Europe South Asia Asia Pacific Americas Middle East Africa BBC Homepage World Service Education



Front Page

World

UK

UK Politics

Business

Sci/Tech

Health

Education

Sport

Entertainment

Talking Point

In Depth

On Air

Archive
Feedback
Low Graphics
Help

Wednesday, June 30, 1999 Published at 07:15 GMT 08:15 UK


Business: Your Money

Last orders for duty-free

Duty-free shops say they will maintain most of their prices

Nearly 50 years of cheap drink, cigarettes and perfume - in rations of 200 cigarettes and one litre of spirits - comes to an end on Wednesday, the last day for duty-free purchases within the European Union.


The BBC's Rory Cellan-Jones: Duty-paid prices will still be cheaper than at home
The comedian Greg Proops once remarked that the British "drink as if someone is going to take it away from you".

He's not far wrong, judging by the scenes last weekend as thousands flocked to the Continent to stock up before the end of Europe's duty-free trade.

Secretary general of the Duty Free Confederation Brian Goddard mourned the demise of the £4.5bn a year industry

He said: "It is a sad day for consumers and duty-free traders."


[ image:  ]
But will the British shopper really be that much worse off?

The travel companies are doing what they can to offset the predicted loss of business.

BAA, which runs the UK's seven largest airports, says it will continue to offer 90% of its goods at the same prices, although cigarettes and some types of spirits will cost more.

The company is prepared to absorb the higher tax rates to keep people using its shops, even though this will cut deep into BAA's profit, which could be down by as much as £70m over the next two years.


[ image: Ferries will charge according to whose waters they are sailing in]
Ferries will charge according to whose waters they are sailing in
Ferry operators also face big losses and, unlike airports, they have not much trade from journeys to non-European Union countries to fall back on.

But they do have one big advantage: They can charge the duty of the country in whose waters they are sailing. So once they hit French waters, the prices will come down from those charged in Britain.

Splashing out on the Continent

Whatever systems the travel companies bring in to replace duty-free, there is still the option of waiting until you get to the Continent - or Ireland - before splashing out.


[ image:  ]
Rates of duty differ widely depending on your destination, and many goods might be even cheaper than the prices charged in UK duty-free shops.

The duty on wine in France is just a few pence compared with the £1.12p on an average bottle in the UK. Some countries, such as Spain, Italy and Greece, levy no duty at all.

All of the 15 European Union nations impose duty on spirits, but again the differences can be huge. Finland and Sweden are the most expensive places for a bottle of whisky, with duty at twice the UK rate of £5.48. Italy and Spain are among those with very low rates.


[ image: Some countries sell cigarettes and cigars cheaper than in duty-free shops]
Some countries sell cigarettes and cigars cheaper than in duty-free shops
And practically everywhere cigarettes have cheaper price tags than in the UK, where for a pack of 20, two-thirds of the £3.80 cost goes to Customs and Excise.

France, Greece and Luxembourg are among the places to find a bargain.

That's why hypermarkets in France and Belgium have been so successful. They do charge duties, but at the lower local rate.

Ever since the introduction of the EU's single market, British travellers were allowed to return home with more than their meagre duty-free allowances.

Dave West runs Eastenders, a wine, beer and tobacco wholesaler which now has five branches, two of them in the top shopping destinations Calais and Zeebrugge.

He did good business as ferries from the UK discharged their bargain hunters into his stores. But he was somewhat puzzled by the urgency of the shoppers over the weekend, as his prices will stay the same after duty-free ends.

"I originally set up more as a service than a competing business, because we opened at times other shops were shut," he told BBC News Online. "If I ended up with only half the business I've got today I wouldn't be disappointed."

Shopping habits die hard

That seems unlikely, as the "booze cruises" across the English Channel are now a major element of British shopping habits. Mr West says that shows how people are responding to the high rates of duty in the UK.

"There are about 12 million people a year coming over here, nearly a quarter of the population," he says. "If that many people protested in any other way, the government would be forced to change the law."

Was duty-free really cheaper?

As far as the duty-free companies are concerned, the challenge is to retain as much of their business as possible. However, one of the side-effects of the change in the regulations has been to highlight the big profits the shops have been making.

The Consumers Association raised the issue in a report nearly two years ago. It said then: "Duty-free prices are often pegged to offer a set discount against High Street prices. So when excise duty on alcohol and tobacco increases, raising the shop price, duty-free prices usually follow suit, even though no excise duty is paid on duty-free goods."

This week the Consumers Association said it was not particularly disappointed that duty-free was coming to an end as it felt the shops were still not offering particularly good deals.

For example, a bottle of gin without tax and excise duty could in theory cost as little as £6.50p, but some duty-free shops have been charging more than £10. For just another 50p, the same bottle could be bought in a UK supermarket.

Even big purchases such as cameras and CD players can be found in High Street stores at comparable prices.

The duty-free companies argued that they could not buy as cheaply as supermarkets and that the overheads of running an airport business were higher.

The fact that they promise to match their old prices even after the abolition of duty-free makes these arguments sound dubious.

And if former duty-free shops can afford to pay duties and offer lower prices, how big are the profit margins of UK supermarkets and other shops?

Competition

Duty-free shops could be facing even more competition in the future. The supermarket chain Asda says it plans to launch a branded range of products such as perfumes aimed at undercutting the airport and ferry companies.

The one big fear for the public is that profit margins will be squeezed so much, that travel companies will start to put their prices up, as profits from duty-free sales effectively subsidised the sales of tickets.

"P & O have been talking about a possible 15-20% increase in fares," says Dave West of Eastenders.

"A lot of people come to France for a day out and a nice meal, and might only take home a few bottles of wine. Higher prices might put them off coming over here."



Advanced options | Search tips




Back to top | BBC News Home | BBC Homepage | ©


Your Money Contents


Relevant Stories

29 Jun 99 | Your Money
Shopping at 35,000 feet

29 Jun 99 | The Economy
Whisky industry fight for single market

28 Jun 99 | Your Money
Duty-free ends, but prices stay low

04 Jun 99 | The Company File
Europe's duty-free sales are dead

03 Jun 99 | The Economy
The nonsense of duty-free





Internet Links


HM Customs & Excise


The BBC is not responsible for the content of external internet sites.




In this section

The growing threat of internet fraud

Online share dealing triples

Maxwell pledge to pensioners

Insolvent firms to get breathing space

Building society offers £1,000 windfalls

Financial services plan for millions

Why banks love online customers

Help for the 'financially excluded'

Abbey, Halifax raise mortgage rates

Banks accused of sharp practice

Endowment holders 'may win payouts'