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Budget 2016: Soft drinks stocks hit by sugar levy

The chancellor takes aim at sugary drinks but gives the industry two years to adapt
March 16, 2016

Soft-drink makers saw their shares adopt a bitter taste in investors' mouths as chancellor George Osborne took aim at the sugary beverage industry.

Shares in Nichols (NICL), AG Barr (BAG) and Britvic (BVIC) all fell as Mr Osborne told parliament a levy would target producers and importers of soft drinks which contain added sugar.

"The levy will be designed to encourage companies to reformulate by reducing the amount of added sugar in the drinks they sell, moving consumers towards lower sugar alternatives, and reducing portion sizes," he said.

He acknowledged some brands, such as Robinsons, had recently removed added sugar from many of their cordials and squashes but considered more work needed to be done industry-wide.

The chancellor claimed the levy would raise £520m in its first year - which will be in two years' time. He said the Office for Budget Responsibility expected this to fall as companies reduced the sugar in their products and consumers focused on healthier choices.

Money raised from the tax will be used for various school-related projects, including doubling the primary school physical education premium from £160m per year to £320m a year, Mr Osborne claimed.

The Association of Convenience Stores chief executive James Lowman said: "Soft drinks make up 6.6 per cent of convenience stores’ sales, and shoppers now have a wide choice of full sugar, low sugar and no sugar soft drinks when they visit any local shop.

"The chancellor’s new levy on soft drinks companies would have been better considered as part of an holistic strategy to tackle obesity."

The chancellor said there would be a levy on soft drinks with over 5g of sugar per 100ml introduced in 2018 with an exemption for fruit juices. Soft drinks with over 8g of sugar per 100ml will be subject to a higher rate.