PETROL and diesel prices are significantly cheaper in the Republic than in the North or Britain, following yesterday's British budget increase of 3p per litre in the British budget. British motorists now face the prospect of paying £3 a gallon, compared to £2.50-£2.80 a gallon here.

Some petrol retailers are predicting that more Northern Ireland motorists will make the trip across the Border to fill up in the Republic as the price differential has become greater. Petrol prices in the Republic vary from around 56.8p a litre for standard unleaded to 64.3p for leaded.

Like the Republic, prices in the North and Britain can vary greatly and price wars have been a feature of the petrol market, especially in Britain. One garage owner, with garages in the North and the Republic predicted that the biggest differential would be for diesel.

Already, a number of motorists from the North were taking advantage of cheaper diesel prices, said one retailer.

Prior to the budget increases the garage owner charges 51.9p for diesel in the Republic, but 61.9p at his Northern outlet. Unleaded petrol is 60.9p, while four-star leaded is 64.9p.

Several petrol retailers close to the Border told The Irish Times that more Northern Ireland motorists were buying their petrol in the Republic. Traffic has increased between the North and South over the past couple of years.

Meanwhile, the Irish Food Drink and Tobacco Federation has predicted that the 26p decrease in the price of a litre of spirits would hit the drinks industry here. A spokeswoman said it would further exacerbate the discrepancy which already exists.

The whiskey and cream liqueur sales market, for example, was worth around £80 million a year, she said.

She cited a recent survey by Checkout magazine which found that a litre of spirits in a British supermarket was selling at £14.99 compared to £17.99 here.

The spokeswoman said the reduction was obviously made to deter British citizens going to France to avail of cheap alcohol.

She said it would lead to a fall-off in sales in the Republic, especially in the run-up to Christmas.

"A lot of people are going on shopping trips to the North and they will buy spirits there because they are cheaper," she said.

The British Chancellor's decision to increase cigarette prices by 15p was welcomed in Britain by health campaigners who said it would save thousands of lives.