Britain will impose a tax on excessive sugar levels in soft drinks starting in two years’ time to cut down on spiralling childhood obesity levels, finance minister George Osborne said on Wednesday.

"I can announce that we will introduce a new sugar levy on the soft drinks industry," Osborne said, adding that the tax would be on drinks with more than five grammes of sugar per 100 millilitres.

"We all know one of the biggest contributors to childhood obesity is sugary drinks.

"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'."

Shares in soft drinks producers plunged after the announcement.

A.G. Barr, producer of the popular Scottish drink Irn Bru, dropped 5.4%, while squash maker Britvic fell 2.9%.

Health experts welcomed the new tax.

Professor Isabelle Szmigin from the University of Birmingham said: "It is really important that the government is taking seriously the sugar issue and its links to obesity.

"The challenge now will be whether the large soft drinks manufacturers will reform the contents of their products, rather than simply raising prices," she said.

Osborne said the tax would have two bands - drinks with more than five and eight grammes per 100 millilitres - and was estimated to raise £520mn a year ($732mn).

The money raised would be used to fund sports activities in schools, Osborne said.

He said the delay in implementation would "give companies plenty of time to change their product mix".