One of the negative impacts for the UK economy of leaving the EU will fall on the UK cigarette market, which is now completely reliant on cigarette imports from Europe, according to GlobalData.
‘Without a home supplied product any tariffs applied to imported goods between the UK and EU as a result of Brexit will see massive cigarette retail price increases for UK consumers, leading to volume declines of as much as 21 percent by 2021,’ said GlobalData, which describes itself as a ‘data and analytics company’.
‘The average pack price (20s) is likely to increase by more than £3, from £9.60 to £12.74 based on estimates from the Organisation for Economic Co-operation and Development (OECD). The OECD calculations assume that the UK will introduce tariffs of 70 percent on cigarette imports in line with World Trade Organization (WTO) guidelines.
William Grimwade, consumer analyst at GlobalData said the UK’s top six sources for imported cigarettes were all in the EU: Poland, Germany, Portugal, the Czech Republic, Romania and the Netherlands. “The volume of cigarette imports will likely increase anyway over the next few years as stores of domestically produced cigarettes run out,” he said. “We forecast that the impact of Brexit will see UK cigarette volume sales fall by as much as a fifth by 2021.”
In its note, GlobalData said the decline could be even more significant if the UK Government took further action on public health concerns by forcing prices up even further.
‘A recent global study on tobacco consumption suggests global price rises of 50 percent could save more than 60 million lives, and so international opinion is likely to support further cigarette price rises,’ the note said. ‘This means that the UK Gov’t is unlikely to take any action to mitigate against Brexit-induced price rises on cigarettes.’
Grimwade said that the return of duty-free tobacco sales to travellers between the UK and the EU would likely coincide with a large reduction in the number of cigarettes they could bring back to the UK. “The new limit is expected to be somewhere around 200 cigarettes instead of the current 800, which will make it even more difficult for UK consumers to find cheaper supplies of cigarettes,” he said.
The price of Brexit
