A proposed increase in the UK’s Machine Games Duty could force thousands of betting shops to close and strip as much as £92 million a year from British horse racing, according to modelling by consultancy Regulus Partners.
The analysis examines the potential impact of increasing the standard MGD rate on gaming machines from 20% to 40%. Regulus estimates that, without measures to offset the additional cost, the change could make a large part of Britain’s retail betting sector financially unsustainable.
Around 4,000 betting shops could ultimately disappear within three years, reducing the national estate to approximately 1,500 premises, or roughly a quarter of its current size.
Higher duty could add £45,000 per shop
Regulus estimates that an average betting shop produces about £440,000 in annual revenue, divided broadly equally between Category B gaming machines and betting.
Approximately 30% of shop revenue is used for staffing, supporting around 35,000 full-time-equivalent jobs across the sector. Duties, VAT and rent account for another substantial share, while business rates consume roughly 7% to 10%. About 6% of betting-shop revenue flows into British racing through media-rights payments and the statutory Horserace Betting Levy.
According to the modelling, doubling MGD to 40% would add close to £45,000 to the annual operating cost of an average shop. Regulus expects around 1,500 locations to become loss-making immediately, with another 1,000 potentially falling into losses within two years as revenues remain flat and fixed costs continue to rise.
The consultancy believes the eventual number of closures could reach around 4,000 by 2029.
Current HM Revenue & Customs rules apply a 20% Machine Games Duty rate to machines that are outside the lowest-duty category and where the cost to play does not exceed £5. A higher 25% rate applies where the maximum stake can exceed £5.
Racing faces major funding loss
The consequences would extend well beyond bookmakers. Regulus calculates that British racing could lose £92 million annually if the 40% MGD proposal leads to the expected shop closures.
That represents roughly one-third of the sport’s betting-related income.
The British Horseracing Authority has backed the analysis, warning that the reduction would affect prize money, Levy receipts and investment in equine welfare and veterinary research. The BHA also highlighted the wider economic importance of racing, which it says supports around 85,000 jobs.
Regulus argues that betting activity from closed locations would not simply transfer to surviving shops. Retail betting customers have shown limited movement between premises, while the remaining estate has restricted spare capacity.
Since 2014, racing revenue generated through betting shops has increased by only around 0.7% annually, according to the analysis, while revenue per shop has grown by about 1.8% per year. Both figures have lagged inflation, strengthening the consultancy’s view that much of the revenue lost through closures would disappear permanently.
Treasury revenue could also fall
Regulus also questions whether doubling the duty would generate additional money for the Treasury.
Its modelling suggests MGD receipts could instead fall by approximately 32% to around £155 million if closures occur on the projected scale. Across the wider economy, the consultancy estimates that about 28,000 jobs could be lost, while reduced activity affecting suppliers and local businesses could amount to as much as £500 million per year.
The warning comes after the UK already significantly increased taxation elsewhere in the gambling sector. Remote Gaming Duty rose from 21% to 40% from 1 April 2026. From April 2027, remote General Betting Duty is scheduled to increase to 25%, although remote bets on UK horse racing and bets placed through self-service terminals in licensed premises will remain at 15%.
Operators have also been warning about the consequences of another tax increase. Previous industry estimates have suggested that higher retail machine taxes could accelerate shop closures, job losses and the movement of gambling activity away from the regulated sector.
The BHA is therefore urging the government to consider the wider impact on racing and employment before making further changes to betting-shop taxation.