Jeff Evans: Shadows on the brewing industry
This year has not been kind to British brewing.
Like other industries, it has been ravaged by the coronavirus pandemic, with pubs and bars forced to close and production grinding to a halt. But, just as a glimpse of the new future began to unfold with the easing of lockdown, another shadow cast itself across the sector.
In July, the government announced it was to review Small Brewers Relief. This is the system introduced in 2002 that allows smaller brewers to pay less duty on the beer they produce.
More precisely, brewers producing fewer than 5,000hl (3,055 barrels) a year currently pay only 50% of the full tax rate on their output.
Brewers producing more than that enjoy a lower tax reduction, based on a complex formula, up to a ceiling of 60,000hl (36,661 barrels).
The government now proposes to make the duty increase above 5,000hl less dramatic, removing a cliff edge that might deter companies from expanding beyond this level of output.
More controversially, however, it also plans to lower the upper threshold for access to the 50% reduction from 5,000hl to 2,100hl (1,283 barrels), a move that inevitably impacts on some smaller brewers. There was an immediate outcry from those adversely affected. The Society of Independent
Brewers claimed that around 150 businesses would pay more duty, with obvious consequences for profitability or even viability.
Some brewers accused larger companies of seeking to benefit at the expense of their smaller rivals and the public has weighed in too. Social media has been coloured with abuse for those felt to be responsible and with calls for boycotts of those breweries seen to be driving this change.
Much of the angst has been directed against the Small Brewers Duty Reform Coalition, an association of a number of British breweries that has pushed for adjustments that, in part, address what it believes are imbalances in the system caused by overcompensating some brewers for the economies of scale enjoyed by bigger companies.
On hearing the government’s announcement, some of its members recognised the consequences and swiftly withdrew their endorsement of the part of the plan that negatively affected some of their colleagues, but others have reconfirmed their support. One of the arguments put forward is that much of the duty relief received by small brewers is given away to pub companies as discounts to ensure a place on the bar in a congested marketplace.
This must change, the argument continues, not to penalise the brewers but to protect or boost the wholesale price of beer for everyone’s benefit.
It is also argued that larger small brewers – those near the 5,000hl threshold – benefit disproportionately at the expense of much smaller businesses and therefore this reform is long overdue.
The fine detail of the government’s plan is to be finalised this autumn and, while most parties see some positives in the review, as long as there remain clear losers as a result of the proposed changes, it’s hard to see how the matter can be resolved to everyone’s satisfaction.
If it is not, the industry will be left divided at a time when Covid remains an ominous threat, the economy has crashed and Brexit – perhaps even a no-deal Brexit – with all its financial and commercial uncertainties, lies just a few months away. Britain’s breweries have much to fight for – from fears that the overall burden of duty will increase as the government tries to replenish its coffers to licensing matters and how pubs and bars can successfully operate in the current climate. Division within the industry can only undermine their case.