Sugar levy had no lasting negative impacts on the UK soft drinks industry

In 2016, the Soft Drinks Industry Levy (SDIL) was introduced as part of the UK Government’s Childhood Obesity Plan. The levy applies to drinks containing more than 5g of sugar per 100ml, but not to fruit juices and milk-based drinks, or to companies with sales of less than one million litres per year. On its announcement, the soft drinks industry claimed the SDIL would negatively affect businesses across the soft drink supply chain, leading to job losses and a reduction in UK GDP.

To assess how the SDIL could have affected the industry, we conducted an analysis of stock market returns of soft drinks companies registered on the London Stock Exchange. We found that the abnormal stock returns in response to the SDIL news were negative but short-lived. We also observed continuous increase in the soft drinks companies’ stock prices over the following two years to the end of the study, despite widespread industry fears the tax would harm their businesses. This research which was published today in Economics & Human Biology was led by PHI|Lab members Dr Cherry Law, Dr Laura Cornelsen and Professor Richard Smith, in collaboration with researchers from Cambridge and Bath Universities.

How did we conduct this study?

This research looked at stock returns of companies quoted on the London Stock Exchange under the beverage sector, excluding private label producers and eliminating alcoholic beverage manufacturers. This resulted in four companies – including the largest UK soft-drink firm – listed on the London Stock Exchange*. We analysed stock returns from July 2015 to July 2018, noting four key dates – the SDIL announcement on 16 March 2016; the release of draft SDIL legislation and consultation summary on 5 December 2016; the announcement of SDIL rates on 8 March 2017 and when the tax came into effect on 6 April, 2018.

* The companies studied were: A.G. Barr Plc, Britvic Plc, Fever-Tree Drinks Plc and Nichols Plc. The analysis excluded UK operating soft drink producers not listed on LSE such as Coca Cola Enterprises.

What are the main results?

On the day of the announcement, three of the four soft drinks firms experienced a statistically significant and abnormal decline in their stock return but stocks had returned to their normal levels within four trading days.

Our findings show that while the stock market initially perceived the SDIL announcement as detrimental to the soft drink companies, negative financial impact might not be as substantial as claimed by industry in the news media. This research provides an important foundation for more research into the value of fiscal interventions aiming at improving public health.

This study is funded by the National Institute for Health Research (NIHR).


Law C, Cornelsen L, Adams J, Penney T, Rutter H, White M, Smith R (2020) An analysis of the stock market reaction to the announcements of the UK Soft Drinks Industry Levy Economics & Human Biology