UK tobacco market summary

Expenditure & revenue

Consumer spending on tobacco products in 2012 amounted to an estimated £15.1 billion, around 85% of this on cigarettes.

Tax revenue from tobacco in 2012/13 amounted to £12.3 billion – £9.7 billion in excise duty plus £2.6 billion in VAT.

The total tax burden (excise duty plus VAT) accounts for 88% of the price of the cheapest cigarettes on sale in the UK.

Smuggling & crossborder shopping

Owing to the high level of tobacco taxation the UK experiences a high level of smuggling and crossborder shopping in tobacco products – referred to as non-UK duty paid (NUKDP) consumption. HM Revenue & Customs estimate that in 2012/13 up to 16% of cigarette and 48% of handrolling tobacco consumption was NUKDP.

We believe that the majority of NUKDP consumption comes from other EU Member States where taxes, and therefore prices, in many countries are much lower. For example, a typical pack of 20 premium cigarettes costs £7.98 in the UK and around £3.80 in Spain.

The empty pack surveys (EPS) conducted on behalf of the tobacco industry indicate that the non-UK duty paid cigarette market in 2012 was around 21%, up from around 17% in 2011, which represents an additional revenue loss to the Treasury of hundreds of millions of pounds.

As a result of recent VAT increases and the re-introduction of the duty escalator cigarette taxation has increased by 37% since 1 January 2010.

There is widespread concern that these tax increases will lead to an increase in illicit tobacco consumption.

HM Revenue & Customs estimate that in 2012/13 NUKDP consumption lost them revenue of between £1.8 and £3.4 billion.

Smoking prevalence

The latest figures (2011) from the Government’s General Lifestyle Survey show that 20% of the adult population (16+) in Great Britain were cigarette/handrolling tobacco smokers – although the report does note that this is likely to be an understatement. This equates to around 10.5 million smokers – 8.8 million in England. Northern Ireland’s Continuous Household Survey shows that 23% of adults (16+) were cigarette/handrolling tobacco smokers – around 340,000 people.

Employment

TMA member companies directly employ over 5700 people in the UK.

A 2012 study by Cogent estimated a further 66,000 jobs among suppliers and in wholesale, distribution and retailing were dependent on the UK tobacco industry.