British bookmakers' shares slump on tax hike fears
Labour government's maiden budget due on Oct. 30
Analysts expect major hit to companies
Entain top percentage loser on blue-chips index
Betting and Gaming Council comment, Citi comment and background on proposed tax plans from paragraph 8
By Shanima A and Yadarisa Shabong
Oct 14 (Reuters) -Shares in British bookmakers Entain ENT.L, Evoke EVOK.L and Flutter FLTRF.L fell sharply on Monday, after a media report that the Labour government is considering a 3 billion pound ($3.9 billion) tax hike for the gambling sector.
Finance minister Rachel Reeves is expected to increase some taxes in her maiden budget on Oct. 30, where these taxes on betting firms could also be announced, the Guardian reported, citing sources familiar with the discussions.
Ladbrokes-owner Entain dropped nearly 13%, Evoke, owner of the 888 brands, slumped 14% and Paddy Power-owner Flutter fell 7%.
Entain was the biggest percentage loser on the benchmark FTSE 100 index .FTSE, while Evoke shares hit the bottom of the UK all-share index .FTAS.
"The clear conclusion here is that higher taxes would be most impactful for Evoke both in terms of magnitude but also given its financial position," analysts at Berenberg said.
They added that Entain would be materially affected and face a much tighter financial position due to its high leverage, while Flutter would be the least exposed due to its diversification.
Entain and Flutter declined to comment and Evoke did not immediately respond to Reuters' requests for comment.
A spokesperson for Betting and Gaming Council, a gambling industry lobby group, warned against disproportionate tax regimes, saying it could lead to a spike in illegal black market gambling.
Reeves had warned taxes will go up in her Oct. 30 budget with the government reeling under soaring debt and looking to bolster public finances.
Citi analysts said it was unlikely that the government would implement a massive tax hike on gambling companies at this stage given the material disruption it would cause to the industry, jobs and potentially on black market activity.
"But (we) see UK gambling tax creep as incrementally more likely," they said in a note.
Earlier this year, Britain set out plans to crack down on problem gambling as it aims to bring regulations up to date with a rise in betting online and on smartphones.
($1 = 0.7653 pounds)
Reporting by Shanima A, Prerna Bedi and Yadarisa Shabong in Bengaluru; Editing by Rashmi Aich and Emelia Sithole-Matarise
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