A leading tobacco manufacturer is warning that a fall in the illicit tobacco market will be short-lived if the government ploughs ahead with plans to introduce plain packaging and the display ban is rolled out to convenience stores and the rest of the UK.

Figures released by HMRC last week revealed the amount of tax lost due to the illicit trade in cigarettes fell from £1.5bn in 2009-10 to £1.2bn in 2010-11, while revenue lost from non-UK duty paid hand rolling tobacco (HRT) fell from £680m to £660m.

The Customs figures are a mid-point estimate, however, and its upper estimate suggests the figures could be as high as £2.1bn and £810m for cigarettes and HRT respectively.

JTI head of UK communications Jeremy Blackburn claimed the fall in the illicit market was due to a decline in overseas travel that curtailed the supply of non-UK-duty paid tobacco, while a 25% devaluation in the pound versus the euro had made the trade less lucrative.

Prior to the introduction of the display ban for large stores in England in April, tobacco manufacturers had claimed it would serve to accelerate the trade in non-UK duty paid tobacco - thus damaging legitimate trade and hurting the Exchequer.

“The display has only been implemented in 6.2% of retail outlets across the UK since April 2012 and this applies to England only, so our expectations of the impact still stand,” said Blackburn.

The government is expected to publish the results of its consultation into forcing tobacco products into plain packs in the next few weeks. JTI has been running a £2m press advertising campaign over the last month designed to raise awareness of the impact plain packs will have on the illicit trade.

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