“It’s easy to conclude that smaller breweries with thinner margins may find that this removal of relief will prove the difference between sustainability and collapse.”
Early in 2020, the shape and timing of the beer duty changes seemed irrelevant to many after they were frozen in Rishi Sunak’s March budget. However, cost-neutral reforms that brewers have dreaded for almost fifteen years to duty were unexpectedly announced in July. The changes will force many small breweries to pay more to relieve big chains, and our pubs will feel the pinch.
The changes to beer duty come as another blow to breweries in 2020 after lockdown measures derailed the hospitality sector; the reforms to duty are an ominous sign for the future of small breweries. Under pressure from brewery group executives the UK Government announced some allegedly cost-neutral changes to the Small Brewers Relief (SBR) which will be in effect by 2022. Members of the Small Brewers Duty Reform Coalition (SBDRC) were the main lobbyists for the imposition of these beer duty reforms. But what are the changes, exactly?
HM Customs and Excise are lowering the production threshold for 50% duty relief from 5,000 Hectolitres down to 2,100 Hectolitres. That means the UK Government will only provide 50% duty discount to breweries sending less than 210,000 litres of beer a year out of their doors.
For a little bit of context, that is about 370,000 pints, significantly fewer than the 879,000 pints that currently qualify for 50% duty relief. Many breweries that produce well under that are still worried however, because the duty that was once promised to be frozen has now been changed at a moment’s notice and it could happen again.
The Tees Online spoke to Reece Hugill, owner and head brewer of Donzoko Brewing Company in Hartlepool, which produces 700hl of German style lagers and sour beers a year. Reece told us, “As a small, rapidly growing business, I will now have to pay more beer duty, sooner, and way before any economies of scale come into play.” He added that the UK already has “some of the highest beer taxes in Europe, and all this change [to duty] does is play into the hands of conglomerate breweries who profit many millions, by making it harder for small breweries to flourish, grow and employ. Adding to this the complete lack of support received during the coronavirus pandemic and now it’s a very tough time for small breweries such as Donzoko.”
It is expected that somewhere between 150 and 180 breweries nationwide will be affected by the adjustments to the duty discount; this is somewhere in the region of 10% according to CAMRA’s Good Beer Guide for 2020.
The 50% duty relief can save brewers almost £250,000 a year at the moment, if they’re currently producing 5,000hl annually according to Good Beer Hunting. It’s easy to conclude that smaller breweries with thinner margins may find that this removal of relief will prove the difference between sustainability and collapse.
How will this affect brewers in the Tees Valley and the public houses where we can find their wares? The Golden Smog, Stockton’s first micropub, has weighed in on Twitter on these reforms. They have announced they will be boycotting the breweries who have lobbied for the lowering of the Small Brewers Relief threshold. This boycott will mean that every pint purchased from a UK brewery in The Golden Smog is at the least a gesture of solidarity with the affected breweries and at most a move of direct support to small brewers and pubs disproportionately affected by the changes to beer duty coming in 2022.