On 4 April, the government introduced a new levy on sugary drinks commonly known as the sugar tax. We’ve taken a look at how it’s impacted small businesses so far, and how it may do in future.
As the name suggests, the sugar tax is a levy on added sugar, but only currently applies to soft drinks. It applies both to the companies producing the drinks and the ones importing them.
There are two bands for the tax:
According to the government, the goal of the sugar tax is to tackle childhood obesity. The money raised from the levy will go towards funding sports and breakfast clubs.
Initially, they thought the tax would raise £500 million a year, but new estimates suggest it will be closer to half that amount as a number of manufacturers have decided to lower the sugar content in their drinks to avoid the tax.
This was the secondary goal of the tax. To further tackle childhood obesity, the government wants producers of sugary drinks to reformulate their recipes and include less sugar.
The sugar tax claims to cover all types of sugar, from sucrose and glucose to fructose and lactose (commonly found in fruit and milk respectively). However, it does not apply to drinks that are:
For full details on exclusions, check out gov.co.uk
The government have introduced a number of health and lifestyle taxes over the years, including levies on alcohol and tobacco, and is unlikely to stop now.
According to the Financial Times, the government may choose to come after other types of drink now in its war on sugar, or turn its sights towards food.
Public Health England, the government health agency, has recommended that the calorie content of processed foods be cut by 20 per cent by 2024. On top of that, health campaigners have said the fizzy drinks tax should be extended to cover all chocolate, sweets, and other confectionery containing the highest levels of sugar.
While some have taken Public Health England’s recommendation as a voluntary target, charity group Action on Sugar is urging a mandatory levy set at a minimum of 20 per cent on all confectionery products that contain high levels of sugar. That includes all those those sold in coffee shops and restaurants.
Understandably, a number of small business owners are worried. New taxes could impact a variety of trades, from independent chocolatiers to locally run cafés.
Before the sugar tax came in, a number of organisations representing small businesses warned that the levy could affect them disproportionately.
The National Federation of Retail Newsagents pushed against the tax, saying: “A tax on sugary soft drinks will only hit hard working independent retailers who are already reeling from higher costs arising from the newly launched National Living Wage, business rates, and from complying with the tobacco display ban.”
Chief Executive Paul Baxter said: “It has been calculated that the cost on individual independent retailers will be in the region of £8,100 each per year in lost sales as manufacturers pass on their increased costs. This is a cost that independent retailers cannot absorb and will have to pass onto consumers….hitting the poorest hardest.”
Since the tax was introduced, small businesses have been using a variety of techniques to mitigate their losses. Some pubs have taken to using the low-sugar and sugar-free variations of fizzy drinks as standard for their mixers to keep prices down for customers, but offering the full-sugar versions on request.
However, for corner shops and cafes, this type of switching is less of an option. In fear of losing business to large chains, small business owners are swallowing some of the loss. Some are choosing not to raise the price of sugary drinks, or not raise it the full amount requires to compensate, while others are having to raise the price of other items they sell and risking the ire of their customers.
So far, a number of businesses are reporting that little has changed, but it remains to be seen what the long-term impact will be.
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22 June 2020 • 9-minute read
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