Last orders for Britain’s arcades?
Adult gaming centres (AGCs) sell one thing: play on gaming machines. They take no bets on sport, and many never shut. According to reports in the British press, hundreds are open around the clock. As betting shops have closed arcades have moved into similar spots, and politicians increasingly treat them as a symbol of high-street decline.
Andy Burnham, the British prime minister, is among them. He has called betting shops a sign of decaying high streets, and he likes arcades even less, according to The Times. “Andy hates adult gaming centres,” a Labour source told the newspaper. The Treasury may act on that.
Officials are modelling higher rates of machine games duty (MGD), the tax on machine takings, for the budget on 28 October. The Financial Times reports that John Healey, the chancellor, is weighing a rise aimed only at betting shops and AGCs. For businesses that live entirely off machines, the stakes could hardly be higher.
From bookies to AGC’s
The arcades loom larger in politics than in the market. Dan Waugh, a partner at Regulus Partners, a consultancy, notes that on the Gambling Commission’s latest figures they capture “around 4% of spending on gambling in the licensed market”. They compete with bookmakers only on machines, where AGCs take around a quarter of licensed spending, against just under half for betting shops in 2024/25.
The balance has been tilting since 2019, when the government cut the maximum stake on fixed-odds terminals to £2. Waugh says that decision, which he describes as a move “to effectively abolish B2 gaming machines”, pushed machine spending from bookmakers towards casinos, bingo clubs and AGCs, “particularly as shops have closed”.
Bookmakers say the shift is real, if hard to measure. A spokesperson for a large UK operator, who spoke off the record to iGB, would not put a number on it: “I don’t think anyone can estimate the revenue impact with much certainty.”
What matters, he argued, is the money rather than the number of venues: “AGC revenue is growing while betting-shop revenue is declining.”
The cheaper seat
Why do arcades thrive where bookmakers wilt? Largely cost, says the operator: “It’s much cheaper to run an AGC.” 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 no media-rights fees for screening racing. “Their cost base is naturally lower, facilitated by the government.”
Hours and hardware help too. Bookmakers close by 10pm at the latest; arcades can serve the late-night crowd, often after the pubs have emptied. “The hours definitely help.” A betting shop may have only four higher-stake Category B machines. In an AGC those may make up no more than 20% of the total, so operators “flood their shops with almost iPad-style Category C machines”; 50 of those unlock more than ten Category B terminals.
Nor do the economics need to be grand. A former pub on his own high street became an arcade last year, run, he said, by a local family with five or six such venues. “A venue of that size is quite telling of how much money they can make.”
Down to snobbery
The political case rests on location. The Social Market Foundation (SMF), a think-tank, finds that Britain’s most deprived areas have on average six times as many AGCs as the least deprived. Waugh is unmoved: “A large part of the animus against arcades appears to be down to snobbery.”
Commission data, he points out, show lower rates of problem gambling among arcade machine players than among people who play machines in pubs. Arcades cluster in seaside towns and dense cities, as do wet-led pubs and discount shops. “The fact that businesses catering for working class pastimes are more common in working class areas than in affluent ones is unsurprising,” he notes.
Who holds the keys?
Regulation is split. Operators are licensed by the Gambling Commission, but each venue needs a premises licence from the local council. Under the Gambling Act 2005 councils must “aim to permit” applications that meet the law’s tests, which leaves them little power to refuse an unwanted arcade.
The operator spokesperson thinks the Commission was slow to engage: “AGCs for a while weren’t considered properly by the Gambling Commission under the same level of scrutiny”, although “they’re getting there”.
Burnham’s government is handing power to town halls. It has introduced Gambling Impact Assessments, and the prime minister has said “aim to permit” will go. Lord Foster of Bath, who chairs Peers for Gambling Reform, says his group and the All-Party Parliamentary Group on Gambling Reform have both met recently to discuss AGCs. “The current regulatory framework does not work,” he told iGB.
The peers’ main worry is “higher-stake, higher-harm Category B machines” and he wants communities to have “more power to refuse the development of new AGCs if they wish to do so”.
He also points to “evidence of breaches of existing rules, including concerns around the 80/20 machine gaming ratio and the use of ‘infill’ machines and tablets that are not readily accessible or usable”, and wants councils given “greater funding to properly enforce existing rules”.
Bookmakers want more still. Scrapping “aim to permit” is “really about stopping new venues from opening”, the operator spokesperson said; the government must also “close down the other loopholes that AGCs exploit around lower taxes in order to level the playing field”. These are, in his words, “mini-casinos on the high street”.
Doubling down
The bigger threat is fiscal. MGD is charged at 20%-25% on most machines and raises about £600 million a year. The SMF wants a 40% rate for casinos, arcades, betting shops, bingo halls and members’ clubs, but not pubs, which it says could raise up to £458 million; it puts the economic cost of machine-gaming harm at £2.33 billion. Betting shops and arcades pay MGD at the same rates, so both would be caught whether Healey follows the SMF’s broad plan or the narrower rise the FT describes. No rate has yet been confirmed.
Rachel Reeves, Healey’s predecessor, considered a rise but dropped it after industry objections, and raised remote gaming duty from 21% to 40% instead. Healey, facing tighter finances after recent bond-market turmoil, may be bolder. Carve-outs are likely: the prime minister, The Times source added, “loves bingo halls and pubs”.
Waugh expects the damage to spread. Doubling the duty “would certainly result in a large number of AGC closures along with bingo clubs, casinos, seaside arcades and betting shops”, many already weakened by inflation and lockdowns.
Warnings from Entain CEO
Entain, which owns Ladbrokes and Coral and has told investors that arcades are eating into its retail revenue, is the loudest objector. In a letter to the prime minister on 11 September, Stella David, its 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. She 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.
David pressed the point again on Entain’s third-quarter earnings call on 15 October. Around 630 betting shops have closed across the industry in the past year, she told analysts, before any tax rise at all. Putting up the duty, she said, “is actually self-defeating and hollows out an already very underperforming high street”, and “the net take by the Treasury would go down because of those direct impacts”.
As Earnings+More reports, she would not say how much of the cost Entain could offset, only that “we will have mitigation plans that we will put in place, should there be any increase”.
Bacta, the arcades’ trade body, retorts that “you cannot tax or regulate lawful industries out of existence simply because you dislike them”.
If you can’t beat them
If arcades are the cheaper format, why not become one? It has been reported that Betfred might convert some of its shops into AGCs as it closes others. The logic is clear: existing leases, machines that earn without media-rights fees, longer opening hours. However, Betfred says otherwise. “We are not looking to convert betting shops into AGCs,” a spokesperson told iGB. A steep rise in MGD on both formats would, in any case, narrow the gap that makes conversion tempting.
Those likeliest to survive a rise are operators with stronger balance sheets, Waugh reckons. The likeliest to gain is the black market: “In the absence of anything resembling effective enforcement from the Gambling Commission, we may expect the illicit market to grow.”
Frontier Economics, cited in Entain’s letter, estimates that £1.6 billion a year is already bet through illegal land-based gambling. Burnham may yet clear arcades from the high street, only to find bookmakers gone with them and back rooms busier than ever.
A duty rise, as Waugh puts it, “would be an ill wind that blows no-one – bar the criminals and prohibitionists – any good”.