Imperial chief hits out over Government's smoking policy

Gareth Davis, the chief executive of Imperial Tobacco, said he was "not happy at all" about the Government's smoking ban proposals but added that the effect would be minimal in the long run. His comments came after the world's fourth-biggest tobacco company posted an 11 per cent rise in annual profits and announced it would spend up to £450m on buying back shares in the absence of major acquisitions.

The UK-based group, with leading brands such as Lambert & Butler, Richmond and Davidoff cigarettes, said volumes grew 1.5 per cent over the year after a strong second-half performance outweighed a first-half drop. It reported pre-tax profits of £1.1bn for the year to 30 September, near the top end of analysts' forecasts.

Mr Davis deplored government plans to introduce smoking bans in offices, restaurants and pubs serving food in England and Wales by the summer of 2007. Even so, he predicted confidently: "It is clear that smokers will continue to smoke. There may be an initial dip in consumption but this diminishes over time."

Mr Davis pointed to Ireland, where cigarette consumption fell by 5 per cent after a ban was introduced but volumes are now perking up again, he said. Even so, he admitted that the long-term impact of the English smoking ban would probably be to reduce consumption by 1 to 2 per cent.

Mr Davis, a keen smoker himself, said he understood that non-smokers might be irritated by smoke but added: "We don't believe there is sufficient scientific evidence to show that second-hand tobacco smoke causes disease. If there is a risk, then it's a very small one."

In Britain, which accounts for 37 per cent of group profits, Imperial held on to its 44.5 per cent slice of a market which declined by 4 per cent to 51 billion cigarettes, ahead of Gallaher.

In Germany, which makes up nearly one-fifth of group earnings, operating profit was up 24 per cent despite three tobacco tax increases in the past 18 months. Mr Davis said future results would be affected by an imminent European court ruling that could bump up the tax rate on individually sold cigarettes to the same rate as packets.

The pubs group Wetherspoon criticised the Government's non-smoking proposals yesterday as a "halfway house" and said it was "plain stupid" to ban smoking in some pubs and not in others. Jim Clarke, the finance director, said: "To force people to decide between smoking or food is a strange strategy."

Wetherspoon, which plans to ban smoking in all of its pubs by May next year, reported a 7.3 per cent fall in like-for-like sales in 47 non-smoking pubs for the 13 weeks to 23 October, although food sales in the pubs had increased.