Tax hike fuels UK offshore gambling expansion, H2 analysis shows

Channelisation erodes as offshore market surges

Data from H2 Gambling Capital reveals that the proportion of UK online gambling activity captured by licensed operators has dropped steadily. Onshore market share fell an estimated 5 percentage points between 2019 and 2025, with the figure now standing at 92% and forecast to slip further to 85% by 2031.

Offshore GGY climbs sixfold

Gross gaming yield (GGY) generated by unlicensed offshore operators jumped from roughly £200 million in 2019 to an estimated £685 million in 2025, according to the consultancy’s bottom-up web traffic modelling. Turnover over the same period rose from around £5 billion to £16.6 billion, with the volume roughly doubling between 2023 and 2025 alone.

Looking ahead, offshore GGY is projected to reach approximately £1.4 billion by 2031, representing a compound annual growth rate (CAGR) of 12.7% from 2025 levels. Turnover is expected to climb to roughly £36 billion by that point.

Combined UK online GGY – both onshore and offshore – is forecast to rise from £8.8 billion in 2025 to £9.6 billion in 2031, a modest nominal CAGR of 1.4%. However, H2 cautioned that this masks a real-term decline of about 12% over the same period.

Tax increase named as key driver

H2 identified the rise in the Remote Gaming Duty (RGD) from April 2026 as a major catalyst for the offshore shift, describing the levy increase as a “significant headwind” for licensed operators that would encourage player migration to unregulated sites.

The modelling indicates that the effective headwind from the duty rise and related factors could cut growth by 15%–20% on a GGR basis. When adjusted for reduced bonusing, the real-term impact across 2026–27 could reach a decline of 20%–25%.

In 2025, online casino GGY rose 14% to £5.70 billion, while online betting GGY fell 6% to £2.45 billion despite a 5% increase in turnover. Active players dropped 7% and total bets declined 6% in the same year.

For 2026, iGaming GGY is expected to dip marginally by 1% to £5.64 billion, partly offset by promotional spend and lower advertised return-to-player rates on slots. A sharper decline of 5% is forecast for 2027, bringing iGaming GGY to £5.39 billion. Over the two-year period, the combined nominal GGY drop is calculated at 6% (an estimated 11% in real terms).

World Cup provides temporary boost for betting

Online betting is predicted to show relative resilience in 2026 thanks to the World Cup, with GGY rising 3% to £2.52 billion. However, as the event’s boost fades and the RGD for remote betting climbs to 25% from April 2027, betting GGY is forecast to fall to £2.47 billion the following year.

A separate study by credit reference firm TransUnion found that one in eight young adults (12%), particularly those aged 25–34, have knowingly fallen victim to fraud via an unlicensed betting site.

Industry reaction

Despite the offshore expansion, onshore operators are still expected to capture the majority of UK GGY by 2031 – roughly £8.2 billion of the £9.6 billion total.

Reacting to the report, Betting and Gaming Council chief executive Grainne Hurst argued that the only beneficiaries of the tax increase are overseas criminal operators. She warned that Britain would forfeit jobs, investment, and tax revenue as consumers are driven toward unregulated sites that lack the safeguards present in the licensed market.