Nick Goodway: You can still bank on Imps as Osborne's taxes go up in black market smoke
Your support helps us to tell the story
From reproductive rights to climate change to Big Tech, The Independent is on the ground when the story is developing. Whether it's investigating the financials of Elon Musk's pro-Trump PAC or producing our latest documentary, 'The A Word', which shines a light on the American women fighting for reproductive rights, we know how important it is to parse out the facts from the messaging.
At such a critical moment in US history, we need reporters on the ground. Your donation allows us to keep sending journalists to speak to both sides of the story.
The Independent is trusted by Americans across the entire political spectrum. And unlike many other quality news outlets, we choose not to lock Americans out of our reporting and analysis with paywalls. We believe quality journalism should be available to everyone, paid for by those who can afford it.
Your support makes all the difference.Two distinct messages come out of Imperial Tobacco's latest trading update. The first is that cash-strapped smokers are turning to the black market in numbers probably not seen since the Second World War.
According to Imps, the last few weeks have seen the proportion of cigarettes smoked in the UK which have not had any tax or duty charged on them shoot up to 20 per cent from just 16 per cent late last year.
That means the Chancellor, George Osborne, is missing out on one in five fags smoked. The cost to the Treasury is now well above £3bn a year. He should now start worrying about the diminishing returns he is getting, having added an extra 70p on a packet through his last two Budgets.
HMRC data shows that tobacco duty raised £9.1bn in 2010, £9.6bn in 2011 and an estimated £9.7bn in 2012. Could 2013 be the first time total tobacco duty raised actually falls?
As for Imps, the black market problem is much more than the UK. It stretches right across Europe and into Russia. The overall decline in legal cigarette consumption across the European Union is now reckoned to be 7 per cent. That is far more than the normal 1 per cent a year decline seen in most developed countries over the last few decades. For Imps, this means first-half profits will be down on last year.
Investors took fright and marked the shares down by 4 per cent. But look beneath the headline numbers and the best bits of Imps are doing rather well. Cigar sales were up 3 per cent in the first quarter, and sales of the top international brands Davidoff, Gaulloises, West and JPS rose a stunning 12 per cent. This indicates that smokers who are not in the grip of austerity are choosing to smoke more and smoke better.
So that bodes well for Imps as it pushes for growth in markets with fast-growing middle class consumers. In the meantime, a 4.3 per cent dividend yield makes it well worth waiting for Imps' plans to come to fruition.
Join our commenting forum
Join thought-provoking conversations, follow other Independent readers and see their replies
Comments