Share of illicit cigarettes in UK increases as counterfeit flows hit record figures: KPMG
This picture taken on August 4, 2021, shows packs containing counterfeit branded cigarettes found during a raid by customs officers on an illegal smuggling site in Aartselaar, near Brussels. (Photo by JOHN THYS/AFP via Getty Images)
The share of counterfeit and contraband cigarettes in total consumption in the UK has increased by one percentage point to 18.1 per cent in 2021, a study by KPMG has found.
The increase was due to a jump by around 760 million in counterfeit flows, which stood at 3.03 billion cigarettes last year, the highest value recorded in the UK since this annual study began. Counterfeit accounted for over 56 per cent of total illicit cigarettes last year.
Total tax revenue lost to the exchequer from the sale of illicit cigarettes is estimated to be £2.32 billion, £442 million more from 2020.
More worryingly, the decline in the UK's total cigarette consumption slowed in 2021, compared with rates observed between 2017 and 2020, while illicit consumption increased to a level similar to that seen in 2019 at 5.5 billion cigarettes.
Total UK consumption declined by 1 per cent in 2021 to 30.2 billion cigarettes, driven by a decline in legal domestic sales.
The study commissioned by Philip Morris International (PMI) has also revealed that overall illicit cigarette consumption increased across European Union (EU) member states by an estimated 3.9 per cent last year, reaching 35.5 billion cigarettes consumed. Meanwhile, the study estimates that total EU cigarette consumption declined over the same period.
The increase of illicit consumption in the EU was largely driven by an estimated 33 per cent increase in counterfeit consumption in France, where it grew to 8 billion cigarettes last year. Overall, France remains the largest market for illicit cigarettes in the EU, with a total of 15.1 billion illicit cigarettes consumed in 2021, comprising 29 per cent of total cigarette consumption in the country, which represents a significant growth from 13 per cent in 2017.
The UK, which left the EU in 2020, was the second largest illicit cigarette consumption market in the study, with 5.5 billion cigarettes, an increase of 200 million over 2020
“The findings of the KPMG report should be a real wake-up call. It’s alarming that in countries that maintain high excise taxes on cigarettes, such as France, instead of driving a decrease in smoking prevalence, we see a rise in counterfeit cigarette consumption,” said Gregoire Verdeaux, Senior Vice President, External Affairs, PMI.
“In fact, in France in the past five years, while the average price of a pack of legitimate cigarettes has increased by more than half, the number of adult smokers has only marginally decreased.”
The annual KPMG report focuses on the consumption and flows of illicit cigarettes in 30 European countries—the 27 EU member states, as well as the UK, Norway, and Switzerland.
Verdeaux noted that the continued growth of a black market where fake and unregulated cigarettes are easily available seriously undercuts legitimate efforts to reduce and eventually eliminate cigarette smoking.
“We are convinced that consumers need to be incentivised so that they don’t have to turn to illicit cigarettes. This means focusing on education and awareness, and ensuring the availability of better alternatives, such as scientifically substantiated smoke-free products,” added Verdeaux.
“Making them accessible as a better option for millions of adult smokers in Europe who don’t quit should be our common top priority.”
Britain's annual inflation rate jumped more than expected in October to back above the Bank of England's target as households and businesses faced higher energy bills, official data showed Wednesday.
The Consumer Prices Index reached 2.3 per cent from a three-year low of 1.7 percent in the 12 months to September, the Office for National Statistics said in a statement.
CPI was last at 2.3 percent in April, the ONS added in a statement, while analysts' consensus had been for the rate to climb back to 2.2 percent.
The Bank of England (BoE) target stands at 2.0 percent.
"Inflation rose... as the increase in the energy price cap meant higher costs for gas and electricity compared with a fall at the same time last year," ONS chief economist Grant Fitzner said of October's data.
Britain's energy regulator Ofgem sets a price cap quarterly that suppliers can charge customers. The latest increase in October was 10 per cent but this is expected to drop markedly in January according to forecasts.
The regulator had cited rising prices on international energy markets owing to increasing geopolitical tensions, and extreme weather events driving competition for gas, as the reasons behind the sharp rise.
"We know that families across Britain are still struggling with the cost of living," senior Treasury official Darren Jones said in reaction to Wednesday's inflation reading and saying the Labour government needed to do more to help.
Food and non-alcoholic beverage prices rose by 1.9 per cent in the year to October, up from 1.8 per cent to September 2024. The annual rate of 1.9 per cent in October compares with 10.1 per cent in the same month last year.
Analysts said despite prices rising faster than expected, the BoE remained on course to keep cutting British interest rates.
