The Legitimate High Street Framework

• Shocking level of enforcement activity has allowed illicit markets to thrive, undermining legitimate businesses.
• A brazen and unchallenged illicit tobacco market leads the way, with a third of UK smokers and half of 35-44 year olds buying illicit cigarettes.
• Nearly a half of uk smokers buy their illicit cigarettes from seemingly legitimate shops where they are openly for sale at £5 a pack.
• Local councils raiding only 1 shop a month looking for illegal tobacco but when they do they have a hit rate of nearly 50% finding on average 8,000 illegal cigs per seizure.
• HMRC’s tobacco track and trace system used in only 6% of raids with potential penalties and fines left unlevied.
• Co-op calls on government and local authorities to act to help stop the decline of resilient, safe and legitimate high streets, establishing long term benefit for all.

Today (8th September) a new White Paper, joined by a YouGov survey and the Government’s own data on ineffective enforcement and public polling, lays bare how Britain’s high streets are being driven by criminality not honest competition. Illicit tobacco sales, the brazen trade in stolen and counterfeit goods are met with no effective enforcement locally or nationally, creating a ‘shadow economy’ that is undermining legitimate businesses and, as a result, threatening the future of our high streets and leaving organised crime to define the future of communities.

The new White Paper, “Legitimate High Street Framework” commissioned by Co-op, and written by criminologist, Prof Emmeline Taylor highlights the importance of Government and Local Authorities focusing attention on disrupting organised crime networks that are active in many UK towns. Crime doesn’t just exploit declining high streets, it can kickstart and accelerate their decline, and where there are no meaningful consequences, or limited sanctions, these rogue businesses simply relocate, change their name and open up a few doors down. In response, Co-op is calling for the Government to increase investment, increase the number of premises raids and significantly improve the use of Tobacco Track and Trace (TT&T) system.

One of the clearest examples of how organised crime is undermining the legitimacy of the high street is the Illicit tobacco trade in the UK, which is growing at an alarming rate, with estimates ranging from two to ten billion illicit cigarettes in the UK with £1.4 billion in lost annual tax duty. Tobacco is a high value commodity functioning in some criminal markets almost as alternative currency with organised crime gangs exploiting price differentials between legitimate and illegitimate and consumer demand for cheaper products, by expanding the illicit tobacco market.

A new YouGov survey, commissioned by Co-op reveals that over one third of UK smokers (36%) have bought illicit cigarettes, either illegal imported branded cigarettes or worse, counterfeit unbranded/unknown brand cigarettes. This number drastically increases in those under 45 years. 47% of 18-24’s, 40% of 25-34’s and 49% of 35-44’s have all bought illicit cigarettes. While in certain areas of the UK numbers are also high – Yorkshire & Humber 40%, South West 42%.

For those buying counterfeit tobacco products, the contents can often be unknown, and frequently contain material not meant for human inhalation. However, whilst 67% of smokers who buy these products are aware they may not be pure, they are willing to take the risk. The reason is most often to do with price, as 62% of smokers buy illegally for the single reason, they are cheaper. A recent, undercover Co-op exercise in a small geographical area targeted 24 seemingly ‘legitimate’ shops and found 18 of them - 75% - were selling illegal tobacco with an average price of just £5 a pack and the highest price only £8.

The UK is Europe’s second largest illicit cigarette market, after France with thousands of premises across the UK selling these products. According to Co-op’s survey, amongst the common places smokers bought illicit cigarettes are often trading under the guise of legitimate businesses - corner shops (44%), vape shops (15%) independent supermarkets (11%) and barbers (4%). These businesses form part of a wider criminal ecosystem, benefitting the organised crime gangs not just by providing profit but in the legitimacy, they present as a store front.

Freedom of Information requests submitted by Co-op reveal local councils in England are woefully absent in tackling these criminals and the growth of seemingly legitimate shops which service this shadow economy. The FOI’s revealed:

• On average, councils visit just four shops a month to investigate the sale of illegal cigarettes. confiscating illegal cigarettes from just one shop every two weeks and seizing the equivalent of just one illegal cigarette per resident over three years.
• Activity varies massively by location. 66% (two thirds) of seizures and over 75% of confiscated illegal cigarettes were undertaken by just 25% of local councils, which begs the question: what are the remaining 75% of councils doing?
• Regional variation is even starker, with trading standards offices in Yorkshire and the Humber seizing ten times the number of cigarettes per resident, than their counterparts in London.

However, there is clear evidence that when action is taken, results can be achieved. Co-op’s FOI shows that when local councils do visit suspect shops, they find illegal cigarettes almost half (43%) of the time, confiscating an average of 8,000 illegal cigarettes per seizure. But with the number of raids so limited, real change isn’t happening. Closure notices and orders provide local councils and trading standards with certain powers, but they are not being used.

Alongside this low number of raids, is the extremely limited use of the Tobacco Track and Trace (TT&T) system, which enables all tobacco products in UJ to be tracked through the legitimate supply chain to the retailer. Whilst some Trading Standards have increased their use of TT&T through a programme called Project Cece; the Co-op FOI request highlights the crime prevention and detection potential of TT&T is significantly underutilised. 122 councils reported less than 500 TT&T referrals from more than 8,200 seizures in total — fewer than 6%. The vast majority of these referrals (75%) were reported by just 15 councils, with __more than half (57%) reporting no engagement with the T+T technology at all. __

Co-op’s Director of Public Affairs and Campaigns, Paul Gerrard said: “The evidence we have collated shows how shadow and illicit economies are shaping the face of high streets up and down the UK, creating an unsafe environment, impacting legitimate businesses, preventing £1.4B reaching the public purse. Co-op has been the leading voice on tackling retail crime within our own shops, but we need Government and local authorities to invest more time, money and effort into fighting the illicit tobacco trade which is growing to unprecedented levels, as the £30m committed by the Government to this issue, won’t even touch the sides of the problem. Increased investment now will reap long term benefits, not only to the public purse, but to drive social and commercial benefits of thriving high streets and communities”

Prof Emmeline Taylor said: “Britain’s high streets are the lifeblood of communities; however we can see that crime is not simply a consequence of high street decline, it is now one of it’s principle drivers. Illicit tobacco, retail theft and the stolen goods market not only generate victims, but they also distort local economies, undermine legitimate commerce, erode public confidence and weaken the opportunities for successful regeneration. The proposed Legitimate High Street Framework is a criminology informed approach to providing a coherent framework for protecting lawful enterprise, disrupting organised crime and restoring confidence. If Britain’s high streets are to experience the renaissance envisaged under Andy Burnham's policy platform, tackling crime must be recognised as a prerequisite for renaissance, not simply a parallel objective.”