Betfred have pulled out of sponsoring the Derby, citing tax rises announced by Chancellor John Healey at last month's Budget.

The gambling firm had signed a deal, structured in two parts, to sponsor five major British racing meetings known as the British Classics — among the oldest fixtures in the British flat racing calendar. The feature races include the Derby and the Oaks at Epsom, the St Leger at Doncaster, which celebrated its 250th edition this summer, and both the 1,000 and 2,000 Guineas at Newmarket.

Successive tax increases introduced by Rachel Reeves and Healey at consecutive Budgets have squeezed spending available to horse racing — a sport whose commercial backing is closely tied to the betting industry through race sponsorship — prompting Betfred, owned by the UK's top taxpayer, Fred Done, to end its sponsorship.

A Betfred spokesman said: "Following successive tax rises for the betting industry, and in particular the increase to machine games duty at the most recent budget, it is with great sadness that we have taken the difficult decision not to proceed with a three-year renewal of our sponsorship of the British Classics.

"It is not a decision we wanted to make, but the cumulative cost of government policy has left us with no choice."

Mounting tax pressure

Healey announced a five per cent increase to machine games duty — the levy charged on gaming machine play in betting shops and other gambling venues — at the Budget last month, meaning an overall hike of 25 per cent once Reeves' previous 20 per cent increase is taken into account.

The withdrawal follows Betfred's decision to pull out of sponsoring rugby's Super League, a deal that has cost the code £1m per year, making racing the second major British sport to lose Betfred's backing.

Done told the Financial Times: "Do you think when there's no betting shops punters will stop betting? The answer is no. They will find a way to bet, like in the prohibition.

"There won't be the controls [when those gamblers go to the black market], there won't be the taxes and there won't be funding for [horse] racing."

Amy Starkey of the Jockey Club said: "While we are naturally disappointed that Betfred have taken the decision not to renew their sponsorship of the Derby and the Guineas Festival at Newmarket, we understand their reasons for doing so and know this was not an easy decision for them.

"We are currently in conversations with a number of interested prospective partners that share our ambitions for the future of both events."

Attention now turns to which of those prospective partners steps forward for the Derby and the Guineas Festival, and to how the wider betting industry weighs the same cumulative tax rises that Betfred cited.