Budget 2016 sugar
A sugary levy will be introduced on soft drinks from 2018.

A sugar tax is to be introduced on the drinks industry within the next two years Chancellor George Osborne revealed in a shock move during his Budget speech on Wednesday (16 March).

Citing research showing that five-year-old children eat their bodyweight in sugar every year, the chancellor said it was time for the government to take action and, as a result, a new sugar levy will be introduced in 2018.

The Chancellor said: "I am not prepared to look back at my time here in this Parliament, doing this job and say to my children's generation 'I'm sorry, we knew there was a problem with sugary drinks. We knew it caused disease. But we ducked the difficult decisions and we did nothing'."

Osborne added the two-year gap before the implementation of the tax was designed to give manufacturers time to adjust to the new legislation. The levy is expected to raise £520m (€661.5m, $731.5m), which will be used to help support school sport, Osborne said.

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The Chancellor added a number of soft drinks producers were already addressing the issue. "Industry can act and, with the right incentives, it will," he said, indicating that pure fruit juices and milk-based drinks are to be excluded by the levy. The tax will be divided in two bands, one focusing on drinks with over 5g of sugar per 100ml and one on drinks with over 8g per 100ml.

The levy will be imposed onto manufacturers, who can then can choose if they want to pass the price increase onto consumers, however the smallest producers will have an exemption from the scheme.

Soon after the announcement, shares in soft drink manufacturers such as Britvic and AG Barr, the producer of Irn Bru, were down 2.5% and 4.5 respectively. However, the introduction of the sugar levy was met with approval by UK chef Jamie Oliver, who described it as a "profound move".