David Grant, managing director of Lancashire brewer Moorhouse’s, has renewed his attack on the system of tax breaks for smaller brewers, labelling it a “monster” that is “skewing” the market to “badly penalise” regional independent brewers and national suppliers.
Writing in the SIBA Journal, Grant has suggested several possible alternatives to progressive beer duty (PBD), which offers tax relief of up to 50% for brewers producing less than 60,000 hectolitres a year. Moorhouse’s produces c30,000 hectolitres and benefits from only partial tax relief.
Grant said: “The tax relief was not supposed to lead to the decline of larger brewers. These are long established businesses - employers making a significant contribution to local economies and, crucially, future sustainability in the industry.
“Without them, we may not even have a cask ale industry today. Yet In recent times we have seen them forced to rationalise to survive – often shedding jobs. Many may face real crisis over the next few years if the prevailing market conditions continue.
“Since 2002 the number of UK brewers has more than trebled to some 1,200 with new start ups every month; around 80% are producing less than 5,000 hl.
“And over the years the value of the tax break has risen substantially, making it worth around £62 a brewer’s barrel on medium strength ale. This provides considerable incentive for micros to remain small - discouraging businesses to grow, employ more staff and contribute to the local economy.
“This has also created an environment whereby small brewers can, should they wish, survive by offering rock bottom prices to win a place on the bar.
“Who is really benefiting from this cheap beer? Not consumers. Now is the time to ask ourselves some tough questions. With pubs still closing at a dramatic rate, can the industry sustain even more entrants? Where is the limit – 2,000, 3,000? Or is there one?
“Routes to market remain very tight - so how can thousands more beers get onto fewer bars? And what indeed are the prospects for the long term sustainability of the industry’s infrastructure? With the growth of more micro brewers there are fewer long term contracts for raw material suppliers.”
Grant’s proposals include:
• Extending PBD to about 35m pints (122,000 barrels or 200,000 hectolitres) per year - the maximum allowed by EU law. “This could spread the benefit across a much broader production level and reduce the tax break much more gradually”
• Offering the relief to all producers on their first 5m pints (18,330 barrels or 30,000 hectolitres) irrespective of production; of value to smaller regionals
• Reducing the maximum duty advantage from 50% to a lower percentage, maybe 20%
• Introducing a ‘sunset clause’ whereby the tax relief stops after, say, three years.
Grant added: “Many SIBA members will feel that I am simply attempting to pull up the drawbridge. Nevertheless, I feel strongly that we must tackle this issue now if we are to secure a healthy and prosperous British brewing industry for the future.”