The Treasury is modelling a rise in machine games duty (MGD) ahead of the 28 October budget. Chancellor John Healey is looking at lifting the rate for betting shops and adult gaming centres (AGC) only, the Financial Times reports. MGD is charged at 20%-25% on most machines and raises about £600m a year. The new rate is not confirmed.
Arcades run on machines alone
AGCs depend on machines for their revenue. Dan Waugh, a partner at Regulus Partners, points to the latest Gambling Commission data: AGCs account for about 4% of gambling spend in the licensed market. They compete with bookmakers on machines only — in 2024/25 AGCs generated about a quarter of that spend, betting shops slightly under half. The split dates to 2019, when the maximum stake on fixed-odds betting terminals was cut to £2. The money moved to casinos, bingo clubs and arcades.
AGC economics are simpler. A spokesperson for a large British operator says arcades are cheaper to run: business rates as hospitality, a smaller statutory levy, no payments for media rights on racing broadcasts. Opening hours help as well. Bookmakers shut by 22:00 at the latest, arcades serve the night crowd. Category C machines make up as much as 80% of the estate, and 50 of them unlock access to more than ten category B terminals.
Location and the levy fight
Politics now turns on where the venues sit. The Social Market Foundation found AGCs are on average six times more numerous in Britain's most deprived areas than in the most affluent. Regulation is split: the Gambling Commission issues the operator licence, the local council the premises licence, and under the Gambling Act 2005 councils must follow the 'aim to permit' principle. Burnham said that principle will go. Lord Foster of Bath and the cross-party gambling reform group have already discussed AGCs. The main complaint is high-stake category B machines and breaches of the 80/20 ratio.
Entain is the main opponent of the increase. In a letter to the prime minister dated 11 September, CEO Stella David put the cost of doubling the rate from 20% to 40% at an extra £100m a year for the company's UK sites. An EY model for the Betting and Gaming Council gives up to 1,470 closures, 15,900 job losses and net losses to the Treasury of about £120m. The industry closed about 630 betting shops over the past year. Frontier Economics puts the illegal land-based market at £1.6bn in stakes a year. For Waugh, a higher tax hits arcades, bingo clubs, casinos and bookmakers, and the black market gains.
