Tobacco companies' share prices tumble after US commits to cutting cigarette nicotine levels

Analysts said that the move was a game-changer for the industry

The slide in stocks was poised to wipe billions off the market value of the world's biggest tobacco producers

Shares in major tobacco companies across the UK fell sharply on Friday after the US Food and Drug Administration announced that it was seeking to cut nicotine levels in cigarettes.

Shares in British American Tobacco, which had been trading close to an all-time high, tumbled well over 10 per cent before recovering slightly to end the day close to 7 per cent lower. That made Friday one of their worst days in years. Shares in Imperial Brands fell more than 4 per cent.

By Friday evening in London, the slide in stocks was poised to wipe billions off the market value of the world's biggest tobacco producers, according to Thomson Reuters.

The US Food and Drug Administration said that it aims to reduce nicotine levels in cigarettes but also encourage smokers to shift towards e-cigarettes as part of a major new regulatory programme.

“The overwhelming amount of death and disease attributable to tobacco is caused by addiction to cigarettes -- the only legal consumer product that, when used as intended, will kill half of all long-term users,” FDA Commissioner Scott Gottlieb said. “Unless we change course, 5.6 million young people alive today will die prematurely later in life from tobacco use.”

Analysts said that the move was a game-changer for the industry.

“It’s hard to overstate what this could mean for the companies affected: non-addictive levels of nicotine would likely mean a lot fewer smokers and of those people who do still light up, smoking a lot less,” said Neil Wilson, a senior market analyst at ETX Capital.

“This will blow a hole in their earnings,” he said.

“This is just the US regulator acting but we can easily see others, particularly in Europe, where regulatory pressures are already extremely high, following suit,” Mr Wilson added.