The Centre for Economics and Business Research (Cebr) has produced a report, on behalf of the United Kingdom Vaping Industry Association (UKVIA), detailing the economic contribution of the vaping industry to the UK economy using key macroeconomic indicators such as turnover, Gross Value Added (GVA), employment and employee compensation.
The vaping industry, particularly standalone vape shops, has seen significant growth in recent years. Between 2017 and 2020, the number of vape shops in the United Kingdom (UK) has increased from 2,280 to close to 3,650, approximately a 61% increase. This trend is also mirrored by the number of vapers in the UK.
The number of vapers in the UK has increased from 2.7 million in 2017 to 3.7 million in 2021, approximately a 37% increase, per ONS data. In recent years, vaping has become popular for an aid to stop smoking in the UK and is estimated to be 95% less harmful than smoking, according to Public Health England. However, in 2019, there was an outbreak of an e-cigarette or vaping use-associated lung injury (EVALI) illness.
The EVALI crisis occurred almost exclusively in the United States and cases peaked in September 2019. By February 2020, the Centers for Disease Control and Prevention (CDC) had recorded over 2800 hospitalisations due to EVALI, along with 68 deaths caused by the condition.
By 2020, as there was a substantial decrease in cases, the CDC stopped reporting specifically on case, although this continued to be monitored and a low number of cases has persisted. Much of the blame for this outbreak was placed by the CDC on harmful chemicals in illegal cannabis vaping products. Whilst there was no similar outbreak in the UK, associated concerns and the negative publicity are likely a contributing factor to the slight decrease from 3.2 million to 2.9 million vapers in the UK, observed in 2019. There was not a similar outbreak in the UK, most likely because vaping was tightly regulated in the UK and such oils that may have caused the outbreak are banned in the UK.
Figures reveal the 2017 spending avenue proportions for vaping products, revealing physical vape shops to be the most popular way to purchase vaping products, with 39% of total production occurring in these outlets. Figures show a different consumer preference in spending avenues for 2021. The most popular spending avenue for vapers remains physical vape shops at 33% (a 6% decrease since 2017) with online vape shops remaining in second at 18% (a 2% decline since 2017). There has been an increase in newsagent/corner shops purchases from 8% in 2017 to 16% in 2021 and supermarkets increasing from 7% in 2017 to 9% in 2021.
As such, there seems to have been a movement away from solely vaping retailers (both physical and online) to newsagents, corner shops and to a lesser extent supermarkets. This may have been caused by the COVID-19 pandemic where vaping retailers were forced to close, whereas newsagents/corner shops were allowed to remain open. To satisfy demand consumers likely shifted their consumption pattern towards these open retailers, a trend which at least to some extent seems to have remained entrenched.
However solely considering these relative consumption trends, does not take into account the broader growth in the market, over the same period. Over the entire period total consumption on vaping products increased significantly. Therefore it would be wrong to state that solely because the share of consumption in specific vaping retailers decreased, that the economic impact of this segment declined.
The report assessed the economic contributions made by the UK vaping industry. We find that in 2021, the UK vaping industry directly contributed:
• £1,325m in turnover
• £401m in Gross Value Added
• 8,215 FTE jobs
• £154m in employee compensation
• £310m in Exchequer contributions
The contributions made by the UK vaping industry are not constrained to these direct impacts alone. Further demand is supported along the supply-chains (induced impacts) and when employees spend their earnings in the wider economy (indirect impacts).
Cebr estimates that once these additional impact layers are considered, the UK vaping industry supported the following aggregate economic footprint in 2021:
• £2,804m in Turnover
• £939m in Gross Value Added
• 17,710 FTE jobs
• £325m in employee compensation
From a regional perspective, the direct economic contribution of the UK vaping industry varies significantly:
• The largest contributing region for Turnover was the South East (£217 million). The smallest regional contributor to vaping industry turnover in 2020 is Northern Ireland (£39 million).
• The largest contributing region for GVA being London (£35 million). The smallest regional contributor to GVA in 2020 was Northern Ireland (£13 million)
• In terms of direct employment contributions, Scotland (1,341 FTEs) is the highest vaping industry employer. Consistently with turnover and GVA, Northern Ireland was a minor contributor to vaping industry employment (261 FTEs)
• The South East has the highest direct contribution of employee compensation (£26 million). Northern Ireland yields the lowest compensation of employees in the vaping industry (£5 million)
In turn, the regional aggregate footprint is as follows:
• The South East contributes the highest level of turnover, GVA, Employment and COE on aggregate (£459 million, £237 million, 2,498 FTEs, £52 million respectively)
• Northern Ireland contributes the lowest level of turnover, GVA, employment and COE on aggregate (£37 million, £13 million, 468 FTEs, £8 million respectively)
The UK vaping industry also contributes to the national economy through further socio-economic spillover effects. This is primarily through the health and productivity outcomes for individuals who switched from smoking to vaping. The economic values of these spillover effects are as follows:
• The total saving in healthcare costs as a result of smokers switching to vaping in 2019 was £322 million. Furthermore, the total increase in productive output as a result of smokers switching to vaping in the first scenario in 2019 was £1.3 billion.
• The average healthcare and productivity cost per smoker in 2019 was £395 and £2,117 respectively.
• The average healthcare saving for each individual ex-smoker who vapes is £202 and the associated productivity saving is £813 in 2019
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