Imperial Tobacco Drops on Labour Plan to Introduce Tobacco Tax

Source from:  Bloomberg 04/14/2015

Imperial Tobacco Group Plc shares fell in London after the opposition Labour Party said it would partly fund an increase in National Health Service staffing with a levy on tobacco firms.

The stock slid as much as 1.8 percent following the release of Labour's manifesto for next month's general election, which gave no details of the planned tax. The party said it plans to add 8,000 doctors, 20,000 nurses and 3,000 midwives to the health service, with financing also coming from a levy on properties worth more than 2 million pounds ($2.9 million) and measures to combat tax avoidance.

Labour's manifesto pledge comes almost seven months after leader Ed Miliband vowed to partly pay for increased health spending by taxing tobacco companies. Imperial Tobacco is the biggest cigarette maker in the U.K., the country representing almost a fifth of the company's sales.

"It was expected to an extent, so it's not a total surprise," said Martin Deboo, an analyst at Jefferies.

Imperial Tobacco was down 1 percent at 3,250 pence at 12:35 p.m. in London, recouping some of the earlier losses. British American Tobacco fell 1.4 percent to 3,666 pence.

"This is a bigger risk to Imperial" as it controls about 45 percent of the U.K. market, Philip Gorham, an analyst at Morningstar, said by e-mail. "For BAT, it's much smaller."

Labour's announcement is a riposte to a pledge made by the ruling Conservative party to increase health funding by 8 billion pounds a year. An April 11 poll commissioned by pollster YouGov showed Labour and the Conservatives tied at 34 percent of the vote. The election takes place May 7. Enditem