SHOP owner Barrie Taylor knows the cost of illegal cigarette smuggling to his business - exactly £2.25m a year.

The businessman, who runs seven stores which sell tobacco in County Durham, came up with the figure when he examined his cigarette sales two years ago.

Concerned about falling revenues, Mr Taylor compared his cigarette sales in 1994 with those in 2000.

Even taking into account reduced public smoking levels because of health concerns, he came up with the £2.25m annual figure.

Mr Taylor, whose headquarters is at his town centre store in Spennymoor, said: "I am one of the fortunate ones in that I have not had to make anyone redundant, but I have lost workers through natural wastage because when they leave I have not replaced them.

"The further north you go the worse it becomes, and the North-East of England is really bad. There are shops which have gone out of business because of it. People think cigarettes are low margin lines but they are a really good cash flow product."

He is angered at the way traffickers target children, often using ice cream vans.

He said: "I have heard of some shops where customers say they are not buying any cigarettes that week because they are waiting for the ice cream van to come round.

"I detest the smugglers. They are just crooks."

The Tobacco Alliance, which represents 21,000 small shop owners, including many in the region, estimates that, by 2005, 75 per cent of cigarettes smoked in Britain could be illegal.

Alliance officials also worked out that the Treasury is missing out on £3.5bn a year in tax which is not paid on black market cigarettes, equivalent to £150 per household. The alliance estimates that the figure is equal to 27 new hospitals.

National spokeswoman Audrey Wales said: "The impact of tobacco smuggling is destroying Britain's network of corner shops, a key part of our national way of life.

"The loss of these shops would be a disaster for local communities up and down the country, particularly for the elderly and those without their own transport, who are especially dependent on the service provided by local retailers.

"Smugglers do not care who they sell their goods to. Children have easier access to tobacco on the black market than from legitimate retailers who demand proof of age."

Cost of contraband

A Tobacco Alliance survey revealed that:

* 25 per cent of traders' turnover was tobacco, primarily cigarettes, amounting to one sixth of gross profit

* 79 per cent of members were very concerned about smuggling

* 80 per cent were aware of smuggled tobacco sold illegally in their area

* 54 per cent had been approached by people offering smuggled tobacco

* 31 per cent knew of smugglers supplying under-age smokers

* 44 per cent reported a dramatic drop in sales because of smuggled cigarettes

* 92 per cent recorded some kind of decrease

* 26 per cent cut staff because of decreased tobacco sales

* 31 per cent considered reducing their workforce as a result

* 52 per cent said reduced tobacco sales also reduced sales of other goods

* 79 per cent wanted to see the Government reduce or freeze tobacco taxes to reduce people's temptation to turn to cheap cigarettes

* 70 per cent wanted to see increased penalties for trafficking