Duty free ban sinks ferry profits

Ferry companies and UK airports face depleted profits and a more complicated tax regime as a result of today’s abolition of duty free.

The decision earlier this month to kill off duty free after a nine-year fight by airport operators and ferry companies, sparked a last-minute rush of ‘booze cruises’ over the weekend and means travellers within Europe will now have to pay VAT on cigarettes and bottles of spirits.

Despite lobbying against the change, travel companies have been putting in place contingency plans to cope with the anticipated loss of revenue.

A BAA spokesman said the move would hold back profits by about £40m in the first year after abolition. The blow will be cushioned by government subsidy, but Manchester Airport which is not entitled to subsidy, will lose £15m a year.

For ferries, prices will have to be changed halfway across the Channel, with a rush of purchases expected in French waters where the duty is lower.

Stena Line has decided to see how the change will affect revenue before raising prices.

Sailing between Harwich and the Hook of Holland, Stena Line will only open on-board shops once ferries have left UK territorial waters. ‘We are trading margins for volume,’ a spokesman said.