Trade and industry secretary Stephen Byers on Monday announced that allegations that British American Tobacco (BAT) has been involved in cigarette smuggling are to be investigated by the DTI.

Byers said he had appointed investigators to look into allegations that BAT were responsible for orchestrating, managing and controlling cigarette smuggling in Asia and Latin America, allegations that were published in the Guardian and aired on Channel 4.

The move was made in response to a health select committee report on the tobacco industry, which stated that criminal proceedings should be considered against BAT should the allegations prove true. The DTI investigators have powers to demand documents and call witnesses. Once in receipt of their report, Byers could pass on the findings to other bodies for further investigation, which could include criminal investigation. In addition, the Company Directors Disqualification Act 1986 gives the DTI the power to seek the disqualification of a director found to have been guilty of misconduct for up to 15 years.

"I have given careful consideration to the unanimous recommendation of the select committee that the DTI should investigate the allegations of BAT's involvement in smuggling," Byers said in a statement.

BAT said that it was "naturally disappointed'' at the announcement. A spokeswoman for former Conservative chancellor Kenneth Clarke, who is BAT's deputy chairman, said he had nothing to say about Byers' move.Clive Bates, director of anti-smoking lobby group Ash (Action on Smoking and Health), whose research led to the initial allegations, said: "It's a bold and powerful move by the government and it will be a turning point in the battle against large-scale cigarette smuggling. BAT's fingerprints appear all over the massive global illegal trade in cigarettes. The DTI has investigated serious large-scale misconduct before, but this time it's not just a over-mighty individual rogue, but an entire business operation under scrutiny, involving dozens of top executives and hundreds of marketing staff."

The news failed to knock confidence in BAT on the London Stock Exchange. Shares in the company rose more than three per cent, or 14.5p at 496.5p.