Ministers face calls to impose higher taxes on the multibillion-pound online gambling industry as a report claims it has had a “negative impact” on the UK economy.

The report, commissioned by the Campaign for Fairer Gambling and produced by economic consultancy National Economic Research Associates (Nera), claims the rise in online gambling has been “detrimental to the British economy”, diverting money from other sectors that create significantly more economic activity.

Gambling Commission figures show online gambling revenues in Britain have increased from £4.2bn in the financial year 2015-16 to £6.5bn in 2022-23.

Recent data show more than 24.5bn online bets were placed by customers of the biggest operators in the first quarter of 2023-24. More than 9m online betting sessions lasted longer than an hour.

Derek Webb, founder of the Campaign for Fairer Gambling, said the gambling review by the previous government had “failed to properly consider the fiscal, economic and societal impacts” of online gambling.“Growing the economy will require adequately taxing the online gambling sector and placing constraints on the stimulation of online gambling – an activity that should be permitted but not promoted,” he said.

The Nera report states that online gambling is a high-margin, low-cost activity for gambling operators, and few people are employed specifically in the industry. It says other industries where would-be gamblers may spend their money, which it calls “discretionary alternatives”, create more value in terms of economic activity.

The report states: “Other industries where would-be gamblers might spend their money instead are much more labour-intensive than gambling. Therefore when customers spend money on these discretionary alternatives it creates more value in terms of overall economic activity, jobs created and wages paid out.”

The report adds: “Between 2015-16 and 2022-23, British customers spent an average of £5.6bn annually on online gambling. We estimate that had the effect of reducing economic activity by £1.3bn per year and wages by £2.6bn.” This is compared with the money being spent elsewhere in the economy.

Senior figures in the gambling industry say the report accepted online gambling already produced greater tax revenues, compared with alternative pursuits. It says there is a risk that curbs on online gambling would drive customers to the unregulated offshore market, rather than spending their money on other activities in Britain.

A Betting and Gaming Council (BGC) spokesperson said: “BGC members support 110,000 jobs, contribute £4.2bn in tax and generate £7.1bn to the wider economy, as well as pouring millions into sports like horse racing, football, darts, rugby league and snooker.

“Unnecessary restrictions on punters will not induce them to spend on galleries or museums, but instead it will force them to the growing unsafe, unregulated gambling black market online which contributes nothing to the economy, Treasury or sport while offering zero safer gambling protections.”

Will Prochaska, of the Coalition Against Gambling Ads, said the Nera report “blew a hole” in online gambling industry claims that it helped boost the economy. He said problem gambling had “enormous” costs to the economy not included in the Nera analysis.He said: “If we want to reduce harm, we need to reduce consumption. We should consider taxing gambling like cigarettes.”The Social Market Foundation, a cross-party thinktank, is due to publish a report on gambling tax reform ahead of the autumn budget.

Dr Aveek Bhattacharya, research director at the Social Market Foundation, said: “For too long, the gambling industry has been undertaxed, taking advantage of exemptions from VAT, offshore corporation tax avoidance and duty rates set too low to reflect the social and economic costs of problem gambling.

“With the government looking for ways to raise revenue and reduce harm, there is a strong case for higher remote gambling duty in the autumn budget”.