UK weighs higher machine tax on arcades as Burnham targets AGCs

Adult gaming centres sell a single product: play on gaming machines. They take no sports bets, many run around the clock, and they have become a political target as betting shops close and arcades move into the vacated units.

The Financial Times reports that chancellor John Healey is considering raising machine games duty, the tax on machine takings, specifically for betting shops and AGCs, with the budget due on 28 October. Prime minister Andy Burnham has repeatedly described betting shops as a mark of declining high streets and, according to The Times, takes an even dimmer view of arcades. A Labour source quoted by the paper put it bluntly: "Andy hates adult gaming centres."

Dan Waugh, a partner at consultancy Regulus Partners, argues the political attention outweighs the sector's actual size. Citing Gambling Commission figures, he told iGaming Business that AGCs account for "around 4% of spending on gambling in the licensed market". Their overlap with bookmakers is confined to machines, where AGCs take roughly a quarter of licensed machine spending against just under half for betting shops in 2024/25.

Waugh traces the shift to the 2019 cut in the maximum stake on fixed-odds betting terminals to £2, a change he says was designed "to effectively abolish B2 gaming machines". That pushed machine spending away from bookmakers towards casinos, bingo clubs and arcades, a trend he says has accelerated as betting shops shut.

An operator spokesperson for a large UK bookmaker, speaking to iGaming Business on condition of anonymity, said the pattern is real even if its scale is hard to pin down: "I don't think anyone can estimate the revenue impact with much certainty," while noting that "AGC revenue is growing while betting-shop revenue is declining."

The spokesperson attributed AGCs' advantage largely to cost. Arcades are rated as hospitality venues for business rates rather than paying the higher rate applied to betting shops, contribute less to the statutory levy, and avoid media-rights fees for screening racing. "Their cost base is naturally lower, facilitated by the government," the spokesperson said. Arcades can also trade later than bookmakers, which must close by 10pm, catching custom once pubs empty. Machine mix matters too: a betting shop may hold only four higher-stake Category B terminals, while an AGC can use banks of cheaper, iPad-style Category C machines to unlock well over ten Category B machines once they fall under 20% of the total.

The spokesperson described one small operator, a family running five or six arcades including a former pub converted on their own high street last year, as evidence of how profitable even modest sites can be.

Regulatory scrutiny has lagged behind that growth, the spokesperson argued, saying AGCs were for some time not examined by the Gambling Commission with the same rigour applied elsewhere, though "they're getting there".

Campaigners point to where arcades are concentrated rather than how big the sector is. The Social Market Foundation has found that the most deprived parts of Britain host far more AGCs on average than the least deprived, a disparity Waugh dismisses as reflecting "snobbery" rather than evidence of harm, noting Commission data showing lower problem-gambling rates among arcade machine players than among those using machines in pubs. He compares the clustering to that of wet-led pubs and discount retailers in the same areas.

Licensing power sits mostly with the Gambling Commission for operators, but premises require a local council licence, and under the Gambling Act 2005 councils must "aim to permit" applications that meet the legal tests, limiting their ability to block unwanted sites. Burnham's government has introduced Gambling Impact Assessments and said the "aim to permit" duty will be scrapped.

Lord Foster of Bath, who chairs Peers for Gambling Reform, told iGaming Business that his group and the All-Party Parliamentary Group on Gambling Reform have both recently discussed AGCs, concluding that "the current regulatory framework does not work". He wants communities given greater power to refuse new arcades, cited concerns over higher-stake Category B machines and alleged breaches of the 80/20 machine ratio rule involving inaccessible "infill" machines and tablets, and called for councils to receive more funding to enforce existing rules.

Bookmakers want the reform to go further still. The operator spokesperson said ending "aim to permit" would mainly stop new arcades opening, and called on the government to close other loopholes AGCs are said to exploit.