Chancellor mulls higher machine games duty that could hit Britain’s arcades

The Treasury is modelling higher rates of machine games duty (MGD) for the budget on 28 October and John Healey, the chancellor, is reportedly weighing a rise aimed at betting shops and adult gaming centres (AGCs). A narrower rise that targets only betting shops and AGCs is under discussion, according to the Financial Times, while broader proposals from the Social Market Foundation would raise rates across casinos, arcades, betting shops, bingo halls and members' clubs.

What officials are considering and when

Officials in the Treasury have modelled increases to MGD ahead of the 28 October budget. The Financial Times says John Healey is considering a rise that would apply only to betting shops and AGCs, while the Social Market Foundation (SMF) has proposed a 40% rate for casinos, arcades, betting shops, bingo halls and members' clubs, excluding pubs. MGD is currently charged at 20%-25% on most machines and raises about £600 million a year.

How arcades fit into the market

Adult gaming centres sell play on gaming machines and do not take bets on sport. On the Gambling Commission’s latest figures AGCs account for around 4% of spending on gambling in the licensed market. Within machine spending, arcades took about 25% of licensed spending in 2024/25, compared with just under 50% for betting shops.

Dan Waugh, a partner at Regulus Partners, says the balance shifted after the government cut the maximum stake on fixed-odds betting terminals to £2 in 2019. He describes that decision as a move “to effectively abolish B2 gaming machines” and says it pushed machine spending from bookmakers towards casinos, bingo clubs and AGCs, “particularly as shops have closed”.

A large UK operator spokesperson speaking off the record to iGB declined to quantify the revenue shift but said AGC revenue is growing while betting-shop revenue is declining. The operator added that the money matters more than the number of venues.

Costs, hours and machine mix

Operators cite cost differences for why AGCs are thriving where bookmakers are retreating. Arcades are classified as a hospitality venue for business rates, while betting shops pay a higher financial-services rate. AGCs also pay less towards the statutory levy and pay no media-rights fees for screening racing.

AGCs typically keep longer hours than bookmakers, which close by 10pm at the latest, allowing arcades to serve late-night customers. Machine mix matters as well: a betting shop may have only four higher-stake Category B machines, while an AGC might make those machines no more than 20% of its estate and “flood their shops with almost iPad-style Category C machines”; fifty Category C machines will unlock more than ten Category B terminals.

A former pub converted into an arcade on a local high street was cited by an operator as evidence that a small venue can be profitable: it is run by a local family with five or six venues.

Politics, regulation and local power

The arcades have become a political symbol of high-street decline. Andy Burnham, the prime minister, has called betting shops a sign of decaying high streets and, according to The Times, “Andy hates adult gaming centres.” A Labour source told that newspaper the prime minister dislikes arcades even more than betting shops.

Regulation is split between the Gambling Commission and local councils. Operators are licensed by the Gambling Commission, while each venue requires a premises licence from the local council. Under the Gambling Act 2005 councils must “aim to permit” applications that meet statutory tests, which limits local power to refuse new AGCs.

Lord Foster of Bath, chair of Peers for Gambling Reform, said the current regulatory framework does not work and called for communities to have more power to refuse new AGCs and for greater funding for enforcement. He cited concerns about “higher-stake, higher-harm Category B machines” and breaches including the 80/20 machine gaming ratio and the use of infill machines and tablets that are not readily accessible.

A spokesperson for the industry trade body Bacta responded that “you cannot tax or regulate lawful industries out of existence simply because you dislike them.”

The fiscal threat and industry warnings

The SMF estimates a 40% MGD rate applied to casinos, arcades, betting shops, bingo halls and members’ clubs could raise up to £458 million from machine gaming while putting the economic cost of machine-gaming harm at £2.33 billion. No rate has been confirmed.

Entain, which owns Ladbrokes and Coral, has warned strongly against a large MGD increase. In a letter to the prime minister on 11 September, Stella David, Entain’s chief executive, said doubling the standard rate from 20% to 40% would add around £100 million a year to the cost of its UK shops. Entain cited EY modelling for the Betting and Gaming Council that points to up to 1,470 shop closures, 15,900 lost jobs and a net loss to the Exchequer of about £120 million.

On Entain’s third-quarter earnings call on 15 October, Stella David said around 630 betting shops had closed across the industry in the past year before any tax rise. She argued that putting up the duty “is actually self-defeating and hollows out an already very underperforming high street” and warned the Treasury’s net take could fall because of those direct impacts. David said Entain would have mitigation plans if there were any increase, but would not disclose how much cost it could offset.

Frontier Economics, cited in Entain’s letter, estimates that £1.6 billion a year is already bet through illegal land-based gambling. Dan Waugh expects a large duty increase would cause closures across AGCs, bingo clubs, casinos, seaside arcades and betting shops, and believes the illicit market could grow without effective enforcement from the Gambling Commission.

“Doubling the duty would certainly result in a large number of AGC closures along with bingo clubs, casinos, seaside arcades and betting shops,” Dan Waugh of Regulus Partners said.

“Doubling the standard rate from 20% to 40% would add around £100 million a year to the cost of its UK shops,” Stella David wrote to the prime minister on 11 September.

Who gains and who loses

If the Treasury imposes a targeted rise on betting shops and AGCs, both sectors would be affected because they currently pay MGD at the same rates. Carve-outs are possible: a Times source said the prime minister “loves bingo halls and pubs”, and previous proposals have excluded pubs from higher rates. Operators with stronger balance sheets are likeliest to survive a significant duty rise; weaker operators could close. The black market is the potential beneficiary, according to industry and consultancy sources.

The Chancellor’s decision on 28 October will determine whether the fiscal response to machine gaming reshapes the high street further, or accelerates closures that operators, trade bodies and some regulators warn could push more activity into illicit channels.