Illegal tobacco smuggling affects Scotland more than almost any other part of the UK, according to a new study.

The report, by Retailers Against Smuggling, a group with 16,500 retail members across the UK, found that one in five newsagents in Scotland is facing closure because of black market tobacco.

It found that the average newsagent in Scotland loses some £20,000 per year in sales to the illegal trade.

Smuggled and counterfeit tobacco products also cause the Treasury to lose £2.6bn each year in lost taxes - more than £7m each day - money which could be spent on public services.

More than 40% of all freight container seizures in 2002 contained counterfeit cigarettes.

The news comes just days after a Glasgow man was jailed for nine months for being caught in possession of more than 128,000 illegal cigarettes and 131kg of tobacco.

James Brien, 57, of Craigflower Road, Glasgow, pled guilty to the charges.

Kirsten Ferguson, defending, said Brien had been storing the goods for an unnamed individual, which would be sold off at the city's Barras Market. Jim Gilfeather, a senior detection manager with HM Revenue and Customs (HMRC) in Scotland, said: "This case sends out a significant warning to anyone tempted to smuggle illegal products. HMRC officers continue to work across the country to protect our communities by investigating, prosecuting, and removing the financial benefits from individuals and organisations involved in the illegal importation of tobacco.

"Tobacco smuggling undermines public health by creating an unregulated supply operated by criminals."

Scotland has one of the highest prevalence rates of counterfeit tobacco offered for sale of anywhere in the UK and 43% of retailers questioned said they have been offered black market tobacco.

Some 75% of shopkeepers in Scotland are aware of smuggled tobacco being sold in their area and feel the effects on their business.

Counterfeit cigarettes are mainly produced in the Far East and Eastern Europe. Made to order, they are often indistinguishable from the genuine article but carry an even greater health risk as they are unregulated. On average they contain five times the levels of arsenic and lead as normal cigarettes.

The profits from the smuggling and sales of counterfeit tobacco, much of which is sold in Scotland's street markets such as the Barras in Glasgow, are thought to go into organised crime.

Retailers are calling for tougher sentences for those who sell illegal tobacco and want extra customs officers at ports and airports to help combat the problem.

They also think that reducing or freezing tax on tobacco would ease the problem - as it would cut smugglers' high profit margins. Nine out of 10 retailers said they did not think the government is doing enough to combat the problem.

Fiona Barrett, an independent retailer from Glasgow and Scottish Representative for Retailers Against Smuggling, said: "For corner shops like ours, the wide availability of smuggled and counterfeit tobacco is a big threat. A lot of shops face closure because small retailers really depend on sales of tobacco for profits.

"I've had my shop for almost 40 years and over that time the problem has got worse and worse. It's impossible for legitimate retailers like myself to compete with the bargain tobacco products available at car boot sales, pubs and workplaces when the tax on them is so high. Until the price of tobacco is the same across Europe, this problem will only get worse."