Rent, don’t build: why Britain’s most heavily taxed sectors are buying their software off the shelf
Business Economic Syndicated News 
Payroll costs have climbed since employer National Insurance rose to 15 per cent in April 2025, and sector-specific duties keep rising. One response is gaining ground with little fanfare: stop owning the software that runs the business and rent it instead.
Gambling: the sharpest test of the model
No sector has had its margins reset as abruptly as online gambling. Since 1 April 2026, Remote Gaming Duty has risen from 21 per cent to 40 per cent. An operator generating £1m of gross gaming yield now pays £400,000 in duty rather than £210,000. A further rise follows in April 2027, when a new 25 per cent rate for remote betting takes effect.
For mid-sized operators, running their own technology stack is one of the few large costs they can actually cut. That explains the growing interest in platforms such as Agreegain’s white-label casino solution. It bundles games aggregated from third-party studios, payment integration and compliance reporting into a single contract. Pricing is typically a platform fee plus a revenue share. Engineering overhead therefore becomes a cost that moves with revenue rather than a fixed bill paid regardless of trading.
The pressure is already visible. Smaller brands, including Lottomatrix and Small Screen Casinos, have left the UK market, and ITV closed its bingo and slots site in May. As Business Matters reported last month, Betfred blamed the same tax rises for ending its rugby league sponsorship.
The engine you don’t have to build
Gambling is an extreme case, but the model is mainstream elsewhere. The clearest British example is Kraken. It was built inside Octopus Energy to run billing and customer service, and it is now licensed to Octopus’s rivals EDF and E.ON Next, as well as to Severn Trent and broadband provider Cuckoo. The platform is contracted to serve more than 70 million accounts worldwide. A $1bn funding round tied to its demerger from Octopus valued it at $8.65bn.
For the suppliers paying the licence fee, the logic is simple. Replacing a legacy customer system in-house means years of development, a large engineering payroll and the risk of a botched migration. Licensing turns that capital project into an operating cost that rises and falls with the customer base.
When a bank sells its own plumbing
Banking is running the same experiment. Starling’s software arm, Engine, sells the bank’s core technology to other lenders as a service. Starling’s annual results for the year to March 2026 show Engine’s revenue up 25 per cent, its client base doubled and £70m of committed annual recurring revenue secured. Clients include Salt Bank in Romania, AMP Bank in Australia and New Zealand’s SBS Bank.
The timing matters. Group revenue fell to £887m as Bank of England rate cuts squeezed interest income, which is exactly when a recurring software line looks most valuable to the seller. On the buyer’s side, a lender in Bucharest or Auckland gets a modern current account without building its own core platform from scratch.
What buyers give up
Renting is not free of risk, and the cases above show where it bites. Before signing, buyers tend to test three things:
- Dependence. Kraken’s demerger was partly designed to ease clients’ discomfort at running their business on a competitor’s software. The provider’s neutrality matters.
- Exit terms. Customer data, balances and transaction history must be portable, or a cheap licence becomes an expensive trap.
- Accountability. Regulators hold the licensee responsible, not its supplier. A bank running on Engine still answers to its own supervisor, and a UK gambling operator still answers to the Gambling Commission.
Revenue-share pricing also behaves differently from a fixed fee as a business grows. A model that suits a launch can look costly at scale, which is why some contracts include a route to bring the technology in-house later.
A Budget question, not just an IT one
Treasury decisions are usually discussed in terms of rates and thresholds, but they also shape how companies are built. When margins thin, fixed costs become the enemy, and software that once looked like a competitive moat starts to look like overhead. Kraken, Engine and the white-label platforms serving gambling operators all sell the same proposition: someone else carries the engineering bill. Whatever Mr Healey announces on 28 October, the businesses best placed to absorb it may be those that no longer own all of their own machinery.
