Illicit tobacco: Stub it out!
With more than 570 billion illegal cigarettes smoked each year, illegally sold tobacco is now classed as the third largest ‘manufacturer’ of tobacco in the world
Shocking figures, aren’t they? This means that almost 12% of all cigarettes sold and consumed are illegal. And even more worrying, these numbers are growing at pace as criminal gangs continue to regard illicit tobacco as a low-risk and high-profit crime.
When we refer to ‘illegal’, what does that actually mean? In short, it refers to tobacco, either as packs of cigarettes or pouches of rolling tobacco, and vapes that have either been stolen, smuggled into the country or are counterfeit.
While cost-savvy consumers may view a cheap packet of cigarettes as a simple way to save money, the fact is illegal tobacco is having a devastating impact in multiple ways.
It harms legitimate businesses, such as wholesalers and convenience retailers as well as tobacco manufacturers. For the UK wholesale channel, the rise in illegal tobacco has led to a noticeable downturn in sales. All at a time, of course, when the sector is already facing record rises in the cost to do business.
Illegal tobacco is also cheating the UK economy as vital tax revenue is lost. This figure has been calculated to be in excess of £2bn per year – a staggering figure that could and should be benefiting the general public and the Exchequer.
And that’s not all. Without strict quality controls and enforced safety standards and regulations in place, those who purchase illegal tobacco and vapes will have no idea what is in the products they have bought.
Illegal cigarettes can contain a vast array of contaminants such as asbestos, rat droppings, lead and dirt. And, by selling them through unofficial channels, there are no age restrictions, so these illegal products can easily get into the hands of children.
And, while businesses, the economy and consumers all suffer, the real winners here are the criminal gangs who will continue to prosper as their profits fund other criminal operations, such as money laundering, corruption and even terrorism.
WHOLESALE IMPACT
For wholesalers, the impact has been devastating, with some reporting a 20% reduction in tobacco and vape sales since the beginning of 2023, which has had a significant impact on their bottom line.
FWD recognises this as an issue: “The distribution of these products outside the responsible supply chain of legitimate wholesalers and retailers severely undermines the government’s aim of controlling access through pricing, display regulations and age restrictions,” says James Bielby, CEO.
Andy Morrison, Trading Director at Dee Bee Wholesale, has been working to raise awareness of how this activity is affecting the wholesale and convenience channels for some time now.
“We first noticed a downturn in sales of tobacco around 18 months ago and while we did see an uplift in vape sales, the decrease was disproportionate. It quickly became clear that retailers were either buying elsewhere or their own trade had declined, which was a real concern.
“The fact is, if tobacco isn’t purchased through the legitimate routes, where relevant duty and taxes are paid, it is sucking money out of our channel and from the UK.”
RETAIL PRESSURE
He continues: “Our retailers are feeling it too. If customers aren’t calling into their local convenience store for tobacco, they’re not buying other products either.”
Chris Gallagher, Managing Director, United Wholesale Scotland, agrees: “Convenience stores are the beating heart of the communities they serve and right now, they are under increasing pressure with rising costs in every direction,” he says. “To have such a vital revenue stream, such as tobacco and vapes, decline so dramatically means that many are likely to be struggling to stay afloat and unless things change, we may not see them survive the year.”
Gallagher explains why he feels the situation has taken such a dramatic turn: “Right now, it’s a perfect storm. Due to cost-cutting exercises, we’re seeing a reduction in Trading Standards resource, which means less feet on the street and, of course, this means those selling illegal tobacco remain under the radar.
“Add into the mix consumers looking to save money and it’s not hard to see why the black market is flourishing.”
For wholesalers, this presents a particularly painful headache, says Morrison. “As a wholesale business, the lack of sales and profit from tobacco needs to be found elsewhere but right now, with continual cost increases, cost price increases and inflation, this is proving harder than ever.”
SO WHAT NEEDS TO HAPPEN?
