Almost half of all cigarettes consumed in the UK last year were either bought abroad or sourced through the illicit market, according to a new report that has reignited calls for stronger enforcement against illegal tobacco sales.
The latest independent analysis by KPMG, commissioned by Philip Morris International (PMI), found that 45 per cent of cigarettes consumed in the UK in 2025 were non-duty-paid. Of the total market, 13 per cent were legally purchased abroad, while 32.3 per cent were counterfeit or contraband products.
The report estimates that illicit cigarette consumption increased by 1.5 billion sticks compared with 2024, reaching more than 10 billion cigarettes and making the UK the second-largest illicit cigarette market in Europe by volume, behind France.
According to the study, the illicit trade cost the Treasury an estimated £4.46 billion in lost tax revenue during 2025. This money could fund over 95,000 new police officers.
Philip Morris Limited (PML), the UK affiliate of PMI, said two emerging trends are driving growth in the illegal market: the proliferation of so-called "front" shops and the rise of illicit cigarette manufacturing within the UK itself.
The company said organised criminal gangs are increasingly using businesses such as convenience stores, vape shops, candy stores, barbers and mobile phone retailers as fronts for the sale of illicit tobacco and vape products.
At the same time, the report highlights a shift in illegal manufacturing closer to key consumer markets, with several large-scale illicit cigarette factories uncovered in the UK over the past year. According to PML, these facilities were capable of producing hundreds of millions of cigarettes annually.
Peter Nixon, managing director of Philip Morris Limited, said the findings should serve as a warning to policymakers.
"This should be a major wake-up call for the government; poorly resourced enforcement is depriving the UK of almost £4.5 billion a year," he said. "The past few years have been a boon time for organised crime gangs who are selling illicit cigarettes and vapes with impunity, ruining our high streets and communities."
PML is urging the government to strengthen enforcement efforts and introduce a licensing scheme for retailers selling tobacco and nicotine products.
Catherine Goger, illicit trade prevention manager at PML, said: "In our fight against these ‘front’ shops, we have expanded our undercover teams who gather evidence and intelligence in communities across the UK. To drive illicit products off our high streets, the government needs to introduce a robust licencing scheme as soon as possible."
The KPMG study, now in its 20th year, was conducted independently and examines illicit cigarette consumption across Europe. It defines illicit products as counterfeit cigarettes, illicit whites and contraband tobacco sold without the payment of UK duties and taxes.