Flutter Notes Benefit of Potential UK Tax Hike if Competition Suffers

Flutter Entertainment has forecast it could in fact benefit from the pending gambling tax increase in the UK, due to how it could force smaller operators to be squeezed out of the market.

On November 26, Chancellor Rachel Reeves is expected to announce a new remote betting and gaming duty (RBGD) in the Autumn Budget. The RBGD is expected to replace the current system of three separate remote betting taxes. It is unclear what the new tax rate would be, but in September, 101 Labour MPs signed a letter calling for a rate of 50% of gross profit.

There has been constant debate played out in the public domain on this topic in recent weeks, with several operators considering the possibility of shop closures and redundancies if a severe tax hike is brought in, including Entain Group, owner of Ladbrokes and Coral, Evoke, owner of William Hill, and Betfred.

Flutter slightly differs its stance

Last month, Flutter itself told staff it would be closing 57 of its Paddy Power shops across the UK and Ireland. According to various media reports, these shop closures will put 247 jobs at risk. Flutter said 28 betting shops in Great Britain will close, along with another 28 in Ireland, and one in Northern Ireland. Flutter said the closures are not directly related to the potential tax rise, but also said any changes to gambling duties could have a “significant impact on jobs and investment.”

In its Q3 report, Flutter reiterated its concerns, but also mentioned a potential benefit that could come from a tax hike, noting the pressures it could bring to smaller operators in the market.

Flutter said:

“We remain engaged with policymakers and expect decisions will be based on economic merit, taking into account the industry's substantial contribution to UK tax revenues and employment. Significant increases to the tax rates would threaten jobs and investment across the UK market, as well as driving more customers to unregulated operators on the black market - where there are no player protections and regulatory oversight.

“We continue to engage with policymakers and await the outcome in the Budget later this month. However, should taxes increase, Flutter's growing scale and market leading position will help to mitigate the impact, and we would likely benefit from the consolidation of share among sub-scale operators over time.”

We’ve been here before

Flutter itself is an example of how changes to tax regulation can lead to consolidation. The gaming group began with the merger of Paddy Power and Betfair in 2016, which was part of a wave of consolidation in the industry that came about after the point-of-consumption tax was introduced in the UK in 2014.

That law change required operators to pay tax on all earnings made in mainland UK, and prevented them from being taxed at the point of supply from jurisdictions such as Gibraltar and the Isle of Man.

Aside from the potential tax regulation update, Flutter’s UK and Ireland (UKI) revenue went up 1% year-on-year to $853 million (£646.4 million). Flutter said its UKI sportsbook revenue, which decreased 7%, reflected a 6% decline in handle, primarily due to the UEFA Euro 2024 football tournament being played in Q3 in the prior year.

Flutter’s overall group revenue for the quarter was $3.79 billion, up 17%. About 35% of this total was made up from Flutter’s US total, where Flutter operates its FanDuel brand and generated $1.37 billion, up 9%.