Pub operators and hospitality leaders have warned that Chancellor Rachel Reeves’ expected tax raid on gaming machines could inflict serious damage on an industry already battling soaring costs, staff shortages and fragile consumer confidence.
With speculation mounting that the Chancellor will sharply increase Machine Gaming Duty (MGD) in the November 26 Budget, trade bodies say the move risks pulling away one of the last remaining revenue supports for thousands of community pubs.
Fruit machines have been part of Britain’s pub culture for more than 50 years, and although their numbers have declined since their heyday, they remain an essential income stream. According to UKHospitality, almost 36,700 fruit and slot machines operate across nearly half of the UK’s pubs, generating £622 million annually. Once taxes, supplier rent and other charges are deducted, operators are left with an estimated £385 million — or roughly £8,500 per pub — at a time when margins are already “wafer thin”.
Fears have intensified following reports that Reeves is preparing significant increases in gambling taxes to help plug a £30 billion hole in the public finances. Proposals being discussed include raising sports betting duties from 15% to 30% and lifting duty on machine and online slots from 20% to 50%. For pubs, whose gaming machines are low-stakes and incidental to their core trade, industry leaders say such a jump would be devastating.
Lawson Mountstevens, managing director of Heineken-owned Star Pubs, said pubs are already under “tremendous pressure” following last year’s steep rise in Employer National Insurance and the national minimum wage. “Our low-stakes machines are an important revenue stream. Any move that erodes their value puts further strain on our ability to serve communities up and down the UK.”
That sentiment is shared across the sector. James Baer, executive chairman of Amber Taverns, said increasing MGD for machines that are “ancillary” to pubs’ main purpose would be another “unwelcome setback” after what he described as a “savage attack” on hospitality last year.
Greene King chief executive Nick Mackenzie warned that the measure may “inadvertently be the tipping point” for pubs already grappling with an “avalanche of costs”. The British Beer & Pub Association (BBPA) estimates a rise in MGD to 50% would cost pubs £187 million a year, equivalent to 16,300 jobs.
Emma McClarkin, chief executive of the BBPA, said the impact could be catastrophic. “These are low-margin businesses that create huge numbers of jobs for young people. Any increase in the cost of doing business brings them closer to closing their doors for good.”
Analysts believe listed pub companies could also face significant hits. At JD Wetherspoon — already absorbing £60 million in additional annual costs due to labour changes — Peel Hunt analyst Douglas Jack estimates a move to 50% MGD would cost the group £18 million. Founder Sir Tim Martin said gaming machines may represent a small portion of Wetherspoon’s sales, but remain “an important part of pub economics” and are “already highly taxed”. Another increase would be “another straw on the camel’s back”.
The industry fears the government’s calculations are flawed. Rather than bringing in more revenue, higher taxes could make many machines unprofitable, prompting their removal and actually reducing the total tax take. Chris Jowsey, chief executive of Admiral Taverns, warned the move would have a “devastating impact”, cutting income for pubs in areas where alternative revenue streams are limited. At Admiral Taverns’ 1,300 pubs, machines currently generate around £6,000 net revenue per year; under the proposed tax rate, this would fall to £2,625.
Alongside financial pressures, industry leaders say the timing could not be worse. New projections from the BBPA suggest 332 pubs will have closed by the time the Chancellor delivers her Budget. The concern is that an MGD rise will accelerate the decline of one of Britain’s most cherished community institutions.
Trade bodies including the BBPA and UKHospitality are now urging the government to freeze duty on Category C low-stakes fruit machines and Category D arcade-style penny fall machines — both of which are disproportionately used in pubs and leisure venues.
Kate Nicholls, chairwoman of UKHospitality, said that for many pubs, machine income has become “increasingly important” as they deal with spiralling operational costs. Raising MGD on these machines, she said, would be “detrimental” to the long-term health of the sector.
A Treasury spokesperson said tax decisions will be announced at the Budget, adding that its consultation on gambling taxation is focused on remote betting websites, which employ fewer people, have lower costs, and deliver higher profits than traditional venues.
Industry leaders remain unconvinced. “This would not deliver the intended yields,” Jowsey said. “It would accelerate pub closures, cut jobs, hollow out high streets and likely reduce the overall tax take. It would feel like the rug is being pulled out from beneath community pubs.”
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Reeves’ fruit machine tax ‘would gamble with pubs’ futures’, industry warns
