Drinks trade fights back against loss of business to France

LONDON ECONOMICS, an independent consultancy, predicts that more than 10 per cent of British citizens' expenditure on alcoholic drinks could take place in France by the turn of the century.

Brewers and supermarket groups are rising to the threat, ensuring that their beer brands can be bought on French shelves and by opening supermarkets in Channel ports.

London Economics said the problem was growing so fast that Britain would probably have to follow the lead of Denmark, Canada and the Republic of Ireland, which have all cut tax rates to stem cross-border trading.

Bill Robinson, a director of the economic consultancy and a former special adviser on tax issues to Norman Lamont, the previous Chancellor of the Exchequer, said: 'The whole point of excise duties is to stop people drinking too much and to raise revenue.

'Cross-border shopping frustrates these objectives. It enables people to drink more while paying less tax. If we had the correct revenue-maximising rates before the advent of cross-border shopping, we now have rates that are too high. Cutting them would probably raise revenue.'

The Treasury has started taking submissions from the drinks industry about the growth in cross-Channel trading, although few brewers and City analysts believe the Government will cut alcohol taxes.

Cross-channel shoppers fall into four main categories - the holidaymaker, the day tripper, the serious shopper and the bootlegger. A typical holidaymaker will spend pounds 48 on drink and make a net saving of pounds 43, while a serious shopper will spend pounds 223 and save pounds 114 after the pounds 70 ferry fare.

Tesco, the supermarkets group, said it lost pounds 38m of alcohol drinks sales last year to French retailers and drinks sales lost to France in the first four months of 1994 had exceeded the comparable period last year.

The company said it was planning to open stores in France. 'We would rather not do this as it diverts valuable resources from our UK operations,' a spokesman said. 'However, we simply cannot continue to allow such great losses.'

'The company has told the Treasury that even if it acted as a charity and gave away cases of beer our customer would still have to pay pounds 3.26 in duty and 57p in VAT. This would only be 66p cheaper than the same beer sold in France. It is clearly impossible for us to compete under these conditions.'