Tax & admin · 9 March 2017

Hammond’s sugar tax announcement adds to anxiety for food and drink manufacturers

Food and drink manufacturers
Food and drink manufacturers have made voluntary efforts to decrease sugar levels in drinks
Small business owners in the food and drink sector are braced for further costs, after chancellor Philip Hammond confirmed increases to the soft drinks levy in the Spring Budget.

The so-called ‘sugar tax? will see drinks with over five grams of sugar per 100ml taxed by 18p per litre, while drinks with over eight grams per 100ml will be taxed 24p in the litre.

Hammond stated that the potential 1bn raised by the levy would be handed to the Department for Education (DfE) to invest in sports initiatives in schools.

The sugar tax rise arrives at time of low confidence for UK food and drink manufacturers, as new research finds that fears over Brexit and rising costs are starting to hit the sector.

A survey by the Food and Drink Federation (FDF) the industry’s largest members organisation revealed that almost half of all members were less confident over business prospects than the last poll in October 2016.

Over nine in ten food and drink businesses experienced increases to ingredient prices in the last four months. Just 5.6 per cent saw reported margin growth, while over two thirds had witnessed a negative impact on their profitability in the same period.

Responding to the sugar tax hike, Wright claimed the FDF continued to oppose the levy because there is no evidence that it will reduce obesity, and recommended that the levy be postponed while food and drink manufacturers make voluntary? efforts to reduce sugar levels.

However, there was positivity regarding sales opportunities outside of the EU. Not a single respondent expected the volume of exports outside of Europe to decrease in 2017.

Commenting on the outlook of food and drink manufacturers, FDF director general Ian Wright emphasised the impact of volatile pricing in the retail sector.


 
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ABOUT THE EXPERT

Praseeda Nair is the editorial director of Business Advice, and its sister publication for growing businesses, Real Business. She's an impassioned advocate for women in leadership, and likes to profile business owners, advisors and experts in the field of entrepreneurship and management.

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