A steep drop in beer sales in London and other cities with smoking bans has sparked a demand for $500 million in compensation for Ontario's bar and pub industry if the province implements a provincewide ban. In the four months following a July 1 ban on smoking in public and work places, London's bar and pubs saw beer sales drop an average of nearly 10 per cent, according to statistics from the Brewers of Canada.

And if Ontario's Liberal government delivers on its election promise to implement a total ban on smoking, it will wreak havoc on the industry with closings and layoffs, says the head of the Pub and Bar Coalition of Canada.

"It's no different than SARS or mad cow disease," said Barry McKay.

"When the province finally accepts that this is murdering our industry, there will have to be some compensation."

The demand for compensation came after the coalition examined the brewer's sales to licensed establishments in London, Belleville, Kingston, Cornwall and other areas where smoking is banned.

A provincewide smoking ban would mean a loss of $180 million in beer sales for bars and pubs every year, the coalition says.

With a minimum investment of $250,000 in a small bar, and factoring the loss of revenues for businesses that survive a smoking ban, potential losses will be in the region of $500 million, the group estimates.

At least 900 small bars across Ontario will be forced to close if all municipalities follow the no-smoking trend, the coalition says.

There hasn't been a study to determine the economic impact of the no-smoking bylaw in London, although there are indications of its impact, such as recent bar and bingo hall closings.

Richmond Tavern owner Marc Dencev, a vocal opponent of the ban, said daytime sales dropped more than 50 per cent after July 1, while night sales dropped almost 20 per cent.

"The daytime has started to come back the last two months, and we've changed the format at night to draw a younger crowd. But the levels are still lower," he said.

Lindsay Elwood, chairperson of the London Downtown Business Association, said he's not surprised by the drop in beer sales.

"I think we rushed to judgment in London and we were snowballed and didn't give alternatives a fair chance," he said, referring to calls to allow smoking rooms in bars.

One anti-smoking group is dismissing the plea for compensation, saying it has no valid economic rationale.

"These beer sales numbers are very misleading, they don't take into account microbreweries, imports, wine sales, spirit sales, food sales," said Michael Perley, director of the Ontario Campaign for Action on Tobacco.

Mary-Lou Albanese, the Middlesex-London Health Unit's manager of chronic disease and injury prevention, agrees with Perley, saying she feels many downtown bars haven't been hurt badly, if at all.

"The information I'm getting from owner-operators is that they're doing fairly well," she said.

Albanese said in other jurisdictions which have banned smoking, such as California, most of the business lost eventually returned after three to six months.

An official in Premier Dalton McGuinty's office says the government will be sensitive to how bar owners will be affected by a smoking ban.

The Ontario Tobacco Control Act, passed in 1994, allowed municipalities to restrict smoking in workplaces and public places.

Since then, 73 of 446 Ontario municipalities have implemented smoke-free bylaws in restaurants or bars and restaurants.