The number of cigarettes bought in the UK which have avoided duty and taxes is set to soar, one of the country's top three manufacturers has warned.
Japan Tobacco International, the owner of UK-based Gallaher, conducted a secret shopping trip around north-west London that revealed a huge range of counterfeit cigarettes and rolling tobacco being sold for around half the retail price.
These include well-known brands of cigarettes where the packaging is written in Spanish but the tax stamp is Belgian and rolling tobacco which contains large amounts of impurities.
The firm believes that after two of the largest duty hikes in the past two Budgets – a total of 70p on a packet of 20 – the rate of smuggling and production of counterfeit cigarettes will soar.
Recent research showed that 23.3 per cent of cigarettes smoked in London and a staggering 44 per cent of rolling tobacco had avoided UK taxes. That is almost 50 per cent higher than the national average of 16.4 per cent. It is estimated that nationally the Treasury lost £2.9bn last year from the illegal tobacco trade.
Indications that the scale of the illegal trade is escalating are on the rise. In the past 10 months Her Majesty's Revenue & Customes has seized more than one million fake rolling tobacco pouches being smuggled into the UK to be filled with illegal tobacco.
A recent court case which saw the ringleaders of a 10-man gang running an illegal cigarette factory in Chesterfield jailed, heard it made an estimated profit of £120m a year and robbed the Treasury of more than £130m in tax.
Martin Southgate, JTI's UK managing director, believes moves to introduce plain packaging do not help. He said: "These measures will not help achieve a reduction in young people taking up smoking, this will only increase the illegal trade in tobacco."
The Government was due to have published its response to a consultation paper from the Department of Health earlier this month but appears to have delayed it once again.
Imperial Tobacco boss Allison Cooper has already threatened to take legal action if the Government presses ahead with plans to force cigarettes to be sold in unbranded packaging. She said the move could provide a "stimulus" for illegal cigarettes.