Regulus warns: MGD increase would put £92M of horseracing revenue at risk

Regulus Partners calculates that doubling the Machine Games Duty (MGD) to 40% would put approximately £92 million a year of revenue linked to horse racing at risk, and that up to 4,000 betting shops could close within three years if the measure is applied without mitigations. The consultancy's public warning was published on 5 October 2026, ahead of Chancellor John Healey's autumn budget.

Key finding on the MGD and horseracing revenues

Regulus Partners' study projects that an increase in the MGD to 40% would add around £45,000 in annual costs per shop, eroding free cash flow at many branches. The consultancy estimates that 1,500 shops would immediately be loss-making and forced to close; a further 1,000 would fall into losses over the next two years, in a context of flat revenues and rising fixed costs.

The loss to horseracing calculated by Regulus equals roughly one third of the sector's betting-derived revenues: £92 million per year. The British Horseracing Authority (BHA) accompanied the study with a statement describing the modelling as a "stark warning" for the industry and Government.

"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, director of communications and corporate affairs at the British Horseracing Authority.

How the per-shop economic model breaks down

Regulus uses industry figures to describe the revenue and cost structure per shop:

• Average annual revenues per shop: £440,000, generated equally by category B machines and by betting activity.

• Staff costs: around 30% of revenues, which would support about 35,000 full-time-equivalent roles.

• Taxes and VAT plus rents: approximately 20%.

• Business rates: between 7% and 10%.

• Contributions to horseracing via media rights and levy: around 6%.

According to the model, the MGD increase removes residual profitability in many shops and converts about 1,500 into immediately unviable operations. The analysis adds that the market has no spare capacity to absorb displaced customers; therefore Regulus concludes that a substantial part of the lost business would be permanent.

Tax and employment impact that challenges Treasury projections

Regulus and the BHA question the Treasury's assumption that doubling the MGD will raise receipts. The consultancy projects a potential 32% fall in MGD revenues, bringing them to around £155 million if the closures occur as forecast.

The study also estimates roughly 28,000 jobs lost across the wider economy — including suppliers and local retail — and knock-on effects that could reach £500 million a year in impact to the supply chain and local trade.

Operators' reaction and sector analysis of the MGD hike

The publication of the modelling joins other critical work on the proposal. Deutsche Bank assessed the operator impact and concluded that Rank Group would be among the most affected because of its large retail footprint: an increase in costs close to £35 million a year, equivalent to around 44% of forecast EBITA for 2028 and about 17% of EBITDA in the near term, even after partial mitigation measures. Before mitigation, Deutsche Bank placed the impact close to 24% of EBITDA.

Entain CEO Stella David warned of the risk of customers diverting outside the regulated market, estimating that up to £1,000 million in stakes could move to the black market. David also noted the consequences for workers and town-centre communities.

"They are people losing their jobs and communities losing long-established high street businesses," wrote Stella David.

Betfred owner Fred Done said the increase would force the chain to close 495 of its shops within a year, with the loss of 2,575 jobs and around £67 million less in tax take.

Why closures do not equal redistribution of revenues

Regulus emphasises that the market does not operate with spare capacity and that in-shop betting customers do not switch premises easily. Since 2014, racing-related revenues tied to betting shops have been essentially flat, with an average annual growth of 0.7%, while revenue per shop rose only 1.8% annually, figures that lag inflation. The result, according to the consultancy, is that most of the volume lost from shop closures would be lost permanently.

What the industry is asking for and what remains to be decided in the budget

The sector's appeal combines requests for reconsideration and proposals for mitigation ahead of Chancellor John Healey's autumn budget. Regulus and the BHA insist the Government should value the secondary impact on horseracing and employment and explore measures that preserve long-term funding for the sport and the viability of the retail network.

For suppliers, operators and compliance officers, the MGD debate reveals a risk of rapid reconfiguration of the retail market and a possible transfer of activity to unregulated channels, with fiscal and social implications.