New report warns of black market risk from higher taxes and tighter regulation, industry body claims

A new report on Europe's gambling industry has shown the threat of black market growth posed by increased taxation and regulation, the Betting and Gaming Council (BGC) has claimed.

The warning comes with chancellor of the exchequer Rachel Reeves preparing to deliver her budget on November 26.

Reeves signalled at the Labour Party conference in September that gambling duties were set to rise when she said that gambling firms "should pay their fair share". 

The report by PwC examined the impact of taxation and the regulatory environment on a number of online gambling markets across Europe.

It found that around six per cent of all online betting and gaming in the UK now takes place on black market websites, an increase from a previous estimate made by PwC in a report published in 2021 which estimated the black market at 2.3 per cent of total spend.

The new report's analysis, using data from consultants H2 Gambling Capital, showed that 'channelisation', the share of play with licensed operators, had fallen from 99 per cent in 2020 to 94 per cent in 2024.

Looking further afield, the report found clear links between more restrictive policy regimes and larger black markets, with France (43 per cent channelisation), Sweden (65 per cent) and the Netherlands (63 per cent) having large black markets.

By contrast, Spain and Denmark, with more moderate tax regimes and open licensing systems, kept a much greater proportion of gambling within the regulated sector, with 89 per cent channelisation in both jurisdictions.

Grainne Hurst: "Report should serve as a clear warning"

BGC chief executive Grainne Hurst said: "Britain has one of the safest gambling markets in Europe but if the Treasury isn’t careful, we could quickly end up like France or Sweden, with huge black markets contributing nothing in tax, offering zero player protection, and providing no funding for sport or the economy.

"This PwC report should serve as a clear warning. Well-balanced regulation and fair taxes protect players, raise more revenue for the Treasury, and support thousands of jobs. Unlicensed operators do none of those things."

The report concluded that higher effective tax rates and tighter regulation lead to smaller regulated markets, while jurisdictions that liberalise and maintain balanced taxation enjoy stronger growth and greater consumer protection.

It also challenged the assumption that higher gambling duties increase public revenues, finding that, between 2019 and 2024, countries with tax rates below 25 per cent of gross gaming revenue had annual growth in tax receipts of 13 per cent, compared with nine per cent in higher-tax jurisdictions.

Campaigners have been calling for remote gaming duty and machine games duty to be increased to as much as 50 per cent.

Operators facing steeper duties typically cut back on marketing and promotions, the report said, making licensed platforms less competitive and pushing players towards the black market.

The report said: "An increase in tax rates or tightening regulations reduces operator profitability, resulting in fewer promotions and higher pricing, making the player proposition less attractive."

Read these next:

Why Britain risks repeating a Dutch disaster by raising gambling taxes 

Treasury committee recommendations to raise gambling duties would 'decimate' racing 

Leading independent bookmaker warns 'there will be nothing left to tax' if gambling duties are hiked in autumn budget 

Sign up to receive On The Nose, our essential daily newsletter, from the Racing Post. Your unmissable morning feed, direct to your email inbox every morning.