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England's smoking ban is set to give pubs, clubs, restaurants and bars a "shock" fall in sales of tobacco and alcohol, an economics thinktank has warned.

The Centre for Economics and Business Research (Cebr), publishing its consumer and housing progress report today, reveals that Britain's hospitality sector is likely to see a three per cent reduction in tobacco and alcohol sales in the third quarter of 2007.

It predicts this negative impact of the smoking ban, primarily implemented to protect employees of the hospitality sector, will decline further in the fourth quarter as colder weather decreases the attraction of a quick cigarette outside.

"Virtually all parts of the hospitality sector are going to be affected to a greater or lesser extent by the forthcoming smoking ban," Cebr's senior economist, Jonathan Said, commented.

"However, while some companies have made concerted efforts to understand the likely impact and plan around it, others are likely to face a shock come July 1st."

Meanwhile Jaspreet Sehmi, an author of Cebr's report, said that the fall in tobacco and cigarette sales – traditionally "relatively immume" to cyclical changes - would further drive down the bleak-looking picture for Britain's retail sector.

"We expect belts to tighten across the board over the next 18 months as high interest rates, low house price inflation and a weak international economic situation take effect," he predicted.