Threefold increase in black market cigarettes

Smoker

An almost 300% increase in counterfeit cigarette volume has driven a second consecutive annual rise in UK black market cigarette consumption, according to a new report published by KPMG.

Coming just days after the implementation of the EUTPD2 legislation, the report also found that 16% of all cigarettes now consumed in the UK are either contraband or counterfeit. The overall volume of illegal cigarettes consumed in the UK during 2015 increased by over 6% to reach 6.7bn cigarettes. This represents the second-highest increase in volume across the whole of the EU.

Key findings in the KPMG Project Sun report for the UK in 2015 include:

  • If the total black market volume had been consumed legally an additional tax revenue of €2.8bn would have been raised in the UK.
  • Non-duty paid volume coming in to the UK from Romania has increased by nearly 400%.
  • 78% of counterfeit products had duty free labelling.
  • EU Member States lost an estimated €11.3bn in tax revenues.

All four major tobacco manufacturers operating in the EU – BAT, Imperial, JTI and PMI – jointly commissioned the report, which can be found online at www.kpmg.com/uk/projectsun.

In response to the report Paul Adeleke, from Philip Morris, said: “This illegal activity not only comes with a financial cost, but it fosters criminality in local communities. Philip Morris International continues to devote significant resources in combating this problem as it strongly believes that effective solutions require solid cooperation between governments, law enforcement agencies, manufacturers and retailers.”

Peter Nelson, Imperial Tobacco Anti-Illicit Trade Manager, found the data “disturbing” as it reflected only factory-made cigarettes and not fine cut tobacco – which has traditionally tended to be more popular among the illicit trade.

“The report also highlights a significant increase in counterfeit cigarettes of 28% in 2015,” he added. “This is a concern as we move into the next phase of standardised packaging, where criminal groups could take even greater advantage of new legislation to increase their ill-gotten market share”.