BAT to axe British cigarette production

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British American Tobacco, the group behind the Dunhill and Lucky Strike brands, is to end more than 90 years of cigarette production in the UK and Ireland, announcing plans to close its Southampton and Irish factories with the loss of 600 jobs.

The Southampton factory, which has operated since 1913, will close within the next two years with the loss of 530 manufacturing jobs. Production will be transferred to Poland, Romania and Switzerland. The remaining job losses will come from BAT's plant in Dundalk, Co Louth.

The company has been reviewing the prospects of both factories for some time, and has decided it is uneconomical to keep them open. A statement from BAT yesterday said: "Regrettably, both reviews have concluded, subject to consultations, that there is no viable future for either."

Southampton was BAT's last UK cigarette production facility, and 10 years ago employed more than 1,600 people. BAT's factories in Spennymoor and Darlington were closed in 2001 and 2003 respectively. Since BAT's beginnings, more than 90 per cent of its cigarettes made in the UK have been exported to Europe, Asia and Africa. The company wants to move production closer to the markets in which they will be sold. Labour costs are also cheaper there.

Allan Short, the head of BAT's UK operations, said: "Higher costs in Western Europe and the increasing trend towards local production have combined to turn the tide against our manufacturing operations in the UK and Ireland."

BAT said last month a quarter of production from Southampton would be moved to Singapore and South Korea. Current volumes are already about half of its full capacity of 50 billion cigarettes a year and are set to drop further when rules on high-tar cigarettes made at the factory come into effect in 2007. From then, BAT will no longer be able to produce cigarettes with more than 10mg of tar within the EU, so it plans to increase production in Switzerland - a non-EU member - to keep producing high-tar cigarettes. Volumes at its Irish factory have been affected by tax rises and the ban on smoking in public.

Unions said the savings on transportation costs were "miniscule". "This is a company that makes £1.5bn profit a year. It is unbelievable that for sake of few pennies they would be prepared to sacrifice their loyal and long-serving employees in Southampton," Mike Budd, of Amicus, said.