The Finance Act 2022 legislated for tougher sanctions to be introduced to reduce the sale of illicit tobacco, including a stronger penalty of a fine of up to £10,000 and up to two years in prison. However, at the current time, the on-the-spot penalties of up to £10,000 are only available for HMRC to hand out, so there is a call for this to be fully extended to Trading Standards too. For many caught selling illegal tobacco and vapes, the punishment is an on-the-spot £200 fine.
“A starting point should be to hand out stronger consequences for those caught selling illegal products,” says Morrison. “Currently, rather than seizure, low-cost fines or store closure, where those caught find a way to trade again under a different name or in different premises, we need the laws to be toughened up to deter them from the crime in the first place.”
Gallagher agrees: “Right now the benefits far outweigh any potential punishment and this has to change.”
TIME FOR ACTION
“We are working closely with tobacco manufacturers including JTI and Imperial,” says Morrison. “We need to educate retailers and consumers about the dangers of illicit tobacco and vapes, as well as encouraging them to report suspected illicit activity.”
ILLEGAL TOBACCO IN THE UK
The reality of illicit trade across the country
1: Illegal tobacco products worth more than £61,000 were seized by Trading Standards officers in Barnet after sniffer dogs found products hidden in stores.
Operation CeCe, a government strategy to disrupt the illegal tobacco market, confiscated 2,634 packets of cigarettes, 199 pouches of handrolled tobacco and 1,513 vapes, all duty-evaded, foreign-labelled and counterfeit goods, and goods that failed to comply with UK regulations. These were being sold at a significantly reduced rate to make them more attractive to children and adults, particularly during difficult financial times.
2. More than 670,000 illicit cigarettes were removed from Lincolnshire streets in 2024, according to the latest figures from Lincolnshire Council, marking a 150% increase compared to 2023.
Trading Standards and Lincolnshire Council joined forces to seize the cigarettes, also seizing 17,000 illegal vapes and 370g of handrolling tobacco. As a result, 68 stores in the county were handed closure orders for selling counterfeit products.
To crack down on this activity, the council’s trading standards team carry out regular test purchasing and inspections, work with landlords to remove tenants, secure closure orders on premises and bring criminal cases before the courts.
3. A covert operation by tobacco manufacturer JTI in Wolverhampton discovered that counterfeit and contraband tobacco and vape products were easily available to purchase in every store they visited during the operation.
JTI’s undercover operatives carried out test purchases across 22 stores in the city during October 2024 and discovered that all 22 had illegal tobacco available to purchase, including packs of cigarettes, rolling tobacco and vapes. The typical price for a 50g pack of counterfeit roll-your-own tobacco was around £4, compared to the recommended retail price of JTI’s lowest price 50g product of £31.25.
“We’ve conducted hundreds of test purchases in the past 12 months and, unfortunately, our findings show that illicit tobacco is prevalent in every large town and city we investigate,” says Ian Howell, Public Affairs Manager, JTI UK.
“Lack of sufficient funding and powers for enforcement agencies, combined with years of escalating tobacco duty, has contributed to the rapid growth of this black market.
“We also fear the problem will only get worse if the government proceeds with the proposed generational smoking ban, taking footfall and profit away from law-abiding stores and giving illegal operators an increased customer base.”
WHOLESALER CHECKLIST
Raise awareness with retail customers about the dangers of illicit tobacco, and the risks they could face by stocking and selling them.
- If approached by a retail customer to stock a product you know isn’t legal in the UK, explain why the product is illegal and offer alternatives from your own range.
- Keep retail customers up to date with the latest legislation changes and what these changes mean for them, such as the disposable vape ban coming in June.
- Encourage your customers to protect their local communities and report all suspicious activity to the relevant authorities.
- Train your staff on the dangers of illegal tobacco and vapes so they can pass this information on to your customers.
REPORT ALL ILLEGAL TOBACCO AND VAPE SALES
There are multiple ways you can report suspected illegal tobacco and vape sales, including:
- HMRC Revenue and Customs Fraud Helpline – 0800 788 887
- Trading Standards via the Citizens Advice consumer helpline – 0808 223 1133
- Crimestoppers – 0800 555 111. You can also visit crimestoppers-uk.org/ give-information/forms/ pre-form to anonymously report all illegal tobacco sales.
