Monday 8 August 2016 4:13 pm

Oxford Economics study finds soft drinks tax will cost UK economy £132m and put 4,000 jobs at risk

The sugar tax will put more than 4,000 UK jobs at risk and will cost the economy £132m as a result of lower sales, research from global forecasting group Oxford Economics has found. 

The levy on soft drinks, which was a surprise announcement in the March Budget, will have the biggest impact on the hospitality sector and smaller retailers once it is introduced in April 2018.

The report estimated the levy could raise £504m in tax revenue for HM Treasury, though this figure was below its own forecast of £520m.

This figure, which is based on 2015 sales values and volumes, includes £420m in tax revenue from the levy itself, and an additional £84m in the form of VAT payable on the levy.

Read more: A spoonful of sugar tax can help fizzy drinks go down

The industry is estimated to support a £6.4bn contribution to UK GDP and provide jobs for 233,000 people.

There will be two bands of tax assessed on the volume of the sugar-sweetened drinks companies produce or import.

One band will be for total sugar content above five grams per 100 millilitres; a second, higher band for the most sugary drinks with more than eight grams per 100 millilitres.

It will have a cost saving of just five calories per person, per day, the study found. This is equivalent to one bite of an apple and echoes figures produced by the TaxPayers' Alliance based on data from a similar soft drinks tax in Mexico.

Read more: Public consultation could introduce sugar advertising crackdown

Oxford Economics said this "apparently small" average impact "reflects that customers may switch their consumption towards fruit juices and milk, which do not fall within the scope of the levy, but nonetheless contain naturally-occurring sugars".

Gavin Partington, director general of the British Soft Drinks Association, said:

Post-Brexit, securing investment and jobs is more important than ever. This research 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. 

As an industry we recognise that obesity must be tackled which is why we have invested heavily in reformulating drinks. Since 2012 this has led to a 16 per cent reduction in sugar intake from soft drinks.

The tax is therefore unnecessary and harmful to our economy.

A spokesperson for the Treasury said: "The soft drinks industry levy is a major step forward in our effort to tackle childhood obesity, treating obesity and its consequences costs the NHS £1.5bn every year. 

"Health experts agree there is a specific problem with sugar-laden fizzy drinks that must be addressed. The levy encourages producers to take reasonable steps to reduce added sugar levels in their drinks.

"If they do, they won’t have to pay the levy. We know that diet and sugar free versions of drinks can be profitable to produce, as these drinks are often cheaper for businesses to make. We have also given producers two years before implementation so they have time to reformulate their products."