Regulus: Doubling MGD Could Put £92m of Racing Income and 4,000 Shops at Risk

Regulus Partners has modelled the impact of a proposed increase in Machine Games Duty and concluded that doubling MGD to 40% would put about £92 million of horse racing income at risk and could render thousands of betting shops unviable. The consultancy published its findings ahead of Chancellor John Healey’s autumn budget later this month and projected up to 4,000 shop closures within three years if no mitigating measures are introduced.

How Regulus calculates the hit to betting shops and horse racing

Regulus says the UK betting-shop estate today derives roughly equal shares of revenue from category B gaming machines and from betting activity, with an average annual turnover of about £440,000 per shop. The firm’s financial breakdown allocates roughly 30% of that revenue to staff costs — supporting about 35,000 full-time-equivalent jobs — while approximately 20% goes to duties and VAT and 7–10% to business rates. Around 6% of shop revenue currently underpins British horse racing via media-rights payments and a statutory levy.

A rise in MGD to 40% would add roughly £45,000 of duty costs per shop each year, Regulus calculates, effectively erasing free cash flow at many premises. Their model estimates 1,500 shops would immediately become loss-making and close, and a further 1,000 shops could become loss-making within two years if revenues remain flat while fixed costs rise. The net effect would shrink the estate to about 1,500 shops nationwide — roughly a quarter of today’s total — and put £92 million of betting-derived revenue for horse racing at risk, which Regulus says is about one-third of the sport’s income from betting.

Why closures would not simply redistribute customers

Regulus challenges the idea that customers displaced by closures would simply move to remaining shops. The consultancy notes that the market operates with limited spare capacity and that customer behaviour has shown low propensity to switch locations. Since 2014, the analysis says, horse racing revenues tied to betting shops have effectively flatlined, rising only 0.7% per year, while revenue per shop grew 1.8% annually — both trailing inflation. Regulus therefore treats lost revenue from closures as likely permanent rather than redistributed.

Wider economic and tax implications

The consultancy also disputes Treasury assumptions that a higher MGD automatically raises tax receipts. Regulus forecasts a possible 32% decline in MGD revenues if closures materialise, lowering receipts to about £155 million. The modelling estimates around 28,000 job losses across the wider economy and suggests supplier and local-trade impacts could reach roughly £500 million a year.

The British Horseracing Authority framed Regulus’s output as a “stark warning.” Greg Swift, director of communications and corporate affairs at the British Horseracing Authority, urged the government to account for secondary impacts on racing and on the 85,000 jobs the sport supports:

"We strongly urge the government to seriously consider the secondary impact on horse racing of a tax hike on betting shops, and also urgently explore measures to ensure that British racing — and the 85,000 jobs it supports — is put on a long-term and sustainable financial footing," said Greg Swift.

Industry pushback: operators and analysts respond

The Regulus release sits alongside other industry analyses criticising the hike. Deutsche Bank modelled operator-level impacts and identified Rank Group as especially exposed because of its large land-based footprint. Deutsche Bank estimated an increased duty cost for Rank of about £35 million per year, which would equate to roughly 44% of the firm’s forecasted 2028 EBITA and about 17% of nearer-term EBITDA after partial mitigation; before mitigation the bank put the pre-mitigation increase close to 24% of EBITDA.

Entain’s chief executive, Stella David, warned that a sharp MGD rise could drive consumers out of the regulated market and estimated up to £1 billion in stakes might migrate to the black market. David also highlighted the social impact on high-street workers and communities: "They are people losing their jobs and communities losing long-established high street businesses," she wrote.

Betfred’s owner Fred Done has given a concrete operator-level example: he said the MGD hike would force Betfred to close 495 shops within a year, costing 2,575 jobs and roughly £67 million in foregone tax revenue.

What the Treasury faces in the autumn budget and what operators should watch

Chancellor John Healey will present the autumn budget later this month; Regulus’s modelling is timed to influence debate by challenging the expected yield from a duty rise. Policymakers will need to reconcile headline tax projections with the consultancy’s scenario where closures, lower participation and migration to unregulated markets cut receipts and impose local economic damage.

Operators and suppliers should examine three concrete pressure points: machine economics when MGD reaches 40%, the potential need to reduce shop footprints rapidly, and contingency planning for reduced media-rights and levy funding for racing. For regulators and the racing industry, the immediate question is how to safeguard the funding structures that currently transfer roughly 6% of shop revenue into racing.