Sunday, 20 March 2011

Beware the Budget Double Beer Whammy


When George Osborne, Chancellor of the Exchequer, sits down on the green leather benches of the House of Commons on Wednesday, having just finished delivering his budget ,the task for many brewers, breweries and publicans in calculating it's impact on them will just be starting.

There is a genuine fear that this year's budget could bring a punitive beer double whammy to brewers and drinkers alike in terms of tax hikes and the removal of financial incentives such as the Small Brewers Relief.

Many involved in the beer industry are rightly worried of the impact that Osborne's measures may bring have on their businesses and livelihoods. Beer in the UK is hideously over taxed as it is. We are the second highest out of the 27 EU member states for excise duty and since 2008 beer duty in the UK has increased by 26%. If that's not bad enough the rise in VAT from 15% to 20% and the soaring cost of beer raw materials has hit pubs and breweries hard. Beer sales in UK pubs have declined, since 2008 by 30%.  As a consequence of these factors, 29 pubs are closing every week. Despite this, beer still provides a significant contribution to the British economy. It supports over 400,000 jobs and generates almost £5.5 Billion in Revenue for the Exchequer every year.

It simply doesn't make economic or political sense to increase beer duty any further. Economically, any rise in duty will cut consumption, which in turn reduces the amount of tax taken. Politically, the Tories have made great play on the role of the private sector to generate jobs and a rise in duty would, again do the opposite as pubs close and breweries cut capacity.

Freezing beer duty is a start, but I would like to see Osborne go further. I would like to see a commitment from him to bring the British Beer Duty down to the European average and give British brewers and pubs a fairer crack of the whip rather than being convenient  cash cows and whipping boys for the Treasury.

The status of the Small Breweries Relief (SBR) also hangs in the balance and if changed or re-calibrated on Tuesday then it could have a significant impact on this growing beer sector. Small Breweries Relief was introduced in 2002 and it acted as a stimulus and catalyst for the extraordinary growth in small breweries.

In recognition of the high initial costs involved in setting up a brewery and in an attempt to offset these costs, the Labour Government introduced the SBR which meant that smaller scale Breweries producing less that 60,000 hectolitres per year received up to a 50% reduction. This incentivised a great many to take the leap and set up their own brewery. Prior to the SBR there was 350 breweries in the UK. Now there are over 750, with 700 of these receiving some payment from the SBR scheme. This scheme has created new businesses, jobs and greater consumer choice. Clearly, without this financial support many small local breweries would not be able to survive and would go to the wall.

Any attempt to remove or negativley re-calibrate the payment scheme trigger points would effectively drown at birth the growing cottage  brewery industry that has been responsible for employing hundreds of thousands of workers who in turn have contributed immeasurably to many local community economies and ultimately to the Exchequer.

I just hope that, by Wednesday, Osborne has done his sums correctly and realises the contribution and impact that beer and pubs have made to not only local communities but also the British Economy.



  1. Completely share your sentiments that we don't want to see pubs closing and breweries unable to compete because of tax increases.

    2 minor things in your post though...

    "the growing cottage brewery industry that has been responsible for employing hundreds of thousands of workers" I'm not sure the cottage brewing industry as you put it employs hundreds of thousands of people. Those breweries receiving lower rates are likely to have way under 100 employees, and even if all 700 had 100 employees that's 70,000(of course there's the supply chain and we're not devaluing any of those jobs, sorry for being pedantic).

    "As a consequence of these factors, 29 pubs are closing every week." And as a consequence of many other often forgotten factors too, though we don't deny that tax is a significant one. I'm a firm believer that there are much more complex issues beneath this though.

  2. @mark

    Points taken.

    The first one is sloppy writing and should have been tightened up to include those working not just at the brewery but also those that depend on the beer produced for their livelihoods.

    second point - I totally agree with you. The issue of pub closures is much more complex that just government levies. Stack 'em high, sell 'em cheap supermarket booze, a tightening of many household belts during tight fiscal times and other factors undoubtedly have played a part in the number of closures. A 30% plus rise in duty since 2008 hasn't helped either.