The plans initially advised exemptions for "micro" ventures with less than 10 employees, such as burger vans and family-run cafes.
However, it is now believed that the exemption will apply to companies with less than 250 employees.
According to Diabetes UK, this would mean just 520 business would have to use calorie labels, that's 0.3 per cent of the 168,040 restaurants around the country.
Diabetes UK said its own research suggested 76 per cent of UK adults want to see calorie information on the menus of all cafes and restaurants, while 75 per cent agree the same in relation to takeaways.
Helen Dickens, assistant director of policy and campaigns at Diabetes UK, said: “Exempting 99.7 per cent of businesses from its calorie labelling legislation would be a cop out from our government.
”The UK is gripped by an obesity crisis. Urgent action is needed to address it, but if the government water down their original commitments, then the legislation will have significantly less impact.
“If the Government is serious about addressing inequalities and supporting the most vulnerable in our society, then they must be ambitious in their action to tackle obesity.”
According to Diabetes UK, obesity is a key risk factor for developing Type 2 diabetes and one in three children are overweight or obese.
Type 2 is preventable and reversible, yet the number of children and young people being treated for Type 2 diabetes has increased by nearly half in four years, according to the Health Department, which added that without intervention, more than five million people in the UK will have the condition by 2025.
While the UK has started to take positive steps in making it easier for people to make healthy choices, Kate Oldridge-Turner, head of policy and public affairs at World Cancer Research Fund, said more needs to be done.
“The Government needs to be bold by implementing further policies, such as restrictions on junk food marketing to children by banning the use of cartoons across all media and subsidies on healthy food," Oldridge-Turner said.
“It is paramount for our children's future health.”
The comments follow a recent study by the University of Cambridge and the University of Oxford which found that putting calorie information on restaurant menus reduces how much diners eat by 12 per cent.
In the example of a 600-calorie meal, consisting of a soft drink and a pizza slice, this equates to roughly 71 calories, that's the same amount in a single digestive biscuit.
“This evidence suggests that using nutritional labelling could help reduce calorie intake and make a useful impact as part of a wider set of measures aimed at tackling obesity,” said lead author, professor Theresa Marteau.
“There is no ‘magic bullet’ to solve the obesity problem,” she added, “so while calorie labelling may help, other measures to reduce calorie intake are also needed."
Join our new commenting forum
Join thought-provoking conversations, follow other Independent readers and see their replies