"But it lends some support... that the Bank will skip the December meeting and cut rates only gradually, by 25 basis points in February and at every other policy meeting until rates reach 3.50 percent in early 2026," forecast Ruth Gregory, deputy chief UK economist at Capital Economics research group.
The central bank earlier this month trimmed borrowing costs by 25 basis points to 4.75 per cent.
Following its decision, the BoE added that a maiden budget from Britain's Labour government in October, featuring tax rises and increased borrowing, would boost growth but also lift inflation.
Nestle on Tuesday said it will increase investment in advertising and marketing to 9 per cent of sales by the end of 2025. The company also announced plans to make its waters and premium beverages activities a global standalone business from New Year.
Unveiling a plan to fuel and accelerate growth at a Capital Markets Day for investors and analysts, the Swiss group also said it aims cost savings of at least CHF 2.5 billion (£2.25bn) above existing initiatives by end 2027 to fund increased investments.
“Our iconic brands and innovative products connect with people every day, at every stage of their lives. These strengths give us a unique advantage and position us to win in the marketplace. We will now invest further in our brands and growth platforms to unlock the full potential of our products for our consumers and our customers,” Laurent Freixe, Nestlé chief executive, commented.
“Our action plan will also improve the way we operate, making us more efficient, responsive and agile. I am confident that we can deliver superior, sustainable and profitable growth and gain market share, while transforming Nestlé for long-term success.”
Nestlé confirmed its 2024 guidance, with organic sales growth of around 2 per cent, underlying trading operating profit margin of around 17 per cent and underlying EPS broadly flat in constant currency. Looking ahead to 2025, the company expects an improvement in organic sales growth compared to 2024, with the underlying trading operating profit margin anticipated to be moderately lower than the 2024 guidance.
Nestle last month lowered its outlook for 2024 to 2 per cent as the company reported falling sales for the first nine months of the year.
The consumer goods major, whose brands range from Nespresso coffee capsules to Purina dog food and Haagen-Dazs ice cream, had already cut its annual sales growth expectations from 4 per cent to 3 per cent in July.
The company on Tuesday said it expects organic growth to be over 4 per cent in the medium term, in a normal operating environment, with an underlying trading operating profit margin of over 17 per cent.
Nestle said the its new action plan will allow it to drive category growth and improve market share performance.
Actions will include targeted investments in winning brands and growth platforms, more focused innovation activities to drive greater impact, and systematically addressing underperformers.
Nestle will step up investment in advertising and marketing to support growth. The necessary resources will be generated through cost savings and growth leverage.
As part of the action plan to drive operational performance, Nestle’s water and premium beverages activities will become a global standalone business under the leadership of Muriel Lienau, head of Nestlé Waters Europe, as of January 1, 2025.
Nestle said the new management will evaluate the strategy for this business, including partnership opportunities.
A single UK-wide scheme deposit return scheme (DRS) would be far more successful, efficient and effective, retailer body the Federation of Independent Retailers (the Fed) has stated, expressing surprise and some concerns over Welsh government’s decision to press ahead with its own deposit return scheme for bottles and cans and not to join a UK-wide DRS.
The Fed’s National President Mo Razzaq has further warned that this decision by Wales - coupled with its intention to include glass in its scheme - would cause unnecessary confusion. He commented: “While we applaud Wales’s desire to make its deposit return scheme a success, we would prefer to see one single scheme for the UK.
“Interoperability across the UK is vital, so that anyone buying a drinks can in England will have the confidence that they can return it in Wales.”
Razzaq added, “A single UK-wide scheme would be far more successful, efficient and effective, enabling shoppers to understand and embrace DRS as quickly as possible.”
In a written statement yesterday, the Welsh government confirmed that it “was not able to proceed with the joint process.
It had always maintained that glass would be part of its deposit return scheme. Earlier this month, the UK government confirmed that it would not include glass in the scheme.
Deputy First Minister Huw Irranca-Davies, who has responsibility for climate change, confirmed Wales’s deposit return scheme “supports the transition to reuse for all drinks containers including those made from glass.”
Through DRS, consumers will pay an additional 20p when they purchase a drink in a single-use container. This is redeemed when they take the container back to a return point operator.
Razzaq added: “The Fed has always been very supportive of a UK-wide DRS as we believe it has huge potential to boost recycling and curb litter – two issues that impact on the environment and people’s quality of life.”
Welsh member Vince Malone added: “This is a concerning development, as Fed members believe a Welsh DRS scheme can only work effectively if it has a UK scale and is aligned with the rest of the country.”
According to Keep Britain Tidy’s National Litter Survey, by volume, drinks containers make up 75 per cent of the litter found on streets. Estimates suggest that more than eight billion drinks containers are wasted across the UK each year.
Retail insolvencies remained flat in the lead up to the Budget, shows a recent report, though experts feel that a wave of distress is expected following the Chancellor’s increase in employers’ National Insurance contributions and National Minimum Wage.
Today’s company insolvency statistics show retail trade insolvencies fell slightly from 2,101 in the 12 months to September 2023, to 2,089 in the 12 months to September 2024, and were flat month-on-month (137 in August 2024 to 138 in September 2024).
Gordon Thomson, restructuring partner at leading audit, tax and consulting firm RSM UK, said, “While retail insolvencies were flat in the lead up to the Budget, a wave of distress is expected following the Chancellor’s increase in employers’ National Insurance contributions and National Minimum Wage, due to the vast number of people employed in the industry.
"The current statistics may be the calm before the storm as additional costs put further pressure on retailers’ already-stretched margins, leading to an increased rate of insolvencies in Q1 2025.
“Consumer confidence has been shaky in the lead up to the Budget, and it’s crucial this returns to avoid a disappointing Black Friday and Golden Quarter. Confidence is needed to drive a boost in consumer spending and to the overall UK economy, which saw meagre growth of 0.1% in the last quarter.
“The retail sector is also grappling with increased crime rates, which not only has a devastating impact on margins but also on staff morale. The government’s promises to tackle shoplifting are more important than ever during this festive period, but that alone won’t be enough to revive the sector.
"Retailers will be holding on to see how the next few months perform, but further support is needed to avoid more having to close their doors for good.”
Today, on The National Lottery’s 30th birthday, operator Allwyn is announcing that, through selling tickets, National Lottery retailers have helped players raise a landmark £50 billion for Good Causes since 1994 – funding an incredible 700,000 individual projects across the UK.
Allwyn is also announcing that National Lottery retailers have now earned over £8 billion in sales commission since the first draw on Saturday 19 November 1994.
In addition to changing the face of communities up and down the UK, more than 7,400 millionaires have been created and over £95 billion awarded in prizes since the launch of The National Lottery in 1994.
Over 570 dedicated independent National Lottery retailers have been selling The National Lottery since launch – including Brian McLister, owner of McLister’s Store in Ballycastle, and Raj Patel, owner of News Bit in Bushey.
Through selling National Lottery tickets to players, Raj’s store has raised over £700,000 for National Lottery Good Causes since 1994, while Brian’s store has raised over £650,000.
“I feel proud that we’ve been able to make a difference,” said Brian McLister, owner of McLister’s Store in Ballycastle. “We’ve always strived to serve our local community and to help wherever we can. It’s great to be able to see the benefit of National Lottery funding in your area. Our local museum has been completely regenerated thanks to the funding they’ve received. It feels good to know that we’ve helped in some way.”
Raj Patel, owner of News Bit in Bushey, added: “Whenever I hear that over £30 million is raised every week for Good Causes, it makes me happy that by selling tickets and Scratchcards in my store, I’m helping in some way.”
Allwyn has been running some special games and draws to celebrate three decades of The National Lottery, including:
Last Saturday’s (9 Nov) special Lotto £15 million "Must Be Won" draw which saw a millionaire made and the jackpot roll down to boost all the lower prize tiers.
A EuroMillions 100 European Millionaire Maker draw on Saturday 22 November which will see 100 prizes of £1 million (or €1 million) guaranteed to be won in a single night.
A special 30th birthday Scratchcard that hit stores in the lead up to the birthday and offers the best chance of winning £30 on a game, as well seven top prizes of £300,000.
Brian McLister
Allwyn’s Interim Retail Director, James Dunbar, said: “By selling billions of tickets, and continuing to be the majority sales channel, it’s hard to ignore just how central National Lottery retailers have been in helping players raise £50 billion for Good Causes since 1994. They’ve now earned over £8 billion in sales commission along the way, which further demonstrates the incredible impact of The National Lottery on the UK over the last 30 years. We would like to thank retailers for their amazing commitment and support over the last three decades.”
Three decades of National Lottery funding has created an unparalleled legacy: powering athletic excellence, protecting cultural treasures, advancing artistic achievement and strengthening communities nationwide.
Running alongside the major initiatives are the hundreds of thousands of grants – usually for £10,000 or less – which help small projects to make an amazing difference in their areas.
Since funding began in 1994, UK athletes have won more than 1,000 Olympic and Paralympic medals. The National Lottery has funded the making of more than 600 films which have won an incredible 551 awards, including 16 Oscars, 128 BAFTAs and 34 Cannes awards. Popular attractions and notable landmarks across the UK such as the Eden Project, the Giant’s Causeway, the Kelpies, the Angel of the North and Wembley and the Principality Stadium have all received support from The National Lottery.