A report in the possible repercussions of plain tobacco packaging has claimed up to 30,000 jobs in convenience retailing could be lost. The cost to the tax payer could top £5bn if tobacco firms successfully win compensation.
The study, which was carried out by Independent Centre for Economics and Business Research predicts lower prices for legal tobacco, increased illicit trade and a shift by customers from convenience retailers to larger retailers as a result of increased transaction times and longer queues are expected.
This could lead to the loss of between 2,000 and 3,500 jobs in small independent retail outlets – due to the loss of gross earnings of between £12-20m. The total number of job losses in the sector could be up to 30,000 when the impact of non-tobacco sales is taken into account – this is based on an estimated reduction in SIRs’ overall gross earnings of up to £300m.
In financial terms for UK plc, the report predicts a reduction in tobacco’s aggregate annual contribution to the Exchequer of between £219m and £348m.
The report also discusses compensation to tobacco companies due to restrictions in their marketing capabilities. The report cites a ‘significant risk’ of legal challenges, most likely under Article 17 of the EU Charter of Fundamental Rights or Article 1 Protocol 1 of the European Convention on Human Rights.
The tobacco analyst at Citigroup Investment Research, using simplified discounted cash flow modelling of tobacco industry profits calculated a fair value for tobacco industry brand designs (which are lost with plain packaging) of £5bn.
The combined economic implications and compensation bill would be “dire” for the Government’s deficit and debt reduction policy, says the report.
