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The British Horseracing Authority (BHA) claims William Hill’s decision to relocate telephone betting operations to Gibraltar will see Levy payments fall by between £2m and £3m a year.

Levy revenues have already fallen from £115m to £75m in the past two years and BHA chief executive Nic Coward said: “This news is another major blow for racing and reiterates that urgent Government action is needed to safeguard the future of our sport.

“It is hardly surprising that betting operators should look to take advantage of a lax regulatory regime to further increase their profits at the expense of British racing and British jobs.

“British racing needs the new Government to take urgent action to amend the flawed regime they inherited.

“The solution to this issue lies in Government introducing new regulatory arrangements for overseas operators that will see them comply with similar standards to those licensed in the UK, including paying Levy.

“The Levy Board has confirmed to Government that there are no barriers to Levy collection being part of new these proposed new licensing arrangements.

“The BHA will be seeking urgent talks with the Government to address this situation.”

But William Hill chief executive Ralph Topping hit back: “The reaction of the BHA and particularly its chief executive Nic Coward to the restructuring of our telephone business is not unexpected and is in-keeping with his consistent anti-bookmaker stance.

“There is a consequential loss to the Levy and we regret that but this is about rescuing a loss-making business and preserving as many jobs as we can. We are also under an obligation to deliver value for shareholders.

“Our reasons for this move have been fully explained but Mr Coward, who agrees with our stance on betting exchanges, has chosen to ignore the true facts and commercial reality, preferring instead to make a case for a more complex state aid system to prop up racing, rather than leading a process to make racing more commercial and fit for purpose.

“We agree that the Government does need to take action, but that action is to announce the end of the Levy by 2013 and to allow a transition to a full commercial relationship where the market drives the future shape of racing.

“There are people within racing that we can do business with and those people, who have true commercial acumen and a sense of realism, now need to step forward and assume control of racing's helm.

“We've campaigned long and hard on the issue of being allowed to grow our business. We warned that we would have to restructure telephone [operations].

“Do we have to close shops before others accept that our UK business is under unfair pressure?

“As a UK PLC operating in a global context and responsible for some 16,000 employees, we do not have the luxury of waiting for years to see how fiscal and regulatory policy develops in our sector.

“We've done what we can to preserve UK jobs. We could have closed our telephone business down altogether.

“We currently have 170 unprofitable shops, 50 of which will have their future under review before the end of the year, which could put another 200 jobs at risk.

“William Hill pays more in taxes and levies than it makes in profit while the betting exchanges flourish under a favourable system where they only account for taxes and levies on the commission they charge to exchange users.”