated that a significant bump in gambling taxes could put as many as 16,000 retail betting jobs at risk, while as many as 1,500 shops could close.

The Betting and Gaming Council (BGC) have led the lobbying efforts to stop the government in its tracks, banging the drum hard. But BGC CEO Grainne Hurst isn’t convinced that capping the MGD rate at 25% or further tax rises, for that matter, will do gambling operators any favours.

She said: “These are not hypothetical warnings. The Treasury must resist poorly evidenced calls for further tax increases without considering the wider impact. With the Budget to come, we urge the Chancellor to consider the full economic consequences of any further tax increases and protect the jobs, businesses and British sport that depend on the regulated industry.”

Will there be any respite?

Betting companies have been forced to contend with a challenging economic landscape owed to tax rises. Last year, the then Chancellor Rachel Reeves announced a hike in remote gaming duty (RGD) paid on online casino bets, which rose from 21% to 40% of gross gambling yield (GGY), and came into effect in April.

Meanwhile, general betting duty paid on online sports bets will jump from 15% to 25% of GGY, and will be enforced in April 2027, but horseracing will be exempt. Although it is thought that nothing has been set in stone with regard to the MGD cap, if it ends up being a 5% increase, it could give betting operators a bit more breathing room at a time when they need it most.