The high price of tobacco products created by high duty in the UK has led to a boom in the illicit trade, as smokers seek out cheaper sources of cigarettes and RYO tobacco.
Figures from the Tobacco Manufacturers' Association (TMA) reveal that in 2007 non-UK duty-paid consumption accounted for 27% of all cigarettes and 68% of all RYO tobacco smoked in the UK.
And studies suggest that the treasury has lost out on some £30bn as a result of this criminal activity in the past decade alone.
"The UK's high tobacco tax policy has provided economic incentives for criminals to meet the demand that exists for cheap tobacco products," a TMA spokeswoman says. "This has huge implications for government revenue and for law and order. It also threatens the livelihoods of many legitimate businesses."
With significant progress having been made in reducing the volume of genuine smuggled cigarette brands entering the UK, counterfeit products are now the major challenge facing customs authorities and tobacco manufacturers.
Counterfeit cigarettes are manufactured with no regard for smokers' health, and often contain dangerously high levels of tar, carbon monoxide and nicotine. However, despite the risk to smokers' lives, and the crippling penalties faced by those caught selling them, the counterfeit tide continues to rise.
"We estimate that about 5.5 million counterfeit cigarettes are smoked in the UK each day," says Imperial Tobacco UK trade communications manager Iain Watkins. "This presents a huge financial loss to us, the government and our trade customers."
And fake fags aren't just restricted to car-boot sales and dodgy street vendors; they are increasingly infiltrating the legitimate supply chain, too.
The great strides made in printing and scanning technology have meant that it is now harder than ever before to tell genuine product from fake, meaning that retailers and consumers are increasingly being fooled. And TMA believes that the problem will only get worse.
It is for this reason that all cigarette packs manufactured by the TMA's member companies (British American Tobacco, Gallaher, Imperial Tobacco and Philip Morris International) now bear a covert security feature which allows HM Revenue & Customs (HMRC) to instantly verify whether product on a retailer's shelves is genuine.
The covert feature, initially placed on cigarette packs, is to be incorporated onto pouches of hand rolling tobacco from October 1, 2008. Any pack without the mark can be assumed to be counterfeit and will be seized.
Retailers with any information about illegal tobacco sales should call the Customs Confidential Hotline on 0800 59 5000.
Gallaher's Jeremy Blackburn encourages retailers to call with any information they have about counterfeiting in their area. He says: "Customs uses every bit of evidence it gets to help cut off the main source of supply, so reporting any illegal goings-on will ultimately protect a retailer's business."