Despite the best efforts of Tony Blair, Gerhard Schroder of Germany and Lionel Jospin of France, EU leaders could not reach the unanimous agreement necessary to delay abolition at the end of this month.
The duty-free industry is worth pounds 4.3bn a year and up to 30,000 jobs could be at risk in Britain. Ferries and airlines are likely to raise fares and a package holiday for a family of four could go up by about pounds 25, says the Association of British Travel Agents
Duty-free sales on travel to non-EU countries will remain, but British Airways said last night that the abolition inside Europe could mean airports increasing landing charges for airlines by about 15 per cent.
Mr Schroder said yesterday that "Tony Blair, Lionel Jospin and myself fought our corner", but were unable to overcome the opposition of Denmark and the Netherlands. Because a decision was taken unanimously in 1991 by all heads of government to scrap duty-free, only the agreement of all 15 could have reversed it and forced a delay.
Countries that have made full preparation for abolition resented the last-minute attempt to overturn the decision, and the issue at one point threatened to bring down the Danish coalition government.
The European Commission stubbornly refused to budge, too, arguing that the campaign to save duty-free had been orchestrated by a powerful lobbying operations mounted by the drinks industry.