March 6 (Bloomberg) -- The U.K. government is still considering proposals to make plain packaging compulsory for tobacco products, Prime Minister David Cameron’s spokesman said after the Guardian reported that the country will follow Australia in introducing such a law as early as May.
Imperial Tobacco Group Plc, Europe’s second-biggest tobacco company, fell as much as 2.8 percent in London today after the newspaper also said the U.K. plans to ban smoking in cars carrying anyone under the age of 16.
“A process of consultation has been going on,” Jean-Christophe Gray told reporters in London today. “No decisions have yet been taken. On the issue around smoking in cars, there are no plans to change policy in that direction.”
Tobacco companies are facing stricter government restrictions on smoking, with New Zealand announcing last month that it would follow Australia by forcing cigarette makers to sell their products in plain packages.
A similar move in the U.K. “isn’t totally unexpected and the implementation lead time will be long,” said Martin Deboo, an analyst at Investec in London. “Even if it is announced in May, the law may not come into force until 2015 or 2016.”
The 2.8 percent drop in Imperial shares was the most since Jan. 30, when the company forecast lower first-half profit. They were down 1.4 percent at 2,409 pence as of 12:02 p.m. Rival British American Tobacco Plc fell as much as 1.6 percent.
A move to plain packaging in the U.K. “will hurt Imperial more than BAT,” Deboo said. Imperial has 13 percent of tobacco sales and almost 20 percent of profit in the U.K., while BAT generates only 1 percent of revenue in the country, he said.
In Australia, cigarette packets have since Dec. 1 contained warnings that include photos of a gangrenous limb and a cancer victim. All cigarettes in Australia must be sold in uniform packs, with the brand name relegated to the bottom quarter of the package on a drab brown background. The law is being challenged at the World Trade Organization and at arbitration.
Still, plain packaging “has so far had a limited effect on consumption in Australia,” said Erik Bloomquist, an analyst at Berenberg Bank in London. “People will continue to smoke regardless of how unpleasant the pack is to look at.”