Soft drink sugar tax is a ‘wrecking ball', Reeves warned

Telegraph

a day ago

Rachel Reeves is taking a 'wrecking ball' to the drinks industry with her plans to increase sugar taxes, three British brands have warned.
The bosses of Fentimans, Belvoir Farm and Folkingtons said the raid will push many smaller domestic producers 'over the edge'.
In a joint piece for The Telegraph Ian Bray, Pev Manners and Paul Bendit said shoppers will also lose out, being forced to choose between inferior products or higher prices.
Their warning is the latest sign of tensions between businesses and the Treasury over the historically high tax burden imposed by Ms Reeves, the Chancellor.
The sugary drinks tax was the brainchild of George Osborne, the former Tory chancellor, and first came into force in 2018 as an anti-obesity measure.
But it has also proved to be a significant revenue raiser for the Exchequer, bringing in around £2 billion in the first six years of its operation.
Under the measure beverages which contain more than 5g of sugar per 10 millilitres of liquid are subject to an additional government levy.
As a result many fizzy drinks manufacturers changed their recipes at great cost to reduce the amount of sugar contained in their products.
Others who chose not to, because they did not want to alienate customers by changing the taste of their product, raised prices to cover the cost.
Ms Reeves unveiled plans in April to 'strengthen' the tax, including by lowering the threshold at which it kicks in from 5g of sugar per 100ml to 4g.
Premium drinks brands Fentimans, Belvoir Farm and Folkingtons, who are all based in the UK, warned the change would be disastrous for family firms.
They said many companies face ruinously high costs, whilst the projected daily calorie reduction for the average Briton is the equivalent of half a grape.
'On the ground for small and medium-sized enterprises such as ours, making premium soft drinks in glass bottles and aluminium cans, the impact would be akin to being hit with a wrecking ball,' they warned.
'The tiny calorie saving is justification for potentially wrecking products, losing customers, and pushing small businesses over the edge.
'Reformulating a drink – properly – takes time and money, and right now every penny counts. There's only so far you can stretch a business before it breaks.'
The three companies also questioned why action was being taken against drinks producers and not manufacturers of other sugary products.
Ms Reeves has set out plans to extend the tax, known as the Soft Drinks Industry Levy, to milk-based products such as milkshakes and canned lattes.
But the makers of other high-sugar goods responsible for obesity, such as cakes and biscuits, are not subject to any equivalent levy.
'Which begs the question why are businesses like ours being pushed to the brink while other categories look like they're getting a free pass?' the firms said.
'Why should those consumers living a healthy, balanced lifestyle be forced to choose between paying more for a sweet treat or having the recipe of their favourite product amended again? That's simply not fair.'
According to government figures the sugar content in drinks fell by almost half between 2015, when the levy was first announced, and 2024.
But despite its introduction England's already high obesity rates have continued to rise, reaching 28 per cent in men and 30 per cent in women in 2022.
Ministers say many products have now 'clustered' just below the 5g limit and that bolder action is needed to drive sugar levels down.
A Government spokesman said: 'The Levy introduced by the previous government has halved the amount of sugar in drinks and helped to tackle child obesity.
'UK business confidence is the highest in 10 years according to a Lloyds Bank survey published only this week.
'Since the election, we have struck three major trade deals with the EU, US and India, the Bank of England has cut interest rates four times, business rates are being reformed and corporation tax is capped at 25 per cent.'
Increased sugar taxes will push British drinks companies to the brink
By Pev Manners, Ian Bray and Paul Bendit
It's frustrating – infuriating, actually – to be facing yet another change to the Soft Drinks Industry Levy (SDIL), especially one, that, according to the Government's own figures, would amount to a calorie saving that's equivalent of half a grape per person per day, at best.
On paper, the Treasury's proposed lowering of the SDIL threshold from 5g to 4g per 100ml looks like it would require only a small adjustment. On the ground, however, for small and medium-sized enterprises such as ours, making premium soft drinks in glass bottles and aluminium cans, the impact would be more akin to being hit with a wrecking ball.
British soft drinks manufacturers have a proud history. Many of us have been around for decades – some for more than a century – building businesses rooted in our communities, employing local people, and making drinks that people enjoy across the UK and in international markets. This industry is not just made up of big household names – it is full of small and medium-sized firms like ours, often family-run, quietly getting on with things and doing them to the highest standards that are, of course, expected of us.
When the Levy came in back in 2018, many of us adjusted. Some reformulated our drinks, at huge cost. Others didn't – not because they didn't care, but because some companies are loath to change the make-up of products which have a loyal customer base. And besides, that's what a properly functioning market should offer: choice.
Now, we're being told that we may have to go through the whole rigmarole again. Reformulate – again. Invest – again. Compromise – again. And for what? The tiny calorie saving is justification for potentially wrecking products, losing customers, and pushing small businesses over the edge, because it's us who are most at risk here, with research showing that micro, small, and medium-sized businesses – who make up the backbone of the UK soft drinks industry – face nearly double the impact relative to turnover compared to large companies.
For those who may be thinking, 'well you've reformulated once, you can do it again' – unfortunately things are not that black and white. If it were easy, we'd have done it. But it's not. Reformulating a drink – properly – takes time and money. And, right now, every penny counts. Ingredient costs are up, National Insurance is up, Packaging Recovery Notes charges have tripled, Extended Producer Responsibility fees are landing us with fresh bills running into hundreds of thousands of pounds, even for SMEs, and industry is being told to stump up millions more for a Deposit Return Scheme. There's only so far you can stretch a business before it breaks.
We cannot comprehend why soft drinks are back in the firing line. Since 2015, soft drinks manufacturers have invested to reduce sugar consumption from soft drinks by 43 per cent, according to Kantar Worldpanel. That's a major reduction. At the same time, the contribution to sugar in the UK diet from several food categories has grown, including confectionery, biscuits and cakes and pastries. None of these categories has been brought into the Levy. Which begs the question: why are businesses like ours being pushed to the brink while other categories look like they're getting a free pass?
Also: why should those consumers living a healthy, balanced lifestyle be forced to choose between paying more for a sweet treat or having the recipe of their favourite product amended – again – to meet the potentially lowered SDIL threshold? That's simply not fair.
The Government says it wants to support growth, back British businesses like ours, and drive reformulation. Well, here's a thought: start by recognising the ones that have already done the job. Stop looking at moving the goalposts. And leave the Levy as it is.