Soft drink companies consider legal action over UK sugar tax

Shares in a number of companies who make drinks with high amounts of sugar fell after the measure was announced...

Soft drink companies consider legal action over UK sugar tax

Nick Ansell / PA

Soft drink manufacturers are considering taking legal action after the British government announced last week that it plans to introduce a new sugar tax which will add 24p to the cost of a liter of some sugary drinks.

The Guardian reports that companies are waiting for more information as they consider suing the government.

George Osborne's tax is designed to reduce sugar consumption, it is expected to cost £1bn to implement and to raise less than half that amount.

Gavin Partington, director-general of the British Soft Drinks Association expressed his disappointment at the introduction of the tax, saying that the shortfall between the cost of implementing the tax and the money that it will raise "just reaffirms our view that this tax is ill-considered. The evidence does not suggest it will be effective and taxpayers will be left paying a heavy price for it."

Britvic who make Robinson's and AG Barr who manufacture Irn-Bru experienced sharp falls in their share prices after the new measures were announced.

It is possible that the proposed tax could be challenged through European courts on the grounds that it discriminates against soft drinks, and do not apply to juices and milkshakes which are also high in sugar. Measures in other countries have been defeated by similar arguments.

Coca-Cola has refused to rule out taking legal action, "We need to know more about the levy and how the government plans to implement it. Once this is clear to us, we’ll decide on what steps to take as a business and how best to continue the work we have done to help people consume less sugar and calories from our drinks," a spokesperson for the company in the UK said.

The government has defended the tax, saying that it will address health concerns and that companies have been given two years to reduce the levels of sugar in their drinks.

"He introduced a new levy on the soft drinks industry to pay for a doubling of dedicated sport funding for every primary school in the country, a huge expansion of breakfast clubs to ensure that every child gets the best start to the day, and new funding for a longer school day," a spokesperson for Mr Osborne said, adding:

"The chancellor also made clear that this was a policy aimed at driving meaningful change. The new levy will not be introduced until 2018, giving companies plenty of time to change product mix and reduce sugar content."