Investors of UK gambling operators are being warned to be cautious on the sector. It is claimed that the plans of the UK government to introduce a tax increase on the industry will make it a tough future.

Analyst group, Oriel, claimed that while "there are always risks for betting and gaming stocks ahead of the budget," the risks are "greater this year."

The chancellor, George Osbornse, will declare the new budge next month and it is expected to include details of the taxation of offshore gambling operators which will include Ladbrokes, Betfair, William Hill, Rank and Gala.

As a precaution analysts are downgrading the ratings of shares in some online gambling companies and urging investors to be cautious.

Last year the UK government confirmed that would be investigating how it could tax and regulate gambling operators that were based outside the UK yet marketed to UK residents.

Most online operators take advantage of tax havens such as Gibraltar to avoid the UK gambling taxes which are generally around 15 – 20% depending which sector.

The general views are that offshore operators could see gross profits tax introduced for offshore operators in late 2013 or 2014.

Oriel says that is expects "some uncertainty and share price weakness" in some gaming companies and has downgraded their Ladbrokes and William Hill ratings to 'reduce' and removed Betfair from their recommended buy list altogether.