Prime Minister Rishi Sunak has announced plans to phase out smoking in the UK by raising the legal smoking age by one year, wiping nearly £1.4 billion off tobacco shares.
In a speech at the Conservative Party conference in Manchester, the Prime Minister said the Conservatives propose to raise the smoking age by one year every year, meaning that a 14 year old today will never legally be sold a cigarette and their generation can “grow up smoke free.”
The current legal age for buying cigarettes and other tobacco products across the UK is 18. However, it is expected that the government could follow a similar approach to the measures introduced in New Zealand last year, when they banned the sale of tobacco to anyone born on or after 1 January 2009.
In his speech, Sunak claimed smoking is estimated to cause one in four cancer deaths and costs the NHS £2.6 billion annually, with over 470,000 hospital admissions related to tobacco.
The announcement saw British American Tobacco shares lose £974 million and fall to a three-year low, while Imperial Brands fell 2.4% – a drop of £404 million in value.
James Buckley, fund manager at Castlefield, welcomed the Prime Minister’s announcement.
“As sustainable investors, Castlefield have a longstanding exclusion on investing in tobacco stocks. We therefore welcome the announcement of a new law to prevent the future sale of cigarettes to children currently aged fourteen or younger.
“Tobacco stocks have been serial underperformers in recent years as the awareness of the negative financial and health impact of cigarette consumption becomes widespread. Imperial Brands, which has the largest exposure to the UK market, has declined over 20% this year and currently trades at a share price of just over £16, compared to £40 back in 2016, despite regularly returning capital to shareholders via dividends and share buybacks.”
Buckley said that the performance of the tobacco sector highlights how ESG and financial considerations can “ultimately coincide” when a sector’s profits are derived from products that cause “widespread societal damage.”
Main image: mathew-macquarrie-lzcKZlVPYaU-unsplash
