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Wednesday, November 18, 1998 Published at 15:19 GMT

Business: Your Money

Cross channel fares to soar

Ferry prices will sail ahead

The cost of travelling to France on a ferry, or taking your car through the Channel Tunnel, is set to rise dramatically next summer. BBC News Online's Andrew Yates explains why fares are about to soar.

As Christmas approaches, tens of thousands of Britons are preparing to go on a booze cruise.

Hopping on a ferry or train to France to pick up cut price duty free goods has become a national pastime.

[ image: Taking your car could prove expensive]
Taking your car could prove expensive
The number of people amassing large quantities of cheap wine, beer and cigarettes for the festive binge or simply replenishing their drinks cabinet has grown rapidly in recent years

With fares as low as £5 to board a ferry or £10 to travel by car through the Channel Tunnel on Le Shuttle, there are big savings to be made on shopping bills.

But bargain hunters making the journey across the Channel over the next few months would be wise to stock up on their favourite tipple.

Fare fright

Ferry and train fares are set to soar next year, in response to the European Union's (EU) move to scrap duty free sales.

It it a double whammy for day trippers. Not only will they be unable to buy British brands at low prices, but they face the prospect of paying at least 25% more to get to France.

[ image: Duty free shops will disappear]
Duty free shops will disappear
Eurotunnel, which runs the Channel Tunnel and operates Le Shuttle, has already announced it is increasing its summer fares during the peak months of July and August next year by a quarter.

That means a family travelling in a car to France will have to pay £279, a rise of £59 from last year.

Ferry fares to follow

Ferry companies are likely to follow suit.

P&O Stena Line, which dominates the cross channel ferry market, is expected to announce a sharp rise in its 1999 fares within the next few weeks.

[ image: Le Shuttle and the ferries have a strong market presence]
Le Shuttle and the ferries have a strong market presence
Chris Laming, spokesman for P&O Stena, told BBC News Online: "Eurotunnel has increased its fares by 25%. I don't think anyone should be surprised about an increase like that (on ferry fares) given the fact that duty free is going to disappear next year."

Such a rise in fares would add £40 to the cost of a peak summer fare.

P&O has already increased the amount it charges lorries to use its service by £25, causing an outcry from disgruntled drivers.

SeaFrance, the French state owned ferry operator, is also thought likely to hike its fares.

Major profit earner

Duty free is a major earner for the ferries and Eurotunnel.

City analysts calculate that without it, the ferry companies would struggle to make a profit.

Baring any last minute change of heart by the EU, duty free sales will be scrapped from 30 June 1999.

"The most obvious thing to happen is that rates should ferry companies and Eurotunnel... need to recover the revenue and operate profitably," said Mr Laming.

The industry argues that fares have tumbled since the opening of the Channel Tunnel in 1994 kick-started a price war between Eurotunnel and the ferries.

The price of a peak ferry fare from Dover to Calais has halved from £320 five years ago to around £160 this summer.

"Consumers have had it very good for very long. If it (duty free) disappears customers have to pay the true value of the service provided," said Mr Laming.

Market monopoly

But some City observers believe that the scrapping of duty free is just an excuse to increase prices.

Together P&O Stena, which was formed earlier this year through the merger of two rival ferry operators, and Eurotunnel now dominate the cross channel passenger market.

A leading City analyst told BBC News Online that the two operators' strength in the market had allowed them to push up fares.

"The merger of P&O and Stena Line last year took a lot of capacity out of the market. Eurotunnel are trying to give a signal to the ferry operators that they want to take the pressure off pricing.

"I think it will probably kill off growth in a market that has been growing strongly," he said.

Some hope

All is not lost for those people determined to get hold of cheap drinks.

Duty on beer and cigarettes in France remains much lower than in the UK. Prices can be up to 50% cheaper in French shops.

So even if duty free is abolished, the ferries and Eurotunnel should be able to supply duty paid goods at heavily discounted prices.

P&O Stena has already announced plans to open a duty paid shop in Calais and Eurotunnel is expanding its huge shopping complex, Cité Europe, near the French end of the Channel Tunnel.

The real losers

While growth in duty paid sales could make up a large part of the shortfall resulting from the scrapping of duty free goods, the ferries and Eurotunnel are determined to push through the fare rises.

The people who will really suffer will be families travelling to France by car for a normal summer holiday.

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