Introduction of sugar tax is “heavy handed” and will increase costs, says KMPG’s UK head of retail

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KPMG’s UK head of retail, David  McCorquodale, has warned the chancellor’s plans to introduce a new soft drinks tax to encourage companies to reduce the amount of sugar in the drinks they produce will increase retail costs and is a “heavy handed” approach.

“With the estimated cost of obesity to the UK economy standing at £27bn, taking steps towards reducing sugar consumption in young people is clearly a priority for the Government,” he said. “However for retailers the introduction of a new “sugar tax” will mean increases in costs which they then may choose to pass on to consumers.

“It is unclear whether education, regulation or a tax will be the cure for obesity, but for retailers, the introduction of a levy may seem heavy handed when there are various other options to explore. Regulation, for example, could be a step in the right direction, with quotas imposed on soft drinks to not exceed a certain level of sugar/ calories. Many in the retail industry may therefore feel announcing a tax on sugary drinks before further consultation, could be perceived as premature.”

Ian Wright, director general of the Food and Drink Federation, the voice of the UK’s largest manufacturing sector, agreed the tax would cost the industry:  “We are extremely disappointed by the announcement of a new tax on some of the UK’s most successful and innovative companies. For nearly a year we have waited for an holistic strategy to tackle obesity.  What we’ve got today instead is a piece of political theatre,” he said.

“The imposition of this tax will, sadly, result in less innovation and product reformulation, and for some manufacturers is certain to cost jobs.  Nor will it make a difference to obesity. Many of those singled out by the Chancellor have been at the forefront of efforts to provide consumers with healthy choices. The industry will now ask whether such efforts are still affordable.”

Gavin Partington, director general, British Soft Drinks Association, highlighted the steps the sector has already made to reduce sugar content. “We are extremely disappointed by the Government’s decision to hit the only category in the food and drink sector which has consistently reduced sugar intake in recent years – down 13.6% since 2012,” he said.

“We are the only category with an ambitious plan for the years ahead – in 2015 we agreed a calorie reduction goal of 20% by 2020.

“By contrast sugar and calorie intake from all other major take home food categories is increasing – which makes the targeting of soft drinks simply absurd.”