Europe's growing addiction to cigarette smuggling is burning a £7bn hole in the pockets of governments in western Europe through lost tax revenues, and leaving companies including UK-listed British American Tobacco (BAT) and Imperial Tobacco nursing some £600m in lost sales each year.

Criminal gangs are using increasingly creative means to flood Britain with smuggled packs of Marlboro, Superkings or Lambert & Butler, or eastern European brands such as Classics or Jin Ling.

This month it emerged that children in the north east of England are being recruited to act as mules on smuggling missions. Seduced by the offer of cut-price air tickets and spending money, teenagers are flying to low-duty countries to fill their suitcases with cigarettes, returning to Britain to pass them on to criminal gangs.

Meanwhile, in April, HMRC investigators discovered £70m-worth of cigarettes in south London smuggled into the country in empty computer towers and air conditioning units.

In the UK, the cost of tobacco smuggling to the exchequer was estimated by HMRC to run to £2.6bn in the 2006/7 financial year, while losses for retailers, wholesalers and distributors are thought to run to £230m annually and £191m for the manufacturers.

As the recession rocks the UK, demand for low-cost cigarettes is growing, driven by the dominant view that this is a victimless crime. However, tobacco industry insiders and customs officials suggest it is anything but.

The attraction for criminal gangs is that the profits on offer are similar to those made by trafficking drugs, but the penalties are significantly less punitive.

Experts claim a container of 450,000 premium packets of cigarettes transported from Ukraine and sold on the streets of Britain will turn a £1m profit. Similarly, a typical white van filled with smuggled cigarettes will turn a £60,000 profit, while a car load gives £6,000.

"In most cases, if caught, smugglers will often only have their vehicles seized, so it is pretty low risk," says the anti-smuggling head.

"Poland is the turnstile of Europe when it comes to cigarette smuggling," says one senior investigator at a tobacco company. "It is the transit country between East and West."

In June local customs officials discovered 60,000 packets of cigarettes sealed in bricks on a train from Kiev. Other recent finds have included cigarettes hidden in rolls of toilet paper, salads bags or even baked in loaves of bread.
Counterfeit cigarette production is also growing. Polish authorities have raided five illegal factories so far this year, each producing as many as 500m cigarettes a year.

The problem is especially concerning because of the low quality of many of the products. Seized cigarettes have been found to contain worms, arsenic or rat poison. Outside one factory, officials found large piles of cow dung which was being used to fill out the cigarettes.