Europe's €80bn gambling black market shows the unintended consequences of hiking gambling duty - but will the UK government listen?

A report published last week claimed to reveal the enormous size of the black market in illegal gambling in the European Union.

Yield Sec, which describes itself as an intelligence platform, said that illegal gambling operators – defined as those not licensed in the countries they are targeting – made up 71 per cent of Europe's online betting and casino market in 2024 and was worth €80.65 billion.

That dwarfed the regulated sector, which came to €33.64bn in gross gaming revenue, the amount retained by operators once winnings have been paid out.

The illegal market grew by 53 per cent compared to 30 per cent in the regulated sector, which Yield Sec said was fuelled by the men's European Football Championship and the Olympics.

The company also said that demand for pirated sports streaming had grown and that such channels were being used by illegal operators to advertise their services.

Yield Sec claimed that more than 6,200 illegal operators were targeting customers in the EU last year.

Previous reports have found a direct correlation between gambling tax rates and 'channelling' (the proportion of online gambling taking place within the licensed sector).

A report by Copenhagen Economics published in 2016 found that the country with the lowest tax rate, the UK, had the highest channelling rate at around 90 per cent – this was before remote gaming duty was increased to 21 per cent

The two countries included in the study with the highest tax rates at the time, France and Portugal at more than 40 per cent, had the lowest channelling rates at around 50 per cent. All the countries studied with tax rates above 20 per cent had channelling rates below 80 per cent.

The report claimed that the optimal tax rate for both channelling and for maximising tax revenues was between 15 and 20 per cent, which is where the UK is now.

That could be about to change depending on the outcome of this autumn's budget. The assumption is that online gambling duties are going to rise; the question is how much and where.

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If the Treasury's proposals for harmonisation are adopted, then it will be betting on racing and sports that will be worst hit, another hammer blow for the thoroughbred industry.

Alternatively, if proposals from various think tanks gain traction, then rates will rise but more so for online gaming, possibly more than doubling.

Increasing gambling duties would have consequences, according to Yield Sec's founder Ismail Vail in a recent interview with financial research and media firm Hedgeye.

Vail told them that the UK was "about to spoil the theme park, you are about to start cutting holes in the fence. If you increase the tax rate, price, product, promotion – the fundamental three Ps in this business – go out the window."

He added: "If you start giving them surprises like 'we are doubling the tax rates', what do you think will happen? People will pull back, there will be less spent, there will be fewer hires, there will be less money going back to the community, and what will happen? Because they are not pricing themselves as competitively as they used to, crime comes in." 

The possibility that raising gambling duties is not a painless way of filling a hole in the public finances was also raised in The Sunday Times over the weekend.

Deputy business editor Oliver Gill wrote: "The potential for negative fallout from increasing gambling taxes must be considered carefully and dispassionately. Simply hiking levies as a way to fill a budgetary shortfall would be short-sighted."

With MPs having returned to parliament this week, the countdown to the budget is on.

The evidence is there for the Treasury to consider when it comes to the potential unintended consequences of a gambling tax hike, especially from British racing. The question is whether they are listening.

Key man in Reeves's team needs to sharpen up on gambling knowledge

The news that pensions minister Torsten Bell has been drafted in to assist chancellor of the exchequer Rachel Reeves has not gone down well in certain sections of the media.

Torsten Bell: being drafted in to assist Rachel Reeves has not met with a universal thumbs upCredit: Gov.uk

Bell, who entered parliament only last year as the Labour MP for Swansea West, has been described in not-so-glowing terms since the news broke, with epithets such as "zealot" and "fanatic" being flung around willy-nilly.

That might all be somewhat over the top – rather confusingly, he has been described as both hard left and neoliberal – but, given the expectation that increases in gambling taxation are firmly in the Treasury's sights and the potentially catastrophic impact on British racing's finances that might ensue, what are his views on the subject?

Well, he has discussed the issue in his previous guise as chief executive of the economic think tank the Resolution Foundation and the signs were not positive.

Writing the week that the last Conservative government's gambling white paper was published, Bell said: "There’s a balancing act here, but on balance I’m in the ‘about time too’ category."

More worrying was what came next.

"Gambling has surged in Britain (rising from being an £8 billion industry in the late 2000s to over £14 billion pre-pandemic) and so too has gambling addiction," he wrote.

There are two problems with that statement.

The first is that the figures Bell cites do not prove that gambling has "surged" in Britain. The numbers come from the Gambling Commission's official statistics, but before 2014 they do not include gambling operators based offshore. 

It was only when point of consumption licensing was introduced in November of that year that the true size of the industry could be calculated. The industry has grown but not to the extent Bell claims. For example, gross gambling yield has increased from £13.5 billion in 2016 to £15.6bn in 2024.

As for gambling addiction, the Gambling Commission itself has said there are no official statistics on the subject across the population and that problem gambling rates do not automatically equate to addiction. Even so, problem gambling rates – putting to one side the outlying figure produced in the first Gambling Survey for Great Britain – have shown no great change for years.

Let's hope Bell's eye for detail has improved when it comes to the budget.

Barber's Bullets

Donal McCabe to take key role at Jockey Club

Donal McCabe is set to be the Jockey Club's new chief corporate affairs officer, succeeding Stuart Williamson, who left the organisation in the spring.

McCabe will start on October 13 and report directly to the group chief executive Jim Mullen, with whom he worked when director of corporate communications at Ladbrokes between 2013 and 2018. He later took up the role of communications secretary for Queen Elizabeth II until her death in 2022.

Mullen said: "I know Donal well from our time together at Ladbrokes and it’s fantastic to be able to appoint someone of his calibre for this role.

"Donal’s experience and expertise will be crucial in helping to ensure the Jockey Club is prominent on issues that shape the long-term sustainability and future of British horseracing, especially at such an important time for our sport."

Flutter warning over India ban

Flutter Entertainment chief executive Peter Jackson has warned that legislation in India banning real money gaming products will drive customers to the black market.

The legislation was rushed through last month and has led Flutter to shut down such operations in India, where it runs the Junglee brand and has more than 1,100 employees.

Jackson said: "We believe this change will drive customers to the unregulated market, offering limited consumer protections and providing no contribution to the local economy. We believe in regulatory frameworks that put customers first, and are evaluating options to restore skill-based games in the Indian market."

Entain confirms Vouris in Australasian role

Andrew Vouris has been appointed as chief executive of Entain Australia & New Zealand by the gambling industry giant.

Vouris had served as interim chief executive since the end of June when the previous incumbent Dean Shannon stepped down.

Entain's group chief executive Stella David said: "Andrew stood out as the right leader for Entain ANZ. His leadership as interim CEO has demonstrated his commitment to our people, our partners, and to building a sustainable, compliance-led and customer-focused culture."

Date for the Diary

Wednesday: Parliamentary campaign group Peers for Gambling Reform is holding what it describes as a "summit" in Westminster. Speakers include gambling minister Baroness Fiona Twycross, former Conservative Party leader Iain Duncan Smith and Gambling Commission executive director Tim Miller.

Read these next:

'Emotions have been running high' - tensions between racing and bookmakers increase over tax debate 

Strike proposal shows bookmaker warnings on racing's stance over tax harmonisation have had little effect 

Punters will be footing the gambling tax bill – or simply moving to the black market to avoid it  

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