The impact of the sugar tax on soft drinks on retailers and consumers is to be diluted due to expected drops in sugar prices.

The end of EU limits on sugar beet production, which accounts for the vast majority of the sugar in UK products means prices are likely to fall from 500 euro per ton to 300 euros per tonne as production increases, according to the European Commission.

Head of Investec’s commodities team Callum Macpherson told Retail Express:  “The abolition of the quota could help to offset the financial impact of the UK sugar levy.” However, he added that it “might only translate to low single digit falls in the retail price if fully passed through to consumers”.

For example, a one litre bottle of Pepsi regular would contain 110g of sugar and would have a 24p sugar levy. The reduction of sugar prices would lower the price of the product’s manufacture by around 2.2p. This could be higher if the lower prices made suppliers further switch to sugar beet over sugar cane.

Any price drop may also miss the April 18 sugar levy start date as many suppliers have already bulk bought sugar at the old prices.

Part of the Government’s sugar tax plan was to drive reformulation of high sugar soft drinks and to create price differences for the consumer between low and high sugar versions of soft drinks. The lowering of sugar prices could make the price differences less pronounced.

A spokesperson from the Department of Health said any price drop would not alter their commitment to tackling childhood obesity and added: “Progress has already been made since the soft drinks industry levy was announced, with big industry names such as Tesco, Nestle, Britvic and the makers of Ribena and Lucozade all moving to cut added sugar in their products.”