The report shows smokers are likely to take 1.77 extra sick days every year, costing £1.1 billion and the loss of productivity through cigarette breaks costs £1 billion every year.
Alistair McGuire, professor and head of social policy at the London School of Economics, said: "The formula reveals just how much of businesses' bottom line is going up in smoke every year and how small changes could result in major savings."
Drew Collins, of NHS Stop Smoking Services, added: "Smoking is bad for your health and bad for business. If employers want to save money and look after their workers' health, they should get in touch with their local NHS Stop Smoking Service."
Staff who smoke cost UK business billions of pounds through sickness absence and lost productivity
Employees who smoke cost UK business up to 2.1 billion every year, according to the London School of Economics and NHS Smokefree.
