Sainsbury's stops selling cigarettes at some stores

Sainsbury's bagsNick Potts/PA Wire

Sainsbury's has announced that it will stop selling cigarettes at another six supermarkets in Scotland. At this stage, ten Sainsbury's stores north of the border now sell no tobacco. The move is in response to the Scottish government's policy of charging higher business rates on stores selling cigarettes and alcohol.

So will the ban spread, and will it make it down south?
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Why?

The move came after the Scottish Government decided to bring in a health levy added to the business rates of stores with a rateable value of more than £300,000, which sell alcohol and tobacco. The levy has been in place since April this year.

A Sainsbury's spokesperson explained: "The impact of the Levy, introduced by the Scottish Government, has led us to undertake a review of the sale of tobacco in our Scottish stores."

"Earlier this year, we removed tobacco from sale from three of our Scottish supermarkets and one convenience store. This trial has now been extended to a further six supermarkets and will start on Monday 12th November, 2012. The new stores are: Drumchapel, Garthdee, Hamilton, Saltcoats, Livingston and Leven."

Essentially in these stores it just wasn't making enough money to justify the extra levy, so the cigarettes had to go.

First of many?

It is unlikely to be the only shop to make this decision. Many will be faced with the difficult decision between removing products which are a good revenue earner, or paying higher rates (which may be a struggle). We may well see some stores stop selling tobacco, and others closing altogether.

Research at the beginning of the year by the Centre for Economics and Business Research calculated that the levy could take 10% off the profits of Scottish supermarkets. At the time, Scottish Conservative Finance Spokesman, Gavin Brown MSP said:"The retail levy is an 'economically irrational tool'. It is disappointing that the Scottish Government has failed to carry out their own impact assessment and that we have had to rely on others to do so."

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Spread south?

So will the initiative spread? The UK government has had a close eye on the impact of alcohol policies in Scotland. It was proposing following the Scottish lead on minimum alcohol pricing - although that remains in question after it was challenged by the EU last month.

This latest step holds attractions. The Scottish Government is talking up the health benefits. The money raised will go towards preventative health measures to help improve the health of the nation, which could save a small fortune on health costs further down the line.

However, whether or not the UK takes the initiative is likely to depend to a great extent on the impact it has on the retail sector.

The announcement by Sainsbury's may not be much in itself. However, if this turns out to be the thin end of the wedge, it could mean any roll-out cross the UK becomes politically impossible - and it could prove to be a major thorn in the side of the Scottish government too.

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