Smugglers may come to aid of Chancellor's growth forecast

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The Independent Online

Britain's faltering economy could get an unlikely boost from a decision to include smuggling activities in the country's national accounts for the first time. The inclusion of the multi-billion pound illegal alcohol and tobacco trade could boost GDP growth but will exacerbate the UK's record trade deficit.

Britain's faltering economy could get an unlikely boost from a decision to include smuggling activities in the country's national accounts for the first time. The inclusion of the multi-billion pound illegal alcohol and tobacco trade could boost GDP growth but will exacerbate the UK's record trade deficit.

Although smuggling is one of Britain's oldest activities, it will be included in the country's national accounts for the first time next month.

Any extra growth would be welcomed by Chancellor Gordon Brown, whose forecasts for 2.5 per cent GDP growth are looking increasingly optimistic. However, officials stressed it was unlikely to have a huge impact on the headline numbers and said that actual figures would not be revealed. The move will bring the UK into line with accounting standards set by the United Nations and the European Commission, which insist smuggling must be included.

As smuggling involves buying goods overseas and bringing them into the UK, it will count as an import and add to the UK trade deficit currently running at a record £3.2bn. It will also feed into economic growth via consumer expenditure.

Smuggling is big business in Britain. Customs and Excise estimate more than a fifth of the annual £84bn tobacco turnover is made up of illegal imports. The loss to the Exchequer is estimated at £3.8bn a year. The Brewers and Licensed Retailers Association estimates three-quarters of the 1 million pints of beer brought into the UK every day are sold on illegally.

National Statistics, the Government's number-crunchers, are revising all official data back to 1994, when the introduction of the single market across Europe started to have an impact.

"This was when a little problem became something quite substantial," said David Ruffles, an NS trade statistician.

A study by the International Monetary Fund showed it would add between 7 and 13 per cent to economic growth.

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