The UK is set to introduce a tax on sugar-sweetened beverages in April 2018, in an effort to tackle childhood obesity.
But data from Oxford Economics says the tax will lead to a reduction of just 5 calories per day: the equivalent of one bite of an apple.
It adds that the tax will impact the wider economy, notably the hospitality sector and smaller retailers. Lower sales will reduce the industry’s contribution to the economy by £132m.
London and the South East, as well as small retailers and convenience stores, can be expected to bear the brunt of the losses.
Nick Stewart, senior economist at Oxford Economics, said: “These are significant losses considering we estimate the tax will only lead to a reduction of just five calories per person, per day.”
Gavin Partington, director general of trade association the British Soft Drinks Association (BSDA), said: “Post-Brexit, securing investment and jobs is more important than ever. This data shows the soft drinks tax is not only ineffective in fighting obesity, but will come at a significant price for the economy, costing thousands of jobs.”
He added that the industry has already recognized that obesity must be tackled, and points to investment in reformulation. This has led to a 16% reduction in sugar intake from soft drinks since 2012, he added.
“The tax is therefore unnecessary and harmful to our economy,” he said.
The soft drinks sector has pledged to reduce calorie intake from products by 20% by 2020.
It has also committed not to advertise regular soft drinks to children under the age of 16, across all media channels, including online.
Oxford Economics’ modelling assumes that 100% of the levy is passed onto consumers (the government has stated it expects this to be the case).
UK soft drinks industry
- The UK soft drinks industry directly supports a £6.4bn contribution to UK GDP – equivalent to that of the city of Oxford. With the associated industries, this rises to £11.3bn.
- The tax on sugar-sweetened beverages would come in two bands: one for drinks with more than 5g sugar / 100ml; and another for drinks with more than 8g sugar / 100ml.
- Just over one-fifth of the soft drinks sold (by volume) could be subject to the levy.
- The levy can be expected to reduce consumption, reducing the volume of soft drinks sold, by 1.6%,
or 0.4% if it is assumed that some consumers will
switch to milk.
- It is estimated the levy could raise £504m in tax
revenue for the Exchequer.
Source: Oxford Economics
Contribution of UK soft drinks industry to employment
“Our analysis suggests that just over 233,000 people were directly employed in the UK soft drinks industry in 2015,” says the report from Oxford Economics. “Around 55% of these jobs were in the on-trade, while off-trade retailers accounted for 39%.
Including multiplier effects, the UK soft drinks industry is estimated to have supported almost 350,000 jobs in 2015.
“To estimate employment levels after the introduction of the levy, we use the post-levy GDP contribution estimates in conjunction with productivity estimates for each sector of the economy,” continues the report.
“This suggests that the direct employment contribution of the soft drinks industry could fall to 231,000: a reduction of almost 2,700 jobs compared to the pre-levy scenario.
“Including multiplier impacts, the industry’s employment contribution after the levy is introduced is estimated to be 342,000: a reduction of 4,000 compared to before the levy.”
The report can be read in full